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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04492
MFS SERIES TRUST X
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Christopher R. Bohane
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agents for service)
Registrant’s telephone number, including area code: (617) 954-5000
Date of fiscal year end: May 31*
Date of reporting period: May 31, 2020
* | This Form N-CSR pertains to the following series of the Registrant: MFS Aggressive Growth Allocation Fund, MFS Blended Research Growth Equity Fund, MFS Blended Research Mid Cap Equity Fund, MFS Blended Research Small Cap Equity Fund, MFS Blended Research Value Equity Fund, MFS Conservative Allocation Fund, MFS Emerging Markets Equity Fund, MFS Growth Allocation Fund, MFS International Diversification Fund, MFS International Growth Fund, MFS International Intrinsic Value Fund, MFS Managed Wealth Fund, and MFS Moderate Allocation Fund. MFS International Large Cap Value Fund, a new series of the Registrant with a fiscal year end of May 31, had not commenced operations as of the reporting period end. Each remaining series of the Registrant has a fiscal year end other than May 31. |
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ITEM 1. | REPORTS TO STOCKHOLDERS. |
As noted above, MFS International Large Cap Value Fund, a new series of the Registrant, had not commenced operations as of May 31, 2020 and therefore there is no report to shareholders for this Fund.
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Annual Report
May 31, 2020
MFS® Asset Allocation Funds
MFS® Conservative Allocation Fund
MFS® Moderate Allocation Fund
MFS® Growth Allocation Fund
MFS® Aggressive Growth Allocation Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
AAF-ANN
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MFS® Asset Allocation Funds
Contact information | 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
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LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery; however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Conservative Allocation Fund
Portfolio target allocation
Portfolio holdings | ||||
MFS Total Return Bond Fund | 14.7% | |||
MFS Limited Maturity Fund | 9.7% | |||
MFS Inflation-Adjusted Bond Fund | 9.7% | |||
MFS Government Securities Fund | 9.5% | |||
MFS Growth Fund | 6.2% | |||
MFS Research Fund | 6.2% | |||
MFS Value Fund | 6.1% | |||
MFS High Income Fund | 5.0% | |||
MFS Global Bond Fund | 4.9% | |||
MFS Mid Cap Growth Fund | 4.3% | |||
MFS Mid Cap Value Fund | 4.2% | |||
MFS Research International Fund | 4.1% | |||
MFS Emerging Markets Debt Fund | 3.0% | |||
MFS International Intrinsic Value Fund | 2.1% | |||
MFS Emerging Markets Debt Local Currency Fund | 2.1% | |||
MFS International Growth Fund | 2.0% | |||
MFS Global Real Estate Fund | 2.0% | |||
MFS Commodity Strategy Fund | 2.0% | |||
MFS New Discovery Fund | 1.1% | |||
MFS New Discovery Value Fund | 1.0% | |||
Cash & Cash Equivalents | 0.1% |
Portfolio actual allocation
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the Statements 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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Portfolio Composition – continued
MFS Moderate Allocation Fund
Portfolio target allocation
Portfolio holdings | ||||
MFS Government Securities Fund | 9.0% | |||
MFS Growth Fund | 8.4% | |||
MFS Research Fund | 8.3% | |||
MFS Value Fund | 8.1% | |||
MFS Total Return Bond Fund | 7.6% | |||
MFS Mid Cap Growth Fund | 7.6% | |||
MFS Mid Cap Value Fund | 7.3% | |||
MFS Inflation-Adjusted Bond Fund | 6.7% | |||
MFS Research International Fund | 6.1% | |||
MFS High Income Fund | 4.9% | |||
MFS Global Bond Fund | 4.7% | |||
MFS International Intrinsic Value Fund | 3.1% | |||
MFS International Growth Fund | 3.0% | |||
MFS Emerging Markets Debt Fund | 3.0% | |||
MFS Global Real Estate Fund | 3.0% | |||
MFS Commodity Strategy Fund | 2.8% | |||
MFS Emerging Markets Debt Local Currency Fund | 2.0% | |||
MFS New Discovery Fund | 1.7% | |||
MFS New Discovery Value Fund | 1.6% | |||
MFS International New Discovery Fund | 1.1% | |||
Cash & Cash Equivalents (o) | 0.0% |
Portfolio actual allocation
(o) | Less than 0.1%. |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the Statements 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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Portfolio Composition – continued
MFS Growth Allocation Fund
Portfolio target allocation
Portfolio holdings | ||||
MFS Growth Fund | 11.3% | |||
MFS Value Fund | 10.9% | |||
MFS Mid Cap Growth Fund | 9.6% | |||
MFS Mid Cap Value Fund | 9.2% | |||
MFS Research Fund | 8.2% | |||
MFS Research International Fund | 6.9% | |||
MFS International Intrinsic Value Fund | 5.0% | |||
MFS International Growth Fund | 4.9% | |||
MFS High Income Fund | 4.8% | |||
MFS Inflation-Adjusted Bond Fund | 4.8% | |||
MFS Global Real Estate Fund | 3.8% | |||
MFS Commodity Strategy Fund | 3.6% | |||
MFS Emerging Markets Debt Fund | 2.9% | |||
MFS Total Return Bond Fund | 2.8% | |||
MFS New Discovery Fund | 2.2% | |||
MFS New Discovery Value Fund | 2.1% | |||
MFS International New Discovery Fund | 2.1% | |||
MFS Emerging Markets Debt Local Currency Fund | 1.9% | |||
MFS Global Bond Fund | 1.8% | |||
MFS Emerging Markets Equity Fund | 1.0% | |||
Cash & Cash Equivalents | 0.2% |
Portfolio actual allocation
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the Statements 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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Portfolio Composition – continued
MFS Aggressive Growth Allocation Fund
Portfolio target allocation
Portfolio holdings | ||||
MFS Growth Fund | 13.5% | |||
MFS Value Fund | 12.7% | |||
MFS Mid Cap Growth Fund | 10.5% | |||
MFS Mid Cap Value Fund | 9.8% | |||
MFS Research Fund | 9.1% | |||
MFS International Intrinsic Value Fund | 8.1% | |||
MFS Research International Fund | 7.9% | |||
MFS International Growth Fund | 7.9% | |||
MFS Global Real Estate Fund | 4.7% | |||
MFS Commodity Strategy Fund | 4.6% | |||
MFS International New Discovery Fund | 4.0% | |||
MFS New Discovery Fund | 2.7% | |||
MFS New Discovery Value Fund | 2.5% | |||
MFS Emerging Markets Equity Fund | 1.9% | |||
Cash & Cash Equivalents | 0.1% |
Portfolio actual allocation
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the Statements 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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
MFS Conservative Allocation Fund
Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Conservative Allocation Fund (fund) provided a total return of 7.07%, at net asset value. This compares with a return of 9.42% for the fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. The fund’s other benchmark, the MFS Conservative Allocation Fund Blended Index (Blended Index), generated a return of 8.77%. The Blended Index reflects the blended returns of 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.
Factors Affecting Performance
During the reporting period, the fund’s broad diversification across fixed income funds was a notable detractor from relative performance, as diversification away from the US rates market and into credit and global markets generally held back performance. Further, underlying funds that tend to be overweight credit versus their respective market segments, such as the MFS Limited Maturity Fund and MFS Total Return Bond Fund, were among the fund’s top relative detractors during the reporting period.
Within US stock funds, the fund’s investments in mid and small capitalization strategies lagged large capitalization strategies. Additionally, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed.
Within international stock funds, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed. Additionally, strong relative performance of both the MFS International Intrinsic Value Fund and MFS Research International Fund, supported the returns as both funds outpaced their respective benchmarks.
Within the specialty funds segment, the MFS Global Real Estate Fund supported relative performance as the fund outperformed its respective benchmark.
MFS Moderate Allocation Fund
Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Moderate Allocation Fund (fund) provided a total return of 7.35%, at net asset value. This compares with a return of 12.84% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index. The fund’s other benchmark, the MFS Moderate Allocation Fund Blended Index (Blended Index), generated a return of 8.00%. The Blended Index reflects the blended returns of 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.
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Management Review – continued
Factors Affecting Performance
During the reporting period, the fund’s broad diversification across fixed income funds was a notable detractor from relative performance, as diversification away from the US rates market and into credit and global markets generally held back performance. Further, underlying funds that tend to be overweight credit versus their respective market segments, such as the MFS Total Return Bond Fund, were among the fund’s top relative detractors during the reporting period.
Within US stock funds, the fund’s investments in mid and small capitalization strategies lagged large capitalization strategies. Additionally, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed.
Within international stock funds, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed. Additionally, strong relative performance of both the MFS International Intrinsic Value Fund and MFS Research International Fund, supported the returns as both funds outpaced their respective benchmarks.
Within the specialty funds segment, the MFS Global Real Estate Fund supported relative performance as the fund outperformed its respective benchmark.
MFS Growth Allocation Fund
Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Growth Allocation Fund (fund) provided a total return of 6.41%, at net asset value. This compares with a return of 12.84% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index. The fund’s other benchmark, the MFS Growth Allocation Fund Blended Index (Blended Index), generated a return of 6.73%. The Blended Index reflects the blended returns of equity market indices, with percentage allocations to each index designed to resemble the equity allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.
Factors Affecting Performance
During the reporting period, the fund’s broad diversification across fixed income funds was a notable detractor from relative performance, as diversification away from the US rates market and into credit and global markets generally held back performance. Further, underlying funds that tend to be overweight credit versus their respective market segments were among the fund’s top relative detractors during the reporting period.
Within US stock funds, the fund’s investments in mid and small capitalization strategies lagged large capitalization strategies. Additionally, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed.
Within international stock funds, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed. Additionally, strong relative performance of both the MFS International Intrinsic Value Fund and MFS Research International Fund, supported the returns as both funds outpaced their respective benchmarks.
Within the specialty funds segment, the MFS Global Real Estate Fund supported relative performance as the fund outperformed its respective benchmark.
MFS Aggressive Growth Allocation Fund
Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Aggressive Growth Allocation Fund (fund) provided a total return of 5.97%, at net asset value. This compares with a return of 12.84% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index. The fund’s other benchmark, the MFS Aggressive Growth Allocation Fund Blended Index (Blended Index), generated a return of 4.80%. The Blended Index reflects the blended returns of 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.
Factors Affecting Performance
Within US stock funds, the fund’s investments in mid and small capitalization strategies lagged large capitalization strategies. Additionally, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed.
Within international stock funds, value funds, generally underperformed but were partially offset by the fund’s investments in growth strategies, which outperformed. Additionally, strong relative performance of both the MFS International Intrinsic Value Fund and MFS Research International Fund, supported the returns as both funds outpaced their respective benchmarks.
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Management Review – continued
Within the specialty funds segment, the MFS Global Real Estate Fund supported relative performance as the fund outperformed its respective benchmark.
Respectfully,
Portfolio Manager(s)
Joseph Flaherty and Natalie Shapiro
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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
The following charts illustrate a representative class of each 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.
MFS Conservative Allocation Fund
Growth of a hypothetical $10,000 investment
Average annual total returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 6/28/02 | 7.07% | 4.88% | 6.26% | ||||||||
B | 6/28/02 | 6.31% | 4.10% | 5.47% | ||||||||
C | 6/28/02 | 6.24% | 4.09% | 5.47% | ||||||||
I | 6/28/02 | 7.34% | 5.15% | 6.53% | ||||||||
R1 | 4/01/05 | 6.27% | 4.11% | 5.47% | ||||||||
R2 | 10/31/03 | 6.81% | 4.62% | 5.99% | ||||||||
R3 | 4/01/05 | 7.14% | 4.89% | 6.27% | ||||||||
R4 | 4/01/05 | 7.34% | 5.14% | 6.53% | ||||||||
529A | 7/31/02 | 7.08% | 4.86% | 6.21% | ||||||||
529B | 7/31/02 | 6.46% | 4.10% | 5.44% | ||||||||
529C | 7/31/02 | 6.20% | 4.05% | 5.41% | ||||||||
Comparative benchmark(s) | ||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index (f) | 9.42% | 3.94% | 3.92% | |||||||||
MFS Conservative Allocation Fund Blended Index (f)(w) | 8.77% | 5.31% | 6.69% | |||||||||
Bloomberg Commodity Index (f) | (17.06)% | (7.79)% | (6.00)% | |||||||||
FTSE EPRA Nareit Developed Real Estate Index (net div) (f) | (17.08)% | (0.06)% | 5.81% | |||||||||
MSCI EAFE Index (net div) (f) | (2.81)% | 0.79% | 5.27% | |||||||||
Standard & Poor’s 500 Stock Index (f) | 12.84% | 9.86% | 13.15% |
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Performance Summary – continued
Average annual with sales charge | ||||||||||||
Share Class | 1-yr | 5-yr | 10-yr | |||||||||
A With Initial Sales Charge (5.75%) | 0.92% | 3.65% | 5.64% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 2.31% | 3.76% | 5.47% | |||||||||
C With CDSC (1% for 12 months) (v) | 5.24% | 4.09% | 5.47% | |||||||||
529A With Initial Sales Charge (5.75%) | 0.92% | 3.62% | 5.58% | |||||||||
529B With CDSC (Declining over six years from 4% to 0%) (v) | 2.46% | 3.76% | 5.44% | |||||||||
529C With CDSC (1% for 12 months) (v) | 5.20% | 4.05% | 5.41% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, and R4 shares do not have a sales charge.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
(w) | As of May 31, 2020, the MFS Conservative Allocation Fund Blended Index (a custom index) was comprised of 60% Bloomberg Barclays U.S. Aggregate Bond Index, 28% Standard & Poor’s 500 Stock Index, 8% MSCI EAFE Index (net div), 2% Bloomberg Commodity Index, and 2% FTSE EPRA Nareit Developed Real Estate Index (net div). The components and weightings of the Blended Index may have differed during the period, and may differ in the future. |
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Performance Summary – continued
MFS Moderate Allocation Fund
Growth of a hypothetical $10,000 investment
Average annual total returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 6/28/02 | 7.35% | 5.77% | 7.77% | ||||||||
B | 6/28/02 | 6.57% | 4.97% | 6.96% | ||||||||
C | 6/28/02 | 6.55% | 4.97% | 6.97% | ||||||||
I | 6/28/02 | 7.62% | 6.02% | 8.04% | ||||||||
R1 | 4/01/05 | 6.49% | 4.96% | 6.96% | ||||||||
R2 | 10/31/03 | 7.06% | 5.49% | 7.50% | ||||||||
R3 | 4/01/05 | 7.35% | 5.75% | 7.77% | ||||||||
R4 | 4/01/05 | 7.62% | 6.01% | 8.04% | ||||||||
529A | 7/31/02 | 7.34% | 5.72% | 7.72% | ||||||||
529B | 7/31/02 | 6.63% | 4.94% | 6.92% | ||||||||
529C | 7/31/02 | 6.52% | 4.92% | 6.91% | ||||||||
Comparative benchmark(s) | ||||||||||||
Standard & Poor’s 500 Stock Index (f) | 12.84% | 9.86% | 13.15% | |||||||||
MFS Moderate Allocation Fund Blended Index (f)(w) | 8.00% | 5.73% | 7.81% | |||||||||
Bloomberg Barclays U.S. Aggregate Bond Index (f) | 9.42% | 3.94% | 3.92% | |||||||||
Bloomberg Commodity Index (f) | (17.06)% | (7.79)% | (6.00)% | |||||||||
FTSE EPRA Nareit Developed Real Estate Index (net div) (f) | (17.08)% | (0.06)% | 5.81% | |||||||||
MSCI EAFE Index (net div) (f) | (2.81)% | 0.79% | 5.27% |
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Performance Summary – continued
Average annual with sales charge | ||||||||||||
Share Class | 1-yr | 5-yr | 10-yr | |||||||||
A With Initial Sales Charge (5.75%) | 1.17% | 4.52% | 7.14% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 2.57% | 4.63% | 6.96% | |||||||||
C With CDSC (1% for 12 months) (v) | 5.55% | 4.97% | 6.97% | |||||||||
529A With Initial Sales Charge (5.75%) | 1.17% | 4.47% | 7.09% | |||||||||
529B With CDSC (Declining over six years from 4% to 0%) (v) | 2.63% | 4.61% | 6.92% | |||||||||
529C With CDSC (1% for 12 months) (v) | 5.52% | 4.92% | 6.91% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, and R4 shares do not have a sales charge.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
(w) | As of May 31, 2020, the MFS Moderate Allocation Fund Blended Index (a custom index) was comprised of 40% Bloomberg Barclays U.S. Aggregate Bond Index, 41% Standard & Poor’s 500 Stock Index, 13% MSCI EAFE Index (net div), 3% Bloomberg Commodity Index, and 3% FTSE EPRA Nareit Developed Real Estate Index (net div). The components and weightings of the Blended Index may have differed during the period, and may differ in the future. |
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Performance Summary – continued
MFS Growth Allocation Fund
Growth of a hypothetical $10,000 investment
Average annual total returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 6/28/02 | 6.41% | 6.36% | 8.99% | ||||||||
B | 6/28/02 | 5.56% | 5.56% | 8.18% | ||||||||
C | 6/28/02 | 5.56% | 5.56% | 8.18% | ||||||||
I | 6/28/02 | 6.69% | 6.62% | 9.26% | ||||||||
R1 | 4/01/05 | 5.59% | 5.56% | 8.18% | ||||||||
R2 | 10/31/03 | 6.12% | 6.09% | 8.72% | ||||||||
R3 | 4/01/05 | 6.35% | 6.35% | 8.99% | ||||||||
R4 | 4/01/05 | 6.66% | 6.62% | 9.26% | ||||||||
529A | 7/31/02 | 6.33% | 6.31% | 8.94% | ||||||||
529B | 7/31/02 | 5.52% | 5.51% | 8.12% | ||||||||
529C | 7/31/02 | 5.57% | 5.51% | 8.12% | ||||||||
Comparative benchmark(s) | ||||||||||||
Standard & Poor’s 500 Stock Index (f) | 12.84% | 9.86% | 13.15% | |||||||||
MFS Growth Allocation Fund Blended Index (f)(w) | 6.73% | 5.92% | 8.78% | |||||||||
Bloomberg Barclays U.S. Aggregate Bond Index (f) | 9.42% | 3.94% | 3.92% | |||||||||
Bloomberg Commodity Index (f) | (17.06)% | (7.79)% | (6.00)% | |||||||||
FTSE EPRA Nareit Developed Real Estate Index (net div) (f) | (17.08)% | (0.06)% | 5.81% | |||||||||
MSCI EAFE Index (net div) (f) | (2.81)% | 0.79% | 5.27% |
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Performance Summary – continued
Average annual with sales charge | ||||||||||||
Share Class | 1-yr | 5-yr | 10-yr | |||||||||
A With Initial Sales Charge (5.75%) | 0.29% | 5.11% | 8.35% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 1.56% | 5.24% | 8.18% | |||||||||
C With CDSC (1% for 12 months) (v) | 4.56% | 5.56% | 8.18% | |||||||||
529A With Initial Sales Charge (5.75%) | 0.21% | 5.06% | 8.30% | |||||||||
529B With CDSC (Declining over six years from 4% to 0%) (v) | 1.52% | 5.19% | 8.12% | |||||||||
529C With CDSC (1% for 12 months) (v) | 4.57% | 5.51% | 8.12% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, and R4 shares do not have a sales charge.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
(w) | As of May 31, 2020, the MFS Growth Allocation Fund Blended Index (a custom index) was comprised of 52% Standard & Poor’s 500 Stock Index, 20% Bloomberg Barclays U.S. Aggregate Bond Index, 20% MSCI EAFE Index (net div), 4% Bloomberg Commodity Index, and 4% FTSE EPRA Nareit Developed Real Estate Index (net div). The components and weightings of the Blended Index may have differed during the period, and may differ in the future. |
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Performance Summary – continued
MFS Aggressive Growth Allocation Fund
Growth of a hypothetical $10,000 investment
Average annual total returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 6/28/02 | 5.97% | 6.90% | 10.02% | ||||||||
B | 6/28/02 | 5.18% | 6.09% | 9.20% | ||||||||
C | 6/28/02 | 5.20% | 6.10% | 9.20% | ||||||||
I | 6/28/02 | 6.28% | 7.16% | 10.30% | ||||||||
R1 | 4/01/05 | 5.21% | 6.10% | 9.20% | ||||||||
R2 | 10/31/03 | 5.73% | 6.64% | 9.75% | ||||||||
R3 | 4/01/05 | 6.00% | 6.90% | 10.02% | ||||||||
R4 | 4/01/05 | 6.29% | 7.16% | 10.30% | ||||||||
529A | 7/31/02 | 5.93% | 6.85% | 9.96% | ||||||||
529B | 7/31/02 | 5.15% | 6.05% | 9.14% | ||||||||
529C | 7/31/02 | 5.17% | 6.05% | 9.15% | ||||||||
Comparative benchmark(s) | ||||||||||||
Standard & Poor’s 500 Stock Index (f) | 12.84% | 9.86% | 13.15% | |||||||||
MFS Aggressive Growth Allocation Fund Blended Index (f)(w) | 4.80% | 5.76% | 9.48% | |||||||||
Bloomberg Commodity Index (f) | (17.06)% | (7.79)% | (6.00)% | |||||||||
FTSE EPRA Nareit Developed Real Estate Index (net div) (f) | (17.08)% | (0.06)% | 5.81% | |||||||||
MSCI EAFE Index (net div) (f) | (2.81)% | 0.79% | 5.27% |
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Performance Summary – continued
Average annual with sales charge | ||||||||||||
Share Class | 1-yr | 5-yr | 10-yr | |||||||||
A With Initial Sales Charge (5.75%) | (0.12)% | 5.64% | 9.37% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 1.18% | 5.77% | 9.20% | |||||||||
C With CDSC (1% for 12 months) (v) | 4.20% | 6.10% | 9.20% | |||||||||
529A With Initial Sales Charge (5.75%) | (0.16)% | 5.59% | 9.31% | |||||||||
529B With CDSC (Declining over six years from 4% to 0%) (v) | 1.15% | 5.73% | 9.14% | |||||||||
529C With CDSC (1% for 12 months) (v) | 4.17% | 6.05% | 9.15% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, and R4 shares do not have a sales charge.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
(w) | As of May 31, 2020, the MFS Aggressive Growth Allocation Fund Blended Index (a custom index) was comprised of 60% Standard & Poor’s 500 Stock Index, 30% MSCI EAFE Index (net div), 5% Bloomberg Commodity Index, and 5% FTSE EPRA Nareit Developed Real Estate Index (net div). The components and weightings of the Blended Index may have differed during the period, and may differ in the future. |
Benchmark Definition(s)
Bloomberg Barclays U.S. Aggregate Bond Index – 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. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays 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.
Bloomberg Commodity Index – a highly liquid and diversified benchmark for the commodity futures market. The index tracks trades on futures contracts for physical commodities, such as energy (petroleum, gas), precious metals (gold, silver), industrial metals (zinc, copper), grains (corn, wheat), livestock (pork bellies), among others, and are traded in a variety of currencies.
FTSE EPRA Nareit Developed Real Estate Index (net div) – measures the performance of eligible real estate equities worldwide that generate a majority of their revenue and income through the ownership, disposure and development of income-producing real estate. FTSE International Limited (“FTSE”)© FTSE 2019. “FTSE®” is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. “FT-SE®”, “FOOTSIE®” and “FTSE4GOOD®” are trademarks of the London Stock Exchange Group companies. “Nareit®” is a trademark of the National Association of Real Estate Investment Trusts (“Nareit”) and “EPRA®” is a trademark of the European Public Real Estate Association (“EPRA”) and all are used by FTSE under license. The FTSE EPRA Nareit Developed Real Estate Index is calculated by FTSE. Neither FTSE, Euronext N.V., Nareit, nor EPRA sponsor, endorse, or promote this product and are not in any way connected to it and do not accept any liability. All intellectual property rights in the index values and constituent list vests in FTSE, Euronext N.V., Nareit, and EPRA. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.
MSCI EAFE (Europe, Australasia, Far East) Index (net div) – a market capitalization-weighted index that is designed to measure equity market performance in the developed markets, excluding the U.S. and Canada. 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.
Standard & Poor’s 500 Stock Index – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. “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
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Performance Summary – continued
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).
It is not possible to invest directly in an index.
Notes to Performance Summary
Class 529 shares are only available in conjunction with qualified tuition programs, such as the MFS 529 Savings Plan. There also is an additional fee, which is detailed in the program description, on qualified tuition programs. If this fee was reflected, the performance for Class 529 shares would have been lower. This annual fee is waived for Oregon residents and for those accounts with assets of $25,000 or more.
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 each 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 funds may receive proceeds from litigation settlements, without which performance would be lower.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
As a shareholder of the funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including distribution and service (12b-1) fees; and other fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the funds and to compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the fees and expenses which each fund bears directly, each fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which each fund invests. Because the underlying funds have varied expenses and fee levels and each fund may own different proportions of the underlying funds at different times, the amount of fees and expenses incurred indirectly by each fund will vary. If these transactional and indirect costs were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2019 through May 31, 2020.
Actual Expenses
The first line for each share class in the following tables 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 tables provides information about hypothetical account values and hypothetical expenses based on each fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each 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 each 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 tables 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 tables 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.
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MFS CONSERVATIVE ALLOCATION FUND
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.33% | $1,000.00 | $1,003.70 | $1.65 | |||||||||||||
Hypothetical (h) | 0.33% | $1,000.00 | $1,023.35 | $1.67 | ||||||||||||||
B | Actual | 1.08% | $1,000.00 | $1,000.04 | $5.40 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.60 | $5.45 | ||||||||||||||
C | Actual | 1.08% | $1,000.00 | $999.84 | $5.40 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.60 | $5.45 | ||||||||||||||
I | Actual | 0.08% | $1,000.00 | $1,004.95 | $0.40 | |||||||||||||
Hypothetical (h) | 0.08% | $1,000.00 | $1,024.60 | $0.40 | ||||||||||||||
R1 | Actual | 1.08% | $1,000.00 | $999.70 | $5.40 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.60 | $5.45 | ||||||||||||||
R2 | Actual | 0.58% | $1,000.00 | $1,001.83 | $2.90 | |||||||||||||
Hypothetical (h) | 0.58% | $1,000.00 | $1,022.10 | $2.93 | ||||||||||||||
R3 | Actual | 0.33% | $1,000.00 | $1,003.71 | $1.65 | |||||||||||||
Hypothetical (h) | 0.33% | $1,000.00 | $1,023.35 | $1.67 | ||||||||||||||
R4 | Actual | 0.08% | $1,000.00 | $1,004.37 | $0.40 | |||||||||||||
Hypothetical (h) | 0.08% | $1,000.00 | $1,024.60 | $0.40 | ||||||||||||||
529A | Actual | 0.37% | $1,000.00 | $1,003.56 | $1.85 | |||||||||||||
Hypothetical (h) | 0.37% | $1,000.00 | $1,023.15 | $1.87 | ||||||||||||||
529B | Actual | 0.78% | $1,000.00 | $1,001.90 | $3.90 | |||||||||||||
Hypothetical (h) | 0.78% | $1,000.00 | $1,021.10 | $3.94 | ||||||||||||||
529C | Actual | 1.12% | $1,000.00 | $998.89 | $5.60 | |||||||||||||
Hypothetical (h) | 1.12% | $1,000.00 | $1,019.40 | $5.65 |
(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 183/366 (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. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Notes to Expense Table
For the MFS Conservative Allocation Fund, for the period from March 1, 2020 through May 31, 2020, the distribution fee for Class 529B was not imposed. Had the distribution fee been imposed throughout the entire six month period, the annualized expense ratio, the actual expenses paid during the period, and the hypothetical expenses paid during the period would have been approximately 1.12%, $5.61, and $5.65 for Class 529B. See Note 3 in the Notes to Financial Statements for additional information.
For the MFS Conservative Allocation Fund, each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class 529A, Class 529B, and Class 529C shares, this rebate reduced the expense ratios above by 0.01%. See Note 3 in the Notes to Financial Statements for additional information.
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MFS MODERATE ALLOCATION FUND
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.34% | $1,000.00 | $989.30 | $1.69 | |||||||||||||
Hypothetical (h) | 0.34% | $1,000.00 | $1,023.30 | $1.72 | ||||||||||||||
B | Actual | 1.09% | $1,000.00 | $985.50 | $5.41 | |||||||||||||
Hypothetical (h) | 1.09% | $1,000.00 | $1,019.55 | $5.50 | ||||||||||||||
C | Actual | 1.09% | $1,000.00 | $986.20 | $5.41 | |||||||||||||
Hypothetical (h) | 1.09% | $1,000.00 | $1,019.55 | $5.50 | ||||||||||||||
I | Actual | 0.09% | $1,000.00 | $990.70 | $0.45 | |||||||||||||
Hypothetical (h) | 0.09% | $1,000.00 | $1,024.55 | $0.46 | ||||||||||||||
R1 | Actual | 1.09% | $1,000.00 | $985.43 | $5.41 | |||||||||||||
Hypothetical (h) | 1.09% | $1,000.00 | $1,019.55 | $5.50 | ||||||||||||||
R2 | Actual | 0.59% | $1,000.00 | $988.24 | $2.93 | |||||||||||||
Hypothetical (h) | 0.59% | $1,000.00 | $1,022.05 | $2.98 | ||||||||||||||
R3 | Actual | 0.34% | $1,000.00 | $989.19 | $1.69 | |||||||||||||
Hypothetical (h) | 0.34% | $1,000.00 | $1,023.30 | $1.72 | ||||||||||||||
R4 | Actual | 0.09% | $1,000.00 | $990.56 | $0.45 | |||||||||||||
Hypothetical (h) | 0.09% | $1,000.00 | $1,024.55 | $0.46 | ||||||||||||||
529A | Actual | 0.39% | $1,000.00 | $989.56 | $1.94 | |||||||||||||
Hypothetical (h) | 0.39% | $1,000.00 | $1,023.05 | $1.97 | ||||||||||||||
529B | Actual | 0.90% | $1,000.00 | $986.99 | $4.47 | |||||||||||||
Hypothetical (h) | 0.90% | $1,000.00 | $1,020.50 | $4.55 | ||||||||||||||
529C | Actual | 1.14% | $1,000.00 | $985.75 | $5.66 | |||||||||||||
Hypothetical (h) | 1.14% | $1,000.00 | $1,019.30 | $5.76 |
(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 183/366 (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. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Notes to Expense Table
For the MFS Moderate Allocation Fund, for the period from April 1, 2020 through May 31, 2020, the distribution fee for Class 529B was not imposed. Had the distribution fee been imposed throughout the entire six month period, the annualized expense ratio, the actual expenses paid during the period, and the hypothetical expenses paid during the period would have been approximately 1.14%, $5.66, and $5.76 for Class 529B. See Note 3 in the Notes to Financial Statements for additional information.
For the MFS Moderate Allocation Fund, each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class 529A and Class 529B shares, this rebate reduced the expense ratios above by 0.01%. See Note 3 in the Notes to Financial Statements for additional information.
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MFS GROWTH ALLOCATION FUND
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.35% | $1,000.00 | $966.30 | $1.72 | |||||||||||||
Hypothetical (h) | 0.35% | $1,000.00 | $1,023.25 | $1.77 | ||||||||||||||
B | Actual | 1.10% | $1,000.00 | $962.57 | $5.40 | |||||||||||||
Hypothetical (h) | 1.10% | $1,000.00 | $1,019.50 | $5.55 | ||||||||||||||
C | Actual | 1.10% | $1,000.00 | $962.47 | $5.40 | |||||||||||||
Hypothetical (h) | 1.10% | $1,000.00 | $1,019.50 | $5.55 | ||||||||||||||
I | Actual | 0.10% | $1,000.00 | $967.57 | $0.49 | |||||||||||||
Hypothetical (h) | 0.10% | $1,000.00 | $1,024.50 | $0.51 | ||||||||||||||
R1 | Actual | 1.10% | $1,000.00 | $962.71 | $5.40 | |||||||||||||
Hypothetical (h) | 1.10% | $1,000.00 | $1,019.50 | $5.55 | ||||||||||||||
R2 | Actual | 0.60% | $1,000.00 | $964.66 | $2.95 | |||||||||||||
Hypothetical (h) | 0.60% | $1,000.00 | $1,022.00 | $3.03 | ||||||||||||||
R3 | Actual | 0.35% | $1,000.00 | $965.83 | $1.72 | |||||||||||||
Hypothetical (h) | 0.35% | $1,000.00 | $1,023.25 | $1.77 | ||||||||||||||
R4 | Actual | 0.10% | $1,000.00 | $967.23 | $0.49 | |||||||||||||
Hypothetical (h) | 0.10% | $1,000.00 | $1,024.50 | $0.51 | ||||||||||||||
529A | Actual | 0.39% | $1,000.00 | $965.67 | $1.92 | |||||||||||||
Hypothetical (h) | 0.39% | $1,000.00 | $1,023.05 | $1.97 | ||||||||||||||
529B | Actual | 1.14% | $1,000.00 | $962.22 | $5.59 | |||||||||||||
Hypothetical (h) | 1.14% | $1,000.00 | $1,019.30 | $5.76 | ||||||||||||||
529C | Actual | 1.14% | $1,000.00 | $962.20 | $5.59 | |||||||||||||
Hypothetical (h) | 1.14% | $1,000.00 | $1,019.30 | $5.76 |
(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 183/366 (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. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Notes to Expense Table
For the MFS Growth Allocation Fund, each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class 529A, Class 529B, and Class 529C shares, this rebate reduced the expense ratios above by 0.01%. See Note 3 in the Notes to Financial Statements for additional information.
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MFS AGGRESSIVE GROWTH ALLOCATION FUND
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.38% | $1,000.00 | $951.12 | $1.85 | |||||||||||||
Hypothetical (h) | 0.38% | $1,000.00 | $1,023.10 | $1.92 | ||||||||||||||
B | Actual | 1.13% | $1,000.00 | $947.77 | $5.50 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.35 | $5.70 | ||||||||||||||
C | Actual | 1.13% | $1,000.00 | $947.70 | $5.50 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.35 | $5.70 | ||||||||||||||
I | Actual | 0.13% | $1,000.00 | $952.60 | $0.63 | |||||||||||||
Hypothetical (h) | 0.13% | $1,000.00 | $1,024.35 | $0.66 | ||||||||||||||
R1 | Actual | 1.13% | $1,000.00 | $947.82 | $5.50 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.35 | $5.70 | ||||||||||||||
R2 | Actual | 0.63% | $1,000.00 | $950.22 | $3.07 | |||||||||||||
Hypothetical (h) | 0.63% | $1,000.00 | $1,021.85 | $3.18 | ||||||||||||||
R3 | Actual | 0.38% | $1,000.00 | $951.69 | $1.85 | |||||||||||||
Hypothetical (h) | 0.38% | $1,000.00 | $1,023.10 | $1.92 | ||||||||||||||
R4 | Actual | 0.13% | $1,000.00 | $952.73 | $0.63 | |||||||||||||
Hypothetical (h) | 0.13% | $1,000.00 | $1,024.35 | $0.66 | ||||||||||||||
529A | Actual | 0.42% | $1,000.00 | $951.13 | $2.05 | |||||||||||||
Hypothetical (h) | 0.42% | $1,000.00 | $1,022.90 | $2.12 | ||||||||||||||
529B | Actual | 1.18% | $1,000.00 | $947.80 | $5.75 | |||||||||||||
Hypothetical (h) | 1.18% | $1,000.00 | $1,019.10 | $5.96 | ||||||||||||||
529C | Actual | 1.17% | $1,000.00 | $947.49 | $5.70 | |||||||||||||
Hypothetical (h) | 1.17% | $1,000.00 | $1,019.15 | $5.91 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Notes to Expense Table
For the MFS Aggressive Growth Allocation Fund, each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class 529A and Class 529C shares, this rebate reduced the expense ratios above by 0.01%. See Note 3 in the Notes to Financial Statements for additional information.
22
Table of Contents
5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
MFS CONSERVATIVE ALLOCATION FUND
Investment Companies (h) - 99.9% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Bond Funds - 58.6% | ||||||||
MFS Emerging Markets Debt Fund - Class R6 | 6,516,340 | $ | 91,489,415 | |||||
MFS Emerging Markets Debt Local Currency Fund - Class R6 | 9,920,960 | 62,105,211 | ||||||
MFS Global Bond Fund - Class R6 | 16,321,991 | 148,203,673 | ||||||
MFS Government Securities Fund - Class R6 | 27,441,890 | 286,218,916 | ||||||
MFS High Income Fund - Class R6 | 46,436,440 | 150,918,431 | ||||||
MFS Inflation-Adjusted Bond Fund - Class R6 | 26,916,650 | 292,583,981 | ||||||
MFS Limited Maturity Fund - Class R6 | 49,045,595 | 294,273,570 | ||||||
MFS Total Return Bond Fund - Class R6 | 39,532,670 | 444,742,536 | ||||||
$ | 1,770,535,733 | |||||||
International Stock Funds - 8.2% | ||||||||
MFS International Growth Fund - Class R6 | 1,818,831 | $ | 61,476,483 | |||||
MFS International Intrinsic Value Fund - Class R6 | 1,396,929 | 62,344,955 | ||||||
MFS Research International Fund - Class R6 | 7,044,632 | 124,549,084 | ||||||
$ | 248,370,522 | |||||||
Specialty Funds - 4.0% | ||||||||
MFS Commodity Strategy Fund - Class R6 | 14,106,630 | $ | 59,529,980 | |||||
MFS Global Real Estate Fund - Class R6 | 4,107,262 | 61,198,206 | ||||||
$ | 120,728,186 | |||||||
U.S. Stock Funds - 29.1% | ||||||||
MFS Growth Fund - Class R6 | 1,377,927 | $ | 187,108,696 | |||||
MFS Mid Cap Growth Fund - Class R6 | 5,465,780 | 128,445,824 | ||||||
MFS Mid Cap Value Fund - Class R6 | 6,054,627 | 126,723,349 | ||||||
MFS New Discovery Fund - Class R6 | 997,537 | 32,669,315 | ||||||
MFS New Discovery Value Fund - Class R6 | 2,418,052 | 31,869,927 | ||||||
MFS Research Fund - Class R6 | 4,209,919 | 186,667,819 | ||||||
MFS Value Fund - Class R6 | 4,797,704 | 185,767,111 | ||||||
$ | 879,252,041 | |||||||
Money Market Funds - 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 305 | $ | 305 | |||||
Total Investment Companies (Identified Cost, $2,327,607,272) | $ | 3,018,886,787 | ||||||
Other Assets, Less Liabilities - 0.1% | 1,601,024 | |||||||
Net Assets - 100.0% | $ | 3,020,487,811 |
See Portfolio Footnotes and Notes to Financial Statements
23
Table of Contents
Portfolio of Investments – continued
MFS MODERATE ALLOCATION FUND
Investment Companies (h) - 100.0% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Bond Funds - 38.0% | ||||||||
MFS Emerging Markets Debt Fund - Class R6 | 11,514,604 | $ | 161,665,039 | |||||
MFS Emerging Markets Debt Local Currency Fund - Class R6 | 17,518,052 | 109,663,005 | ||||||
MFS Global Bond Fund - Class R6 | 28,426,298 | 258,110,788 | ||||||
MFS Government Securities Fund - Class R6 | 47,117,383 | 491,434,310 | ||||||
MFS High Income Fund - Class R6 | 82,685,038 | 268,726,372 | ||||||
MFS Inflation-Adjusted Bond Fund - Class R6 | 33,508,714 | 364,239,717 | ||||||
MFS Total Return Bond Fund - Class R6 | 37,040,445 | 416,705,010 | ||||||
$ | 2,070,544,241 | |||||||
International Stock Funds - 13.3% | ||||||||
MFS International Growth Fund - Class R6 | 4,903,461 | $ | 165,736,994 | |||||
MFS International Intrinsic Value Fund - Class R6 | 3,756,799 | 167,665,930 | ||||||
MFS International New Discovery Fund - Class R6 | 1,816,746 | 57,391,015 | ||||||
MFS Research International Fund - Class R6 | 18,843,397 | 333,151,254 | ||||||
$ | 723,945,193 | |||||||
Specialty Funds - 5.8% | ||||||||
MFS Commodity Strategy Fund - Class R6 | 36,265,865 | $ | 153,041,949 | |||||
MFS Global Real Estate Fund - Class R6 | 10,823,110 | 161,264,343 | ||||||
$ | 314,306,292 | |||||||
U.S. Stock Funds - 42.9% | ||||||||
MFS Growth Fund - Class R6 | 3,373,833 | $ | 458,132,759 | |||||
MFS Mid Cap Growth Fund - Class R6 | 17,601,720 | 413,640,415 | ||||||
MFS Mid Cap Value Fund - Class R6 | 18,946,696 | 396,554,349 | ||||||
MFS New Discovery Fund - Class R6 | 2,810,457 | 92,042,491 | ||||||
MFS New Discovery Value Fund - Class R6 | 6,545,902 | 86,274,988 | ||||||
MFS Research Fund - Class R6 | 10,189,656 | 451,809,353 | ||||||
MFS Value Fund - Class R6 | 11,374,369 | 440,415,562 | ||||||
$ | 2,338,869,917 | |||||||
Money Market Funds - 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 3,118,448 | $ | 3,118,760 | |||||
Total Investment Companies (Identified Cost, $3,844,893,237) | $ | 5,450,784,403 | ||||||
Other Assets, Less Liabilities - (0.0)% | (678,314) | |||||||
Net Assets - 100.0% | $ | 5,450,106,089 |
See Portfolio Footnotes and Notes to Financial Statements
24
Table of Contents
Portfolio of Investments – continued
MFS GROWTH ALLOCATION FUND
Investment Companies (h) - 100.0% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Bond Funds - 19.0% | ||||||||
MFS Emerging Markets Debt Fund - Class R6 | 10,083,202 | $ | 141,568,155 | |||||
MFS Emerging Markets Debt Local Currency Fund - Class R6 | 15,324,456 | 95,931,094 | ||||||
MFS Global Bond Fund - Class R6 | 9,941,118 | 90,265,356 | ||||||
MFS High Income Fund - Class R6 | 73,263,366 | 238,105,939 | ||||||
MFS Inflation-Adjusted Bond Fund - Class R6 | 21,810,257 | 237,077,495 | ||||||
MFS Total Return Bond Fund - Class R6 | 12,145,298 | 136,634,599 | ||||||
$ | 939,582,638 | |||||||
International Stock Funds - 19.9% | ||||||||
MFS Emerging Markets Equity Fund - Class R6 | 1,583,604 | $ | 46,969,701 | |||||
MFS International Growth Fund - Class R6 | 7,217,443 | 243,949,580 | ||||||
MFS International Intrinsic Value Fund - Class R6 | 5,526,058 | 246,627,979 | ||||||
MFS International New Discovery Fund - Class R6 | 3,232,586 | 102,117,400 | ||||||
MFS Research International Fund - Class R6 | 19,360,036 | 342,285,426 | ||||||
$ | 981,950,086 | |||||||
Specialty Funds - 7.4% | ||||||||
MFS Commodity Strategy Fund - Class R6 | 41,690,352 | $ | 175,933,286 | |||||
MFS Global Real Estate Fund - Class R6 | 12,715,634 | 189,462,950 | ||||||
$ | 365,396,236 | |||||||
U.S. Stock Funds - 53.5% | ||||||||
MFS Growth Fund - Class R6 | 4,125,983 | $ | 560,267,252 | |||||
MFS Mid Cap Growth Fund - Class R6 | 20,242,097 | 475,689,267 | ||||||
MFS Mid Cap Value Fund - Class R6 | 21,664,826 | 453,444,816 | ||||||
MFS New Discovery Fund - Class R6 | 3,340,361 | 109,396,810 | ||||||
MFS New Discovery Value Fund - Class R6 | 7,783,693 | 102,589,068 | ||||||
MFS Research Fund - Class R6 | 9,116,172 | 404,211,077 | ||||||
MFS Value Fund - Class R6 | 13,906,946 | 538,476,956 | ||||||
$ | 2,644,075,246 | |||||||
Money Market Funds - 0.2% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 10,709,672 | $ | 10,710,743 | |||||
Total Investment Companies (Identified Cost, $3,151,381,313) | $ | 4,941,714,949 | ||||||
Other Assets, Less Liabilities - 0.0% | 313,640 | |||||||
Net Assets - 100.0% | $ | 4,942,028,589 |
See Portfolio Footnotes and Notes to Financial Statements
25
Table of Contents
Portfolio of Investments – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND
Investment Companies (h) - 100.0% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
International Stock Funds - 29.8% | ||||||||
MFS Emerging Markets Equity Fund - Class R6 | 1,159,334 | $ | 34,385,841 | |||||
MFS International Growth Fund - Class R6 | 4,340,178 | 146,698,029 | ||||||
MFS International Intrinsic Value Fund - Class R6 | 3,383,587 | 151,009,489 | ||||||
MFS International New Discovery Fund - Class R6 | 2,357,415 | 74,470,724 | ||||||
MFS Research International Fund - Class R6 | 8,310,672 | 146,932,679 | ||||||
$ | 553,496,762 | |||||||
Specialty Funds - 9.3% | ||||||||
MFS Commodity Strategy Fund - Class R6 | 20,139,508 | $ | 84,988,725 | |||||
MFS Global Real Estate Fund - Class R6 | 5,907,570 | 88,022,789 | ||||||
$ | 173,011,514 | |||||||
U.S. Stock Funds - 60.8% | ||||||||
MFS Growth Fund - Class R6 | 1,842,808 | $ | 250,234,867 | |||||
MFS Mid Cap Growth Fund - Class R6 | 8,328,980 | 195,731,038 | ||||||
MFS Mid Cap Value Fund - Class R6 | 8,738,527 | 182,897,369 | ||||||
MFS New Discovery Fund - Class R6 | 1,523,594 | 49,897,687 | ||||||
MFS New Discovery Value Fund - Class R6 | 3,477,030 | 45,827,260 | ||||||
MFS Research Fund - Class R6 | 3,796,834 | 168,351,627 | ||||||
MFS Value Fund - Class R6 | 6,085,042 | 235,612,831 | ||||||
$ | 1,128,552,679 | |||||||
Money Market Funds - 0.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 2,388,351 | $ | 2,388,590 | |||||
Total Investment Companies (Identified Cost, $1,076,169,872) | $ | 1,857,449,545 | ||||||
Other Assets, Less Liabilities - (0.0)% | (810,901) | |||||||
Net Assets - 100.0% | $ | 1,856,638,644 |
Portfolio Footnotes:
(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 each fund’s investments in affiliated issuers were as follows: |
Affiliated Issuers | ||||
MFS Conservative Allocation Fund | $ | 3,018,886,787 | ||
MFS Moderate Allocation Fund | 5,450,784,403 | |||
MFS Growth Allocation Fund | 4,941,714,949 | |||
MFS Aggressive Growth Allocation Fund | 1,857,449,545 |
(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. |
See Notes to Financial Statements
26
Table of Contents
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
At 5/31/20
These statements represent each fund’s balance sheet, which details the assets and liabilities comprising the total value of each fund.
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Assets | ||||||||||||||||
Investments in affiliated issuers, at value (identified cost, $2,327,607,272, $3,844,893,237, $3,151,381,313, and $1,076,169,872, respectively) | $3,018,886,787 | $5,450,784,403 | $4,941,714,949 | $1,857,449,545 | ||||||||||||
Receivables for | ||||||||||||||||
Investments sold | 1,867,125 | 2,287,032 | 2,353,162 | 1,049,970 | ||||||||||||
Fund shares sold | 5,004,494 | 6,285,097 | 4,840,673 | 2,623,750 | ||||||||||||
Receivable from investment adviser | — | — | 136,791 | 61,079 | ||||||||||||
Other assets | 5,454 | 9,769 | 9,020 | 3,637 | ||||||||||||
Total assets | $3,025,763,860 | $5,459,366,301 | $4,949,054,595 | $1,861,187,981 | ||||||||||||
Liabilities | ||||||||||||||||
Payable to custodian | $1,197,314 | $— | $— | $— | ||||||||||||
Payables for | ||||||||||||||||
Investments purchased | 637,841 | 344,878 | — | 1,032,938 | ||||||||||||
Fund shares reacquired | 2,456,289 | 6,765,167 | 4,701,828 | 2,409,570 | ||||||||||||
Payable to affiliates | ||||||||||||||||
Administrative services fee | 193 | 193 | 193 | 193 | ||||||||||||
Shareholder servicing costs | 718,856 | 1,700,071 | 1,902,938 | 918,459 | ||||||||||||
Distribution and service fees | 114,824 | 218,398 | 186,311 | 63,562 | ||||||||||||
Program manager fee | 1,085 | 1,744 | 1,780 | 977 | ||||||||||||
Payable for independent Trustees’ compensation | 14 | 11 | 26 | 22 | ||||||||||||
Accrued expenses and other liabilities | 149,633 | 229,750 | 232,930 | 123,616 | ||||||||||||
Total liabilities | $5,276,049 | $9,260,212 | $7,026,006 | $4,549,337 | ||||||||||||
Net assets | $3,020,487,811 | $5,450,106,089 | $4,942,028,589 | $1,856,638,644 | ||||||||||||
Net assets consist of | ||||||||||||||||
Paid-in capital | $2,367,450,130 | $3,849,872,362 | $3,153,320,760 | $1,075,499,165 | ||||||||||||
Total distributable earnings (loss) | 653,037,681 | 1,600,233,727 | 1,788,707,829 | 781,139,479 | ||||||||||||
Net assets | $3,020,487,811 | $5,450,106,089 | $4,942,028,589 | $1,856,638,644 |
27
Table of Contents
Statements of Assets and Liabilities – continued
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Net assets | ||||||||||||||||
Class A | $1,417,121,034 | $3,173,202,348 | $2,944,438,897 | $928,554,778 | ||||||||||||
Class B | 63,964,930 | 149,969,150 | 126,961,621 | 41,015,574 | ||||||||||||
Class C | 542,273,790 | 874,126,833 | 694,541,183 | 234,144,153 | ||||||||||||
Class I | 400,868,912 | 310,815,164 | 294,213,363 | 178,490,836 | ||||||||||||
Class R1 | 11,468,251 | 24,119,561 | 19,543,472 | 14,484,230 | ||||||||||||
Class R2 | 56,260,164 | 124,724,623 | 123,458,677 | 55,452,894 | ||||||||||||
Class R3 | 95,119,316 | 219,996,234 | 147,887,594 | 87,314,990 | ||||||||||||
Class R4 | 234,300,738 | 252,825,400 | 264,075,532 | 137,679,849 | ||||||||||||
Class 529A | 153,384,498 | 248,005,778 | 261,098,767 | 154,653,624 | ||||||||||||
Class 529B | 4,301,082 | 7,258,184 | 8,702,257 | 2,924,457 | ||||||||||||
Class 529C | 41,425,096 | 65,062,814 | 57,107,226 | 21,923,259 | ||||||||||||
Total net assets | $3,020,487,811 | $5,450,106,089 | $4,942,028,589 | $1,856,638,644 | ||||||||||||
Shares of beneficial interest outstanding | ||||||||||||||||
Class A | 88,676,420 | 176,095,021 | 143,160,695 | 39,967,820 | ||||||||||||
Class B | 4,026,208 | 8,429,671 | 6,225,373 | 1,792,412 | ||||||||||||
Class C | 34,510,590 | 49,537,196 | 34,514,066 | 10,356,045 | ||||||||||||
Class I | 24,836,721 | 16,990,036 | 14,160,337 | 7,545,603 | ||||||||||||
Class R1 | 745,592 | 1,399,481 | 992,758 | 650,956 | ||||||||||||
Class R2 | 3,631,225 | 7,089,707 | 6,153,763 | 2,442,249 | ||||||||||||
Class R3 | 6,005,947 | 12,314,676 | 7,258,635 | 3,790,374 | ||||||||||||
Class R4 | 14,649,849 | 14,044,020 | 12,848,811 | 5,905,199 | ||||||||||||
Class 529A | 9,654,591 | 13,842,309 | 12,810,147 | 6,708,359 | ||||||||||||
Class 529B | 275,054 | 412,406 | 431,836 | 129,460 | ||||||||||||
Class 529C | 2,664,930 | 3,730,632 | 2,881,073 | 985,753 | ||||||||||||
Total shares of beneficial interest outstanding | 189,677,127 | 303,885,155 | 241,437,494 | 80,274,230 | ||||||||||||
Class A shares | ||||||||||||||||
Net asset value per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.98 | $18.02 | $20.57 | $23.23 | ||||||||||||
Offering price per share (100 / 94.25 × net asset value per share) | $16.95 | $19.12 | $21.82 | $24.65 | ||||||||||||
Class B shares | ||||||||||||||||
Net asset value and offering price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.89 | $17.79 | $20.39 | $22.88 | ||||||||||||
Class C shares | ||||||||||||||||
Net asset value and offering price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.71 | $17.65 | $20.12 | $22.61 | ||||||||||||
Class I shares | ||||||||||||||||
Net asset value, offering price, and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $16.14 | $18.29 | $20.78 | $23.65 | ||||||||||||
Class R1 shares | ||||||||||||||||
Net asset value, offering price, and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.38 | $17.23 | $19.69 | $22.25 | ||||||||||||
Class R2 shares | ||||||||||||||||
Net asset value, offering price, and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.49 | $17.59 | $20.06 | $22.71 |
28
Table of Contents
Statements of Assets and Liabilities – continued
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Class R3 shares | ||||||||||||||||
Net asset value, offering price, and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.84 | $17.86 | $20.37 | $23.04 | ||||||||||||
Class R4 shares | ||||||||||||||||
Net asset value, offering price, and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.99 | $18.00 | $20.55 | $23.32 | ||||||||||||
Class 529A shares | ||||||||||||||||
Net asset value and redemption price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.89 | $17.92 | $20.38 | $23.05 | ||||||||||||
Offering price per share (100 / 94.25 × net asset value per share) | $16.86 | $19.01 | $21.62 | $24.46 | ||||||||||||
Class 529B shares | ||||||||||||||||
Net asset value and offering price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.64 | $17.60 | $20.15 | $22.59 | ||||||||||||
Class 529C shares | ||||||||||||||||
Net asset value and offering price per share | ||||||||||||||||
(net assets / shares of beneficial interest outstanding) | $15.54 | $17.44 | $19.82 | $22.24 |
On sales of $50,000 or more, the maximum offering price of Class A and Class 529A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class 529B, and Class 529C shares.
See Notes to Financial Statements
29
Table of Contents
Financial Statements
Year ended 5/31/20
These statements describe how much each fund earned in investment income and accrued in expenses. They also describe any gains or losses generated by each fund’s operations.
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Net investment income (loss) | ||||||||||||||||
Dividends from affiliated issuers | $70,904,597 | $118,181,022 | $96,252,309 | $29,185,416 | ||||||||||||
Expenses | ||||||||||||||||
Distribution and service fees | $11,225,716 | $21,900,140 | $18,888,686 | $6,490,027 | ||||||||||||
Shareholder servicing costs | 1,721,858 | 4,119,439 | 4,792,050 | 2,450,414 | ||||||||||||
Program manager fees | 99,858 | 160,316 | 164,285 | 91,153 | ||||||||||||
Administrative services fee | 17,500 | 17,500 | 17,500 | 17,500 | ||||||||||||
Independent Trustees’ compensation | 43,660 | 91,680 | 63,900 | 37,001 | ||||||||||||
Custodian fee | 63,382 | 106,135 | 88,550 | 37,066 | ||||||||||||
Shareholder communications | 133,374 | 275,621 | 312,002 | 124,618 | ||||||||||||
Audit and tax fees | 37,632 | 38,312 | 38,165 | 37,350 | ||||||||||||
Legal fees | 25,662 | 49,332 | 45,558 | 16,564 | ||||||||||||
Miscellaneous | 296,173 | 346,017 | 312,036 | 236,810 | ||||||||||||
Total expenses | $13,664,815 | $27,104,492 | $24,722,732 | $9,538,503 | ||||||||||||
Reduction of expenses by investment adviser and distributor | (43,597 | ) | (115,268 | ) | (738,455 | ) | (564,690 | ) | ||||||||
Net expenses | $13,621,218 | $26,989,224 | $23,984,277 | $8,973,813 | ||||||||||||
Net investment income (loss) | $57,283,379 | $91,191,798 | $72,268,032 | $20,211,603 | ||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||
Realized gain (loss) (identified cost basis) | ||||||||||||||||
Investments in affiliated issuers | $20,624,261 | $84,168,121 | $85,677,807 | $25,936,693 | ||||||||||||
Capital gain distributions from affiliated issuers | 16,528,669 | 45,015,323 | 53,190,023 | 25,038,280 | ||||||||||||
Net realized gain (loss) | $37,152,930 | $129,183,444 | $138,867,830 | $50,974,973 | ||||||||||||
Change in unrealized appreciation or depreciation | ||||||||||||||||
Affiliated issuers | $101,115,745 | $153,967,564 | $83,019,624 | $35,666,386 | ||||||||||||
Net realized and unrealized gain (loss) | $138,268,675 | $283,151,008 | $221,887,454 | $86,641,359 | ||||||||||||
Change in net assets from operations | $195,552,054 | $374,342,806 | $294,155,486 | $106,852,962 |
See Notes to Financial Statements
30
Table of Contents
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 5/31/20 | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Change in net assets | ||||||||||||||||
From operations | ||||||||||||||||
Net investment income (loss) | $57,283,379 | $91,191,798 | $72,268,032 | $20,211,603 | ||||||||||||
Net realized gain (loss) | 37,152,930 | 129,183,444 | 138,867,830 | 50,974,973 | ||||||||||||
Net unrealized gain (loss) | 101,115,745 | 153,967,564 | 83,019,624 | 35,666,386 | ||||||||||||
Change in net assets from operations | $195,552,054 | $374,342,806 | $294,155,486 | $106,852,962 | ||||||||||||
Total distributions to shareholders | $(100,086,864 | ) | $(247,398,416 | ) | $(238,946,554 | ) | $(88,421,193 | ) | ||||||||
Change in net assets from fund share transactions | $83,099,843 | $(76,719,905 | ) | $23,596,701 | $62,233,205 | |||||||||||
Total change in net assets | $178,565,033 | $50,224,485 | $78,805,633 | $80,664,974 | ||||||||||||
Net assets | ||||||||||||||||
At beginning of period | 2,841,922,778 | 5,399,881,604 | 4,863,222,956 | 1,775,973,670 | ||||||||||||
At end of period | $3,020,487,811 | $5,450,106,089 | $4,942,028,589 | $1,856,638,644 | ||||||||||||
Year ended 5/31/19 | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Change in net assets | ||||||||||||||||
From operations | ||||||||||||||||
Net investment income (loss) | $62,086,293 | $106,914,290 | $84,482,097 | $23,833,805 | ||||||||||||
Net realized gain (loss) | 54,046,556 | 172,824,450 | 171,324,021 | 69,105,651 | ||||||||||||
Net unrealized gain (loss) | 2,181,106 | (69,817,389 | ) | (96,003,027 | ) | (46,506,757 | ) | |||||||||
Change in net assets from operations | $118,313,955 | $209,921,351 | $159,803,091 | $46,432,699 | ||||||||||||
Total distributions to shareholders | $(128,695,165 | ) | $(296,357,134 | ) | $(273,128,441 | ) | $(85,858,612 | ) | ||||||||
Change in net assets from fund share transactions | $(91,192,337 | ) | $(203,578,431 | ) | $6,168,293 | $24,723,734 | ||||||||||
Total change in net assets | $(101,573,547 | ) | $(290,014,214 | ) | $(107,157,057 | ) | $(14,702,179 | ) | ||||||||
Net assets | ||||||||||||||||
At beginning of period | 2,943,496,325 | 5,689,895,818 | 4,970,380,013 | 1,790,675,849 | ||||||||||||
At end of period | $2,841,922,778 | $5,399,881,604 | $4,863,222,956 | $1,775,973,670 |
See Notes to Financial Statements
31
Table of Contents
Financial Statements
MFS CONSERVATIVE ALLOCATION FUND
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.
Year ended | ||||||||||||||||||||
Class A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.45 | $15.50 | $15.43 | $14.69 | $15.05 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.33 | $0.35 | $0.32 | $0.26 | (c) | $0.21 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.75 | 0.31 | 0.43 | 0.85 | (0.18 | ) | ||||||||||||||
Total from investment operations | $1.08 | $0.66 | $0.75 | $1.11 | $0.03 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.35 | ) | $(0.33 | ) | $(0.26 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.55 | ) | $(0.71 | ) | $(0.68 | ) | $(0.37 | ) | $(0.39 | ) | ||||||||||
Net asset value, end of period (x) | $15.98 | $15.45 | $15.50 | $15.43 | $14.69 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.07 | 4.60 | 4.91 | 7.71 | (c) | 0.27 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.33 | 0.33 | 0.32 | 0.33 | (c) | 0.33 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.33 | 0.33 | 0.32 | 0.33 | (c) | 0.33 | ||||||||||||||
Net investment income (loss) (l) | 2.05 | 2.30 | 2.05 | 1.72 | (c) | 1.45 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,417,121 | $1,294,553 | $1,321,127 | $1,330,751 | $1,435,774 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.35 | $15.40 | $15.33 | $14.60 | $14.95 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.21 | $0.24 | $0.20 | $0.14 | (c) | $0.10 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.76 | 0.30 | 0.43 | 0.85 | (0.17 | ) | ||||||||||||||
Total from investment operations | $0.97 | $0.54 | $0.63 | $0.99 | $(0.07 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.22 | ) | $(0.23 | ) | $(0.21 | ) | $(0.15 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.43 | ) | $(0.59 | ) | $(0.56 | ) | $(0.26 | ) | $(0.28 | ) | ||||||||||
Net asset value, end of period (x) | $15.89 | $15.35 | $15.40 | $15.33 | $14.60 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.31 | 3.81 | 4.13 | 6.87 | (c) | (0.43 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.08 | 1.08 | 1.07 | 1.08 | (c) | 1.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.08 | 1.08 | 1.07 | 1.08 | (c) | 1.08 | ||||||||||||||
Net investment income (loss) (l) | 1.32 | 1.56 | 1.31 | 0.97 | (c) | 0.71 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $63,965 | $93,839 | $116,669 | $137,431 | $150,726 |
See Notes to Financial Statements
32
Table of Contents
Financial Highlights – continued
MFS CONSERVATIVE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.20 | $15.25 | $15.20 | $14.47 | $14.83 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.20 | $0.23 | $0.20 | $0.14 | (c) | $0.10 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.75 | 0.32 | 0.41 | 0.85 | (0.18 | ) | ||||||||||||||
Total from investment operations | $0.95 | $0.55 | $0.61 | $0.99 | $(0.08 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.23 | ) | $(0.24 | ) | $(0.21 | ) | $(0.15 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.44 | ) | $(0.60 | ) | $(0.56 | ) | $(0.26 | ) | $(0.28 | ) | ||||||||||
Net asset value, end of period (x) | $15.71 | $15.20 | $15.25 | $15.20 | $14.47 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.24 | 3.88 | 4.05 | 6.94 | (c) | (0.48 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.08 | 1.08 | 1.07 | 1.08 | (c) | 1.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.08 | 1.08 | 1.07 | 1.08 | (c) | 1.08 | ||||||||||||||
Net investment income (loss) (l) | 1.30 | 1.55 | 1.31 | 0.97 | (c) | 0.71 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $542,274 | $535,354 | $571,300 | $670,914 | $727,084 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class I | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.60 | $15.64 | $15.57 | $14.82 | $15.17 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.37 | $0.40 | $0.36 | $0.29 | (c) | $0.24 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.76 | 0.31 | 0.43 | 0.87 | (0.17 | ) | ||||||||||||||
Total from investment operations | $1.13 | $0.71 | $0.79 | $1.16 | $0.07 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.38 | ) | $(0.39 | ) | $(0.37 | ) | $(0.30 | ) | $(0.26 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.59 | ) | $(0.75 | ) | $(0.72 | ) | $(0.41 | ) | $(0.42 | ) | ||||||||||
Net asset value, end of period (x) | $16.14 | $15.60 | $15.64 | $15.57 | $14.82 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.34 | 4.89 | 5.13 | 7.99 | (c) | 0.58 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.08 | 0.08 | 0.07 | 0.08 | (c) | 0.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 2.30 | 2.58 | 2.32 | 1.92 | (c) | 1.66 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $400,869 | $367,586 | $358,866 | $271,960 | $203,031 |
See Notes to Financial Statements
33
Table of Contents
Financial Highlights – continued
MFS CONSERVATIVE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R1 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $14.89 | $14.96 | $14.92 | $14.21 | $14.56 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.20 | $0.23 | $0.20 | $0.14 | (c) | $0.10 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.73 | 0.30 | 0.41 | 0.83 | (0.17 | ) | ||||||||||||||
Total from investment operations | $0.93 | $0.53 | $0.61 | $0.97 | $(0.07 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.23 | ) | $(0.24 | ) | $(0.22 | ) | $(0.15 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.44 | ) | $(0.60 | ) | $(0.57 | ) | $(0.26 | ) | $(0.28 | ) | ||||||||||
Net asset value, end of period (x) | $15.38 | $14.89 | $14.96 | $14.92 | $14.21 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.27 | 3.83 | 4.08 | 6.93 | (c) | (0.42 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.08 | 1.08 | 1.07 | 1.08 | (c) | 1.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 1.31 | 1.53 | 1.31 | 0.97 | (c) | 0.71 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $11,468 | $11,465 | $12,794 | $14,641 | $18,875 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R2 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $14.99 | $15.06 | $15.02 | $14.31 | $14.66 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.28 | $0.31 | $0.28 | $0.22 | (c) | $0.17 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.74 | 0.30 | 0.40 | 0.82 | (0.17 | ) | ||||||||||||||
Total from investment operations | $1.02 | $0.61 | $0.68 | $1.04 | $0.00(w | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.31 | ) | $(0.32 | ) | $(0.29 | ) | $(0.22 | ) | $(0.19 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.52 | ) | $(0.68 | ) | $(0.64 | ) | $(0.33 | ) | $(0.35 | ) | ||||||||||
Net asset value, end of period (x) | $15.49 | $14.99 | $15.06 | $15.02 | $14.31 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.81 | 4.34 | 4.58 | 7.44 | (c) | 0.09 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.58 | 0.58 | 0.57 | 0.58 | (c) | 0.58 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.58 | 0.58 | 0.57 | 0.58 | (c) | 0.58 | ||||||||||||||
Net investment income (loss) (l) | 1.81 | 2.06 | 1.81 | 1.48 | (c) | 1.23 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $56,260 | $64,220 | $72,083 | $85,187 | $97,053 |
See Notes to Financial Statements
34
Table of Contents
Financial Highlights – continued
MFS CONSERVATIVE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R3 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.31 | $15.37 | $15.31 | $14.58 | $14.93 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.32 | $0.35 | $0.32 | $0.25 | (c) | $0.21 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.76 | 0.30 | 0.42 | 0.85 | (0.17 | ) | ||||||||||||||
Total from investment operations | $1.08 | $0.65 | $0.74 | $1.10 | $0.04 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.35 | ) | $(0.33 | ) | $(0.26 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.55 | ) | $(0.71 | ) | $(0.68 | ) | $(0.37 | ) | $(0.39 | ) | ||||||||||
Net asset value, end of period (x) | $15.84 | $15.31 | $15.37 | $15.31 | $14.58 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.14 | 4.57 | 4.88 | 7.70 | (c) | 0.34 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.33 | 0.33 | 0.32 | 0.33 | (c) | 0.33 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | 0.33 | (c) | 0.33 | ||||||||||||||
Net investment income (loss) (l) | 2.06 | 2.33 | 2.05 | 1.71 | (c) | 1.46 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $95,119 | $101,884 | $112,696 | $146,688 | $172,074 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R4 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.46 | $15.51 | $15.44 | $14.70 | $15.06 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.36 | $0.41 | $0.37 | $0.29 | (c) | $0.25 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.76 | 0.29 | 0.42 | 0.86 | (0.19 | ) | ||||||||||||||
Total from investment operations | $1.12 | $0.70 | $0.79 | $1.15 | $0.06 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.38 | ) | $(0.39 | ) | $(0.37 | ) | $(0.30 | ) | $(0.26 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.59 | ) | $(0.75 | ) | $(0.72 | ) | $(0.41 | ) | $(0.42 | ) | ||||||||||
Net asset value, end of period (x) | $15.99 | $15.46 | $15.51 | $15.44 | $14.70 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.34 | 4.86 | 5.17 | 7.98 | (c) | 0.52 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.08 | 0.08 | 0.07 | 0.08 | (c) | 0.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 2.29 | 2.65 | 2.36 | 1.95 | (c) | 1.73 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $234,301 | $179,833 | $196,658 | $135,695 | $109,923 |
See Notes to Financial Statements
35
Table of Contents
Financial Highlights – continued
MFS CONSERVATIVE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.36 | $15.41 | $15.35 | $14.62 | $14.97 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.32 | $0.34 | $0.31 | $0.25 | (c) | $0.20 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.76 | 0.32 | 0.43 | 0.84 | (0.17 | ) | ||||||||||||||
Total from investment operations | $1.08 | $0.66 | $0.74 | $1.09 | $0.03 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.35 | ) | $(0.33 | ) | $(0.25 | ) | $(0.22 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.55 | ) | $(0.71 | ) | $(0.68 | ) | $(0.36 | ) | $(0.38 | ) | ||||||||||
Net asset value, end of period (x) | $15.89 | $15.36 | $15.41 | $15.35 | $14.62 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.08 | 4.60 | 4.83 | 7.65 | (c) | 0.30 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.38 | 0.38 | 0.40 | 0.43 | (c) | 0.43 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.36 | 0.37 | 0.36 | 0.37 | (c) | 0.37 | ||||||||||||||
Net investment income (loss) (l) | 2.02 | 2.26 | 2.03 | 1.66 | (c) | 1.41 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $153,384 | $143,581 | $132,290 | $109,297 | $89,761 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class 529B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.10 | $15.16 | $15.11 | $14.39 | $14.74 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.22 | $0.22 | $0.19 | $0.13 | (c) | $0.10 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.75 | 0.31 | 0.42 | 0.84 | (0.18 | ) | ||||||||||||||
Total from investment operations | $0.97 | $0.53 | $0.61 | $0.97 | $(0.08 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.22 | ) | $(0.23 | ) | $(0.21 | ) | $(0.14 | ) | $(0.11 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.43 | ) | $(0.59 | ) | $(0.56 | ) | $(0.25 | ) | $(0.27 | ) | ||||||||||
Net asset value, end of period (x) | $15.64 | $15.10 | $15.16 | $15.11 | $14.39 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.46 | 3.79 | 4.04 | 6.87 | (c) | (0.48 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.97 | 1.13 | 1.15 | 1.18 | (c) | 1.18 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.97 | 1.12 | 1.11 | 1.12 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 1.43 | 1.49 | 1.27 | 0.90 | (c) | 0.68 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $4,301 | $6,256 | $7,414 | $6,852 | $6,349 |
See Notes to Financial Statements
36
Table of Contents
Financial Highlights – continued
MFS CONSERVATIVE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $15.04 | $15.10 | $15.06 | $14.35 | $14.70 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.20 | $0.23 | $0.19 | $0.13 | (c) | $0.09 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.73 | 0.30 | 0.41 | 0.84 | (0.17 | ) | ||||||||||||||
Total from investment operations | $0.93 | $0.53 | $0.60 | $0.97 | $(0.08 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.22 | ) | $(0.23 | ) | $(0.21 | ) | $(0.15 | ) | $(0.11 | ) | ||||||||||
From net realized gain | (0.21 | ) | (0.36 | ) | (0.35 | ) | (0.11 | ) | (0.16 | ) | ||||||||||
Total distributions declared to shareholders | $(0.43 | ) | $(0.59 | ) | $(0.56 | ) | $(0.26 | ) | $(0.27 | ) | ||||||||||
Net asset value, end of period (x) | $15.54 | $15.04 | $15.10 | $15.06 | $14.35 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.20 | 3.82 | 4.00 | 6.84 | (c) | (0.45 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.13 | 1.13 | 1.15 | 1.18 | (c) | 1.18 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.12 | 1.12 | 1.12 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 1.27 | 1.51 | 1.27 | 0.90 | (c) | 0.65 | ||||||||||||||
Portfolio turnover | 12 | 4 | 6 | 3 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $41,425 | $43,352 | $41,601 | $47,113 | $42,328 |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(l) | The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(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
37
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND
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.
Year ended | ||||||||||||||||||||
Class A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.56 | $17.88 | $17.37 | $16.19 | $17.17 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.33 | $0.37 | $0.34 | $0.26 | (c) | $0.20 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.97 | 0.30 | 0.96 | 1.37 | (0.28 | ) | ||||||||||||||
Total from investment operations | $1.30 | $0.67 | $1.30 | $1.63 | $(0.08 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.37 | ) | $(0.38 | ) | $(0.24 | ) | $(0.24 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.84 | ) | $(0.99 | ) | $(0.79 | ) | $(0.45 | ) | $(0.90 | ) | ||||||||||
Net asset value, end of period (x) | $18.02 | $17.56 | $17.88 | $17.37 | $16.19 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.35 | 4.25 | 7.56 | 10.30 | (c) | (0.31 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.34 | 0.34 | 0.33 | 0.34 | (c) | 0.34 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.34 | 0.34 | 0.33 | 0.34 | (c) | 0.33 | ||||||||||||||
Net investment income (loss) (l) | 1.79 | 2.09 | 1.93 | 1.55 | (c) | 1.23 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $3,173,202 | $3,038,919 | $3,071,863 | $3,077,471 | $3,338,645 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.33 | $17.65 | $17.16 | $16.01 | $17.00 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.19 | $0.24 | $0.21 | $0.13 | (c) | $0.08 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.97 | 0.30 | 0.94 | 1.35 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.16 | $0.54 | $1.15 | $1.48 | $(0.21 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.24 | ) | $(0.25 | ) | $(0.12 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.70 | ) | $(0.86 | ) | $(0.66 | ) | $(0.33 | ) | $(0.78 | ) | ||||||||||
Net asset value, end of period (x) | $17.79 | $17.33 | $17.65 | $17.16 | $16.01 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.57 | 3.49 | 6.75 | 9.43 | (c) | (1.09 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.09 | 1.09 | 1.08 | 1.09 | (c) | 1.09 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.09 | 1.09 | 1.08 | 1.09 | (c) | 1.09 | ||||||||||||||
Net investment income (loss) (l) | 1.05 | 1.36 | 1.19 | 0.80 | (c) | 0.50 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $149,969 | $210,011 | $256,958 | $293,064 | $320,406 |
See Notes to Financial Statements
38
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.21 | $17.53 | $17.05 | $15.91 | $16.90 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.18 | $0.23 | $0.21 | $0.13 | (c) | $0.08 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.97 | 0.31 | 0.93 | 1.34 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.15 | $0.54 | $1.14 | $1.47 | $(0.21 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.21 | ) | $(0.24 | ) | $(0.25 | ) | $(0.12 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.71 | ) | $(0.86 | ) | $(0.66 | ) | $(0.33 | ) | $(0.78 | ) | ||||||||||
Net asset value, end of period (x) | $17.65 | $17.21 | $17.53 | $17.05 | $15.91 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.55 | 3.53 | 6.74 | 9.43 | (c) | (1.09 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.09 | 1.09 | 1.08 | 1.09 | (c) | 1.09 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.09 | 1.09 | 1.08 | 1.09 | (c) | 1.09 | ||||||||||||||
Net investment income (loss) (l) | 1.04 | 1.34 | 1.20 | 0.80 | (c) | 0.49 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $874,127 | $917,199 | $990,317 | $1,181,728 | $1,324,402 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class I | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.81 | $18.12 | $17.60 | $16.40 | $17.38 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.37 | $0.42 | $0.40 | $0.29 | (c) | $0.24 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.00 | 0.31 | 0.95 | 1.40 | (0.28 | ) | ||||||||||||||
Total from investment operations | $1.37 | $0.73 | $1.35 | $1.69 | $(0.04 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.39 | ) | $(0.42 | ) | $(0.42 | ) | $(0.28 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.89 | ) | $(1.04 | ) | $(0.83 | ) | $(0.49 | ) | $(0.94 | ) | ||||||||||
Net asset value, end of period (x) | $18.29 | $17.81 | $18.12 | $17.60 | $16.40 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.62 | 4.51 | 7.78 | 10.56 | (c) | (0.06 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.09 | 0.09 | 0.08 | 0.09 | (c) | 0.09 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 2.04 | 2.35 | 2.21 | 1.74 | (c) | 1.49 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $310,815 | $275,276 | $266,965 | $206,826 | $139,038 |
See Notes to Financial Statements
39
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R1 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $16.83 | $17.17 | $16.72 | $15.60 | $16.59 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.18 | $0.23 | $0.21 | $0.13 | (c) | $0.08 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.93 | 0.30 | 0.90 | 1.32 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.11 | $0.53 | $1.11 | $1.45 | $(0.21 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.21 | ) | $(0.25 | ) | $(0.25 | ) | $(0.12 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.71 | ) | $(0.87 | ) | $(0.66 | ) | $(0.33 | ) | $(0.78 | ) | ||||||||||
Net asset value, end of period (x) | $17.23 | $16.83 | $17.17 | $16.72 | $15.60 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.49 | 3.53 | 6.71 | 9.50 | (c) | (1.10 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.09 | 1.09 | 1.08 | 1.09 | (c) | 1.09 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.09 | 1.09 | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 1.03 | 1.37 | 1.21 | 0.81 | (c) | 0.51 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $24,120 | $26,171 | $27,412 | $31,037 | $36,124 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R2 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.16 | $17.49 | $17.01 | $15.86 | $16.85 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.27 | $0.32 | $0.30 | $0.21 | (c) | $0.16 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.96 | 0.30 | 0.92 | 1.35 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.23 | $0.62 | $1.22 | $1.56 | $(0.13 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.30 | ) | $(0.33 | ) | $(0.33 | ) | $(0.20 | ) | $(0.20 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.80 | ) | $(0.95 | ) | $(0.74 | ) | $(0.41 | ) | $(0.86 | ) | ||||||||||
Net asset value, end of period (x) | $17.59 | $17.16 | $17.49 | $17.01 | $15.86 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.06 | 4.02 | 7.27 | 10.04 | (c) | (0.63 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.59 | 0.59 | 0.58 | 0.59 | (c) | 0.59 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.59 | 0.59 | 0.58 | 0.59 | (c) | 0.59 | ||||||||||||||
Net investment income (loss) (l) | 1.53 | 1.84 | 1.69 | 1.31 | (c) | 1.00 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $124,725 | $136,699 | $166,412 | $191,974 | $220,409 |
See Notes to Financial Statements
40
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R3 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.41 | $17.74 | $17.24 | $16.07 | $17.06 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.33 | $0.37 | $0.35 | $0.25 | (c) | $0.20 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.96 | 0.29 | 0.94 | 1.37 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.29 | $0.66 | $1.29 | $1.62 | $(0.09 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.37 | ) | $(0.38 | ) | $(0.24 | ) | $(0.24 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.84 | ) | $(0.99 | ) | $(0.79 | ) | $(0.45 | ) | $(0.90 | ) | ||||||||||
Net asset value, end of period (x) | $17.86 | $17.41 | $17.74 | $17.24 | $16.07 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.35 | 4.22 | 7.56 | 10.31 | (c) | (0.37 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.34 | 0.34 | 0.33 | 0.34 | (c) | 0.34 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | 0.34 | 0.33 | 0.34 | (c) | N/A | ||||||||||||||
Net investment income (loss) (l) | 1.83 | 2.09 | 1.95 | 1.53 | (c) | 1.23 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $219,996 | $270,597 | $312,677 | $344,821 | $364,025 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R4 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.54 | $17.86 | $17.36 | $16.18 | $17.17 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.37 | $0.44 | $0.39 | $0.30 | (c) | $0.25 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.98 | 0.28 | 0.94 | 1.37 | (0.30 | ) | ||||||||||||||
Total from investment operations | $1.35 | $0.72 | $1.33 | $1.67 | $(0.05 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.39 | ) | $(0.42 | ) | $(0.42 | ) | $(0.28 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.89 | ) | $(1.04 | ) | $(0.83 | ) | $(0.49 | ) | $(0.94 | ) | ||||||||||
Net asset value, end of period (x) | $18.00 | $17.54 | $17.86 | $17.36 | $16.18 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.62 | 4.52 | 7.78 | 10.58 | (c) | (0.12 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.09 | 0.09 | 0.08 | 0.09 | (c) | 0.08 | ||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Net investment income (loss) (l) | 2.04 | 2.50 | 2.21 | 1.80 | (c) | 1.51 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $252,825 | $210,597 | $280,436 | $264,589 | $249,128 |
See Notes to Financial Statements
41
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.46 | $17.79 | $17.29 | $16.11 | $17.10 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.31 | $0.36 | $0.34 | $0.25 | (c) | $0.19 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.99 | 0.29 | 0.94 | 1.37 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.30 | $0.65 | $1.28 | $1.62 | $(0.10 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.36 | ) | $(0.37 | ) | $(0.23 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.84 | ) | $(0.98 | ) | $(0.78 | ) | $(0.44 | ) | $(0.89 | ) | ||||||||||
Net asset value, end of period (x) | $17.92 | $17.46 | $17.79 | $17.29 | $16.11 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 7.34 | 4.18 | 7.50 | 10.31 | (c) | (0.41 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.39 | 0.39 | 0.41 | 0.44 | (c) | 0.44 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.38 | 0.38 | 0.37 | 0.38 | (c) | 0.38 | ||||||||||||||
Net investment income (loss) (l) | 1.74 | 2.05 | 1.89 | 1.50 | (c) | 1.18 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $248,006 | $233,915 | $230,464 | $210,075 | $198,159 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class 529B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.14 | $17.47 | $16.99 | $15.86 | $16.85 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.19 | $0.23 | $0.20 | $0.12 | (c) | $0.07 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.97 | 0.29 | 0.93 | 1.34 | (0.28 | ) | ||||||||||||||
Total from investment operations | $1.16 | $0.52 | $1.13 | $1.46 | $(0.21 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.23 | ) | $(0.24 | ) | $(0.12 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.70 | ) | $(0.85 | ) | $(0.65 | ) | $(0.33 | ) | $(0.78 | ) | ||||||||||
Net asset value, end of period (x) | $17.60 | $17.14 | $17.47 | $16.99 | $15.86 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.63 | 3.44 | 6.73 | 9.37 | (c) | (1.13 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.03 | 1.14 | 1.16 | 1.19 | (c) | 1.19 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.02 | 1.13 | 1.12 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 1.09 | 1.33 | 1.15 | 0.76 | (c) | 0.43 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $7,258 | $8,882 | $11,056 | $14,214 | $16,727 |
See Notes to Financial Statements
42
Table of Contents
Financial Highlights – continued
MFS MODERATE ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $17.01 | $17.35 | $16.89 | $15.76 | $16.76 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.17 | $0.22 | $0.20 | $0.12 | (c) | $0.07 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.96 | 0.29 | 0.92 | 1.34 | (0.29 | ) | ||||||||||||||
Total from investment operations | $1.13 | $0.51 | $1.12 | $1.46 | $(0.22 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.23 | ) | $(0.25 | ) | $(0.12 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.50 | ) | (0.62 | ) | (0.41 | ) | (0.21 | ) | (0.66 | ) | ||||||||||
Total distributions declared to shareholders | $(0.70 | ) | $(0.85 | ) | $(0.66 | ) | $(0.33 | ) | $(0.78 | ) | ||||||||||
Net asset value, end of period (x) | $17.44 | $17.01 | $17.35 | $16.89 | $15.76 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.52 | 3.43 | 6.67 | 9.48 | (c) | (1.18 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.14 | 1.14 | 1.16 | 1.19 | (c) | 1.19 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.14 | 1.13 | 1.13 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 0.99 | 1.32 | 1.15 | 0.74 | (c) | 0.42 | ||||||||||||||
Portfolio turnover | 8 | 2 | 2 | 1 | 2 | |||||||||||||||
Net assets at end of period (000 omitted) | $65,063 | $71,615 | $75,337 | $79,047 | $81,302 |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(l) | The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(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
43
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND
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.
Year ended | ||||||||||||||||||||
Class A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.26 | $20.87 | $19.84 | $18.02 | $19.10 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.33 | $0.38 | $0.36 | $0.25 | (c) | $0.18 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.03 | 0.21 | 1.66 | 2.09 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.36 | $0.59 | $2.02 | $2.34 | $(0.24 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.39 | ) | $(0.40 | ) | $(0.22 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(1.05 | ) | $(1.20 | ) | $(0.99 | ) | $(0.52 | ) | $(0.84 | ) | ||||||||||
Net asset value, end of period (x) | $20.57 | $20.26 | $20.87 | $19.84 | $18.02 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.41 | 3.58 | 10.27 | 13.26 | (c) | (1.13 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.36 | 0.36 | 0.35 | 0.36 | (c) | 0.36 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.35 | 0.35 | 0.35 | 0.35 | (c) | 0.35 | ||||||||||||||
Net investment income (loss) (l) | 1.57 | 1.87 | 1.72 | 1.34 | (c) | 1.00 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,944,439 | $2,852,131 | $2,852,681 | $2,758,650 | $2,915,599 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.08 | $20.65 | $19.64 | $17.83 | $18.89 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.17 | $0.23 | $0.20 | $0.11 | (c) | $0.05 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.00 | 0.23 | 1.64 | 2.08 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.17 | $0.46 | $1.84 | $2.19 | $(0.37 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.15 | ) | $(0.22 | ) | $(0.24 | ) | $(0.08 | ) | $(0.13 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.86 | ) | $(1.03 | ) | $(0.83 | ) | $(0.38 | ) | $(0.69 | ) | ||||||||||
Net asset value, end of period (x) | $20.39 | $20.08 | $20.65 | $19.64 | $17.83 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.56 | 2.85 | 9.42 | 12.43 | (c) | (1.85 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.11 | 1.11 | 1.10 | 1.11 | (c) | 1.11 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.10 | 1.10 | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.83 | 1.13 | 0.98 | 0.58 | (c) | 0.26 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $126,962 | $177,893 | $214,832 | $237,525 | $258,674 |
See Notes to Financial Statements
44
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $19.85 | $20.43 | $19.44 | $17.66 | $18.73 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.17 | $0.23 | $0.20 | $0.11 | (c) | $0.04 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.99 | 0.22 | 1.62 | 2.05 | (0.40 | ) | ||||||||||||||
Total from investment operations | $1.16 | $0.45 | $1.82 | $2.16 | $(0.36 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.18 | ) | $(0.22 | ) | $(0.24 | ) | $(0.08 | ) | $(0.15 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.89 | ) | $(1.03 | ) | $(0.83 | ) | $(0.38 | ) | $(0.71 | ) | ||||||||||
Net asset value, end of period (x) | $20.12 | $19.85 | $20.43 | $19.44 | $17.66 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.56 | 2.84 | 9.43 | 12.44 | (c) | (1.85 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.11 | 1.11 | 1.10 | 1.11 | (c) | 1.11 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.10 | 1.10 | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.82 | 1.13 | 1.00 | 0.59 | (c) | 0.25 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $694,541 | $714,230 | $764,750 | $934,658 | $1,001,877 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class I | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.45 | $21.06 | $20.02 | $18.17 | $19.26 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.38 | $0.44 | $0.42 | $0.29 | (c) | $0.22 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.05 | 0.21 | 1.66 | 2.13 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.43 | $0.65 | $2.08 | $2.42 | $(0.20 | ) | ||||||||||||||
Less distributions declared to shareholders | �� | |||||||||||||||||||
From net investment income | $(0.39 | ) | $(0.45 | ) | $(0.45 | ) | $(0.27 | ) | $(0.33 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(1.10 | ) | $(1.26 | ) | $(1.04 | ) | $(0.57 | ) | $(0.89 | ) | ||||||||||
Net asset value, end of period (x) | $20.78 | $20.45 | $21.06 | $20.02 | $18.17 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.69 | 3.84 | 10.50 | 13.61 | (c) | (0.93 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.11 | 0.11 | 0.10 | 0.11 | (c) | 0.11 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.10 | 0.10 | N/A | 0.10 | (c) | 0.10 | ||||||||||||||
Net investment income (loss) (l) | 1.80 | 2.13 | 1.99 | 1.53 | (c) | 1.24 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $294,213 | $237,232 | $195,227 | $151,865 | $101,044 |
See Notes to Financial Statements
45
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R1 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $19.42 | $20.02 | $19.07 | $17.32 | $18.38 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.16 | $0.23 | $0.19 | $0.11 | (c) | $0.04 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.98 | 0.21 | 1.59 | 2.02 | (0.41 | ) | ||||||||||||||
Total from investment operations | $1.14 | $0.44 | $1.78 | $2.13 | $(0.37 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.16 | ) | $(0.23 | ) | $(0.24 | ) | $(0.08 | ) | $(0.13 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.87 | ) | $(1.04 | ) | $(0.83 | ) | $(0.38 | ) | $(0.69 | ) | ||||||||||
Net asset value, end of period (x) | $19.69 | $19.42 | $20.02 | $19.07 | $17.32 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.59 | 2.85 | 9.40 | 12.48 | (c) | (1.91 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.11 | 1.11 | 1.10 | 1.11 | (c) | 1.11 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.10 | N/A | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.82 | 1.18 | 0.96 | 0.60 | (c) | 0.25 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $19,543 | $23,326 | $30,764 | $33,854 | $38,652 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R2 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $19.78 | $20.39 | $19.41 | $17.63 | $18.70 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.27 | $0.33 | $0.30 | $0.20 | (c) | $0.13 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.00 | 0.21 | 1.61 | 2.06 | (0.41 | ) | ||||||||||||||
Total from investment operations | $1.27 | $0.54 | $1.91 | $2.26 | $(0.28 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.28 | ) | $(0.34 | ) | $(0.34 | ) | $(0.18 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.99 | ) | $(1.15 | ) | $(0.93 | ) | $(0.48 | ) | $(0.79 | ) | ||||||||||
Net asset value, end of period (x) | $20.06 | $19.78 | $20.39 | $19.41 | $17.63 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.12 | 3.34 | 9.94 | 13.03 | (c) | (1.40 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.61 | 0.61 | 0.60 | 0.61 | (c) | 0.61 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.60 | 0.60 | 0.60 | 0.60 | (c) | 0.60 | ||||||||||||||
Net investment income (loss) (l) | 1.30 | 1.64 | 1.46 | 1.10 | (c) | 0.76 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $123,459 | $138,541 | $160,632 | $182,744 | $196,320 |
See Notes to Financial Statements
46
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R3 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.08 | $20.69 | $19.68 | $17.87 | $18.95 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.33 | $0.39 | $0.36 | $0.25 | (c) | $0.18 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.01 | 0.20 | 1.64 | 2.08 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.34 | $0.59 | $2.00 | $2.33 | $(0.24 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.39 | ) | $(0.40 | ) | $(0.22 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(1.05 | ) | $(1.20 | ) | $(0.99 | ) | $(0.52 | ) | $(0.84 | ) | ||||||||||
Net asset value, end of period (x) | $20.37 | $20.08 | $20.69 | $19.68 | $17.87 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.35 | 3.59 | 10.25 | 13.32 | (c) | (1.16 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.36 | 0.36 | 0.35 | 0.36 | (c) | 0.36 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.35 | 0.35 | 0.35 | 0.35 | (c) | 0.35 | ||||||||||||||
Net investment income (loss) (l) | 1.59 | 1.90 | 1.75 | 1.34 | (c) | 1.02 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $147,888 | $170,299 | $202,407 | $235,279 | $242,669 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R4 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.24 | $20.86 | $19.84 | $18.01 | $19.09 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.38 | $0.44 | $0.39 | $0.29 | (c) | $0.23 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.03 | 0.20 | 1.67 | 2.11 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.41 | $0.64 | $2.06 | $2.40 | $(0.19 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.39 | ) | $(0.45 | ) | $(0.45 | ) | $(0.27 | ) | $(0.33 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(1.10 | ) | $(1.26 | ) | $(1.04 | ) | $(0.57 | ) | $(0.89 | ) | ||||||||||
Net asset value, end of period (x) | $20.55 | $20.24 | $20.86 | $19.84 | $18.01 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.66 | 3.83 | 10.50 | 13.62 | (c) | (0.88 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.11 | 0.11 | 0.10 | 0.11 | (c) | 0.10 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.10 | 0.10 | N/A | 0.10 | (c) | 0.10 | ||||||||||||||
Net investment income (loss) (l) | 1.81 | 2.16 | 1.90 | 1.55 | (c) | 1.27 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $264,076 | $232,530 | $230,032 | $243,760 | $210,248 |
See Notes to Financial Statements
47
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $20.09 | $20.70 | $19.70 | $17.89 | $18.97 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.32 | $0.37 | $0.34 | $0.24 | (c) | $0.17 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.01 | 0.22 | 1.65 | 2.09 | (0.42 | ) | ||||||||||||||
Total from investment operations | $1.33 | $0.59 | $1.99 | $2.33 | $(0.25 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.33 | ) | $(0.39 | ) | $(0.40 | ) | $(0.22 | ) | $(0.27 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(1.04 | ) | $(1.20 | ) | $(0.99 | ) | $(0.52 | ) | $(0.83 | ) | ||||||||||
Net asset value, end of period (x) | $20.38 | $20.09 | $20.70 | $19.70 | $17.89 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.33 | 3.57 | 10.17 | 13.27 | (c) | (1.19 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.41 | 0.41 | 0.42 | 0.46 | (c) | 0.46 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.39 | 0.39 | 0.39 | 0.39 | (c) | 0.39 | ||||||||||||||
Net investment income (loss) (l) | 1.53 | 1.83 | 1.68 | 1.28 | (c) | 0.96 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $261,099 | $244,869 | $236,768 | $211,825 | $195,856 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class 529B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $19.86 | $20.45 | $19.46 | $17.67 | $18.72 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.16 | $0.21 | $0.19 | $0.10 | (c) | $0.04 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.99 | 0.23 | 1.63 | 2.05 | (0.41 | ) | ||||||||||||||
Total from investment operations | $1.15 | $0.44 | $1.82 | $2.15 | $(0.37 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.15 | ) | $(0.22 | ) | $(0.24 | ) | $(0.06 | ) | $(0.12 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.86 | ) | $(1.03 | ) | $(0.83 | ) | $(0.36 | ) | $(0.68 | ) | ||||||||||
Net asset value, end of period (x) | $20.15 | $19.86 | $20.45 | $19.46 | $17.67 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.52 | 2.77 | 9.40 | 12.36 | (c) | (1.91 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.16 | 1.16 | 1.18 | 1.21 | (c) | 1.21 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.15 | 1.15 | 1.15 | 1.15 | (c) | 1.14 | ||||||||||||||
Net investment income (loss) (l) | 0.78 | 1.07 | 0.93 | 0.53 | (c) | 0.24 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $8,702 | $10,820 | $11,943 | $12,439 | $13,405 |
See Notes to Financial Statements
48
Table of Contents
Financial Highlights – continued
MFS GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $19.56 | $20.16 | $19.21 | $17.46 | $18.53 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.16 | $0.21 | $0.19 | $0.10 | (c) | $0.04 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.98 | 0.21 | 1.60 | 2.03 | (0.41 | ) | ||||||||||||||
Total from investment operations | $1.14 | $0.42 | $1.79 | $2.13 | $(0.37 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.17 | ) | $(0.21 | ) | $(0.25 | ) | $(0.08 | ) | $(0.14 | ) | ||||||||||
From net realized gain | (0.71 | ) | (0.81 | ) | (0.59 | ) | (0.30 | ) | (0.56 | ) | ||||||||||
Total distributions declared to shareholders | $(0.88 | ) | $(1.02 | ) | $(0.84 | ) | $(0.38 | ) | $(0.70 | ) | ||||||||||
Net asset value, end of period (x) | $19.82 | $19.56 | $20.16 | $19.21 | $17.46 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.57 | 2.74 | 9.37 | 12.38 | (c) | (1.92 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.16 | 1.16 | 1.17 | 1.21 | (c) | 1.21 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.14 | 1.14 | 1.14 | 1.15 | (c) | 1.15 | ||||||||||||||
Net investment income (loss) (l) | 0.79 | 1.08 | 0.94 | 0.53 | (c) | 0.21 | ||||||||||||||
Portfolio turnover | 4 | 3 | 2 | 1 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $57,107 | $61,352 | $70,345 | $74,292 | $71,170 |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(l) | The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(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
49
Table of Contents
Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND
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.
Year ended | ||||||||||||||||||||
Class A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.94 | $23.63 | $21.80 | $19.47 | $20.78 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.28 | $0.34 | $0.30 | $0.20 | (c) | $0.12 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.18 | 0.16 | 2.47 | 2.70 | (0.44 | ) | ||||||||||||||
Total from investment operations | $1.46 | $0.50 | $2.77 | $2.90 | $(0.32 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.29 | ) | $(0.34 | ) | $(0.32 | ) | $(0.20 | ) | $(0.31 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.17 | ) | $(1.19 | ) | $(0.94 | ) | $(0.57 | ) | $(0.99 | ) | ||||||||||
Net asset value, end of period (x) | $23.23 | $22.94 | $23.63 | $21.80 | $19.47 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.97 | 2.82 | 12.82 | 15.22 | (c) | (1.45 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.41 | 0.40 | 0.39 | 0.40 | (c) | 0.40 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.38 | 0.38 | 0.38 | 0.38 | (c) | 0.38 | ||||||||||||||
Net investment income (loss) (l) | 1.18 | 1.47 | 1.30 | 0.99 | (c) | 0.63 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $928,555 | $869,146 | $859,070 | $778,995 | $785,986 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.60 | $23.26 | $21.46 | $19.16 | $20.46 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.10 | $0.17 | $0.13 | $0.05 | (c) | $(0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.15 | 0.17 | 2.43 | 2.66 | (0.46 | ) | ||||||||||||||
Total from investment operations | $1.25 | $0.34 | $2.56 | $2.71 | $(0.48 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.15 | ) | $(0.14 | ) | $(0.04 | ) | $(0.14 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(0.97 | ) | $(1.00 | ) | $(0.76 | ) | $(0.41 | ) | $(0.82 | ) | ||||||||||
Net asset value, end of period (x) | $22.88 | $22.60 | $23.26 | $21.46 | $19.16 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.18 | 2.03 | 12.02 | 14.39 | (c) | (2.26 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.16 | 1.15 | 1.14 | 1.15 | (c) | 1.15 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.13 | 1.13 | 1.13 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 0.44 | 0.73 | 0.57 | 0.23 | (c) | (0.11 | ) | |||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $41,016 | $52,512 | $61,264 | $65,287 | $71,184 |
See Notes to Financial Statements
50
Table of Contents
Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.36 | $23.02 | $21.26 | $18.99 | $20.30 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.09 | $0.16 | $0.13 | $0.05 | (c) | $(0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.15 | 0.18 | 2.40 | 2.64 | (0.45 | ) | ||||||||||||||
Total from investment operations | $1.24 | $0.34 | $2.53 | $2.69 | $(0.47 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.11 | ) | $(0.15 | ) | $(0.15 | ) | $(0.05 | ) | $(0.16 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(0.99 | ) | $(1.00 | ) | $(0.77 | ) | $(0.42 | ) | $(0.84 | ) | ||||||||||
Net asset value, end of period (x) | $22.61 | $22.36 | $23.02 | $21.26 | $18.99 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.20 | 2.04 | 11.97 | 14.42 | (c) | (2.24 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.16 | 1.15 | 1.14 | 1.15 | (c) | 1.15 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.13 | 1.13 | 1.13 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 0.41 | 0.72 | 0.58 | 0.24 | (c) | (0.12 | ) | |||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $234,144 | $221,719 | $227,357 | $274,450 | $282,953 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class I | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $23.33 | $24.02 | $22.14 | $19.77 | $21.09 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.35 | $0.39 | $0.37 | $0.25 | (c) | $0.18 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.20 | 0.17 | 2.51 | 2.74 | (0.46 | ) | ||||||||||||||
Total from investment operations | $1.55 | $0.56 | $2.88 | $2.99 | $(0.28 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.35 | ) | $(0.40 | ) | $(0.38 | ) | $(0.25 | ) | $(0.36 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.23 | ) | $(1.25 | ) | $(1.00 | ) | $(0.62 | ) | $(1.04 | ) | ||||||||||
Net asset value, end of period (x) | $23.65 | $23.33 | $24.02 | $22.14 | $19.77 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.24 | 3.05 | 13.11 | 15.49 | (c) | (1.23 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.16 | 0.15 | 0.14 | 0.15 | (c) | 0.15 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.13 | 0.13 | 0.13 | 0.13 | (c) | 0.13 | ||||||||||||||
Net investment income (loss) (l) | 1.46 | 1.67 | 1.58 | 1.19 | (c) | 0.89 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $178,491 | $167,527 | $142,897 | $112,479 | $62,542 |
See Notes to Financial Statements
51
Table of Contents
Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R1 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.00 | $22.69 | $20.97 | $18.74 | $20.03 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.09 | $0.15 | $0.12 | $0.05 | (c) | $(0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.13 | 0.18 | 2.37 | 2.60 | (0.44 | ) | ||||||||||||||
Total from investment operations | $1.22 | $0.33 | $2.49 | $2.65 | $(0.46 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.17 | ) | $(0.15 | ) | $(0.05 | ) | $(0.15 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(0.97 | ) | $(1.02 | ) | $(0.77 | ) | $(0.42 | ) | $(0.83 | ) | ||||||||||
Net asset value, end of period (x) | $22.25 | $22.00 | $22.69 | $20.97 | $18.74 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.21 | 2.03 | 11.94 | 14.42 | (c) | (2.21 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.16 | 1.15 | 1.14 | 1.15 | (c) | 1.15 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.13 | 1.13 | 1.13 | 1.13 | (c) | 1.13 | ||||||||||||||
Net investment income (loss) (l) | 0.40 | 0.69 | 0.53 | 0.27 | (c) | (0.12 | ) | |||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $14,484 | $17,093 | $17,228 | $16,835 | $17,908 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R2 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.44 | $23.13 | $21.36 | $19.08 | $20.38 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.21 | $0.28 | $0.25 | $0.15 | (c) | $0.08 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.16 | 0.16 | 2.40 | 2.64 | (0.45 | ) | ||||||||||||||
Total from investment operations | $1.37 | $0.44 | $2.65 | $2.79 | $(0.37 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.22 | ) | $(0.28 | ) | $(0.26 | ) | $(0.14 | ) | $(0.25 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.10 | ) | $(1.13 | ) | $(0.88 | ) | $(0.51 | ) | $(0.93 | ) | ||||||||||
Net asset value, end of period (x) | $22.71 | $22.44 | $23.13 | $21.36 | $19.08 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.73 | 2.56 | 12.50 | 14.96 | (c) | (1.69 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.66 | 0.65 | 0.64 | 0.65 | (c) | 0.65 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.63 | 0.63 | 0.63 | 0.63 | (c) | 0.63 | ||||||||||||||
Net investment income (loss) (l) | 0.91 | 1.23 | 1.09 | 0.76 | (c) | 0.40 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $55,453 | $63,038 | $70,426 | $77,558 | $82,546 |
See Notes to Financial Statements
52
Table of Contents
Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class R3 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.75 | $23.44 | $21.63 | $19.31 | $20.62 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.29 | $0.34 | $0.30 | $0.19 | (c) | $0.12 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.17 | 0.15 | 2.45 | 2.69 | (0.45 | ) | ||||||||||||||
Total from investment operations | $1.46 | $0.49 | $2.75 | $2.88 | $(0.33 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.29 | ) | $(0.33 | ) | $(0.32 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.17 | ) | $(1.18 | ) | $(0.94 | ) | $(0.56 | ) | $(0.98 | ) | ||||||||||
Net asset value, end of period (x) | $23.04 | $22.75 | $23.44 | $21.63 | $19.31 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.00 | 2.78 | 12.82 | 15.28 | (c) | (1.47 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.41 | 0.40 | 0.39 | 0.40 | (c) | 0.40 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.38 | 0.38 | 0.38 | 0.38 | (c) | 0.38 | ||||||||||||||
Net investment income (loss) (l) | 1.20 | 1.48 | 1.33 | 0.94 | (c) | 0.65 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $87,315 | $97,866 | $137,905 | $142,459 | $158,309 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class R4 | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $23.01 | $23.71 | $21.87 | $19.53 | $20.85 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.34 | $0.39 | $0.35 | $0.25 | (c) | $0.16 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.20 | 0.16 | 2.49 | 2.71 | (0.44 | ) | ||||||||||||||
Total from investment operations | $1.54 | $0.55 | $2.84 | $2.96 | $(0.28 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.35 | ) | $(0.40 | ) | $(0.38 | ) | $(0.25 | ) | $(0.36 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.23 | ) | $(1.25 | ) | $(1.00 | ) | $(0.62 | ) | $(1.04 | ) | ||||||||||
Net asset value, end of period (x) | $23.32 | $23.01 | $23.71 | $21.87 | $19.53 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.29 | 3.05 | 13.09 | 15.53 | (c) | (1.24 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.16 | 0.15 | 0.14 | 0.15 | (c) | 0.14 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.13 | 0.13 | 0.13 | 0.13 | (c) | 0.13 | ||||||||||||||
Net investment income (loss) (l) | 1.44 | 1.69 | 1.53 | 1.23 | (c) | 0.80 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $137,680 | $109,384 | $91,311 | $72,011 | $60,355 |
See Notes to Financial Statements
53
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Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529A | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.77 | $23.47 | $21.66 | $19.34 | $20.66 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.27 | $0.33 | $0.29 | $0.19 | (c) | $0.11 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.17 | 0.15 | 2.45 | 2.69 | (0.45 | ) | ||||||||||||||
Total from investment operations | $1.44 | $0.48 | $2.74 | $2.88 | $(0.34 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.28 | ) | $(0.33 | ) | $(0.31 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(1.16 | ) | $(1.18 | ) | $(0.93 | ) | $(0.56 | ) | $(0.98 | ) | ||||||||||
Net asset value, end of period (x) | $23.05 | $22.77 | $23.47 | $21.66 | $19.34 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.93 | 2.75 | 12.78 | 15.23 | (c) | (1.54 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.46 | 0.45 | 0.46 | 0.50 | (c) | 0.50 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.42 | 0.42 | 0.42 | 0.42 | (c) | 0.42 | ||||||||||||||
Net investment income (loss) (l) | 1.14 | 1.44 | 1.26 | 0.93 | (c) | 0.59 | ||||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $154,654 | $145,819 | $146,874 | $129,294 | $128,357 | |||||||||||||||
Year ended | ||||||||||||||||||||
Class 529B | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.31 | $22.98 | $21.22 | $18.94 | $20.23 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d)(l) | $0.09 | $0.16 | $0.11 | $0.04 | (c) | $(0.03 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.13 | 0.17 | 2.40 | 2.62 | (0.44 | ) | ||||||||||||||
Total from investment operations | $1.22 | $0.33 | $2.51 | $2.66 | $(0.47 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.15 | ) | $(0.13 | ) | $(0.01 | ) | $(0.14 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(0.94 | ) | $(1.00 | ) | $(0.75 | ) | $(0.38 | ) | $(0.82 | ) | ||||||||||
Net asset value, end of period (x) | $22.59 | $22.31 | $22.98 | $21.22 | $18.94 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.15 | 2.00 | 11.92 | 14.29 | (c) | (2.23 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.21 | 1.20 | 1.21 | 1.25 | (c) | 1.25 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.18 | 1.18 | 1.18 | 1.18 | (c) | 1.18 | ||||||||||||||
Net investment income (loss) (l) | 0.40 | 0.72 | 0.49 | 0.18 | (c) | (0.15 | ) | |||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,924 | $4,253 | $5,021 | $5,357 | $6,868 |
See Notes to Financial Statements
54
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Financial Highlights – continued
MFS AGGRESSIVE GROWTH ALLOCATION FUND – continued
Year ended | ||||||||||||||||||||
Class 529C | 5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | |||||||||||||||
Net asset value, beginning of period | $22.00 | $22.68 | $20.97 | $18.73 | $20.04 | |||||||||||||||
Income (loss) from investment operations | �� | |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.09 | $0.16 | $0.12 | $0.04 | (c) | $(0.03 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.13 | 0.16 | 2.36 | 2.60 | (0.44 | ) | ||||||||||||||
Total from investment operations | $1.22 | $0.32 | $2.48 | $2.64 | $(0.47 | ) | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.10 | ) | $(0.15 | ) | $(0.15 | ) | $(0.03 | ) | $(0.16 | ) | ||||||||||
From net realized gain | (0.88 | ) | (0.85 | ) | (0.62 | ) | (0.37 | ) | (0.68 | ) | ||||||||||
Total distributions declared to shareholders | $(0.98 | ) | $(1.00 | ) | $(0.77 | ) | $(0.40 | ) | $(0.84 | ) | ||||||||||
Net asset value, end of period (x) | $22.24 | $22.00 | $22.68 | $20.97 | $18.73 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.17 | 1.99 | 11.90 | 14.37 | (c) | (2.27 | ) | |||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.21 | 1.20 | 1.21 | 1.25 | (c) | 1.25 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.17 | 1.17 | 1.17 | 1.17 | (c) | 1.17 | ||||||||||||||
Net investment income (loss) (l) | 0.40 | 0.72 | 0.55 | 0.19 | (c) | (0.15 | ) | |||||||||||||
Portfolio turnover | 6 | 5 | 2 | 2 | 5 | |||||||||||||||
Net assets at end of period (000 omitted) | $21,923 | $27,617 | $31,322 | $34,237 | $37,772 |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(l) | The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(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
55
Table of Contents
(1) | Business and Organization |
MFS Conservative Allocation Fund, MFS Moderate Allocation Fund, MFS Growth Allocation Fund, and MFS Aggressive Growth Allocation Fund (the funds) are each a diversified series of MFS Series Trust X (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.
Each 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 each fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Each fund is a “fund of funds”, which invests the majority of its assets in other MFS mutual funds (hereafter referred to as “underlying affiliated funds” or “underlying funds”), which may have different fiscal year ends than the funds. The underlying funds, in turn, may engage in a number of investment techniques and practices, which involve certain risks. Certain underlying funds invest their portfolio in high-yield securities rated below investment grade. Investments in below investment grade quality securities can involve a substantially greater risk of default or can already be in default, and their values can decline significantly. Below investment grade quality securities tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. Certain underlying funds invest a significant portion of their 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. Certain underlying funds invest 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, 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, and accounting systems, and greater political, social, and economic instability than developed markets.
The accounting policies of the underlying funds in which each fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov. The underlying funds’ shareholder reports are not covered by this report.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on each fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
Investment Valuations – Open-end investment companies (underlying funds) are generally valued at their net asset value per share. The investments of underlying funds managed by the adviser are valued as described below. For purposes of this policy disclosure, “fund” also refers to the underlying funds in which the fund-of-funds invests.
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 which there were no sales reported for 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. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Debt instruments sold short are generally valued at an evaluated or composite mean as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less
56
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Notes to Financial Statements – continued
may be valued at amortized cost, which approximates market value. Exchange-traded options are generally valued at the last sale or official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. For put options, the position may be valued at the last daily ask quotation if there are no trades reported during the day. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. 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. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Swap agreements are generally valued using valuations provided by a third-party pricing service, which for cleared swaps includes an evaluation of any trading activity at the clearinghouses. Open-end investment companies are generally valued at net asset value per share. Securities and other assets, including commodity-linked structured notes, 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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 each 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. Each 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 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 May 31, 2020 in valuing each fund’s assets or liabilities:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
MFS Conservative Allocation Fund | ||||||||||||||||
Financial Instruments | ||||||||||||||||
Mutual Funds | $3,018,886,787 | $— | $— | $3,018,886,787 | ||||||||||||
MFS Moderate Allocation Fund | ||||||||||||||||
Financial Instruments | ||||||||||||||||
Mutual Funds | $5,450,784,403 | $— | $— | $5,450,784,403 |
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Level 1 | Level 2 | Level 3 | Total | |||||||||||||
MFS Growth Allocation Fund | ||||||||||||||||
Financial Instruments | ||||||||||||||||
Mutual Funds | $4,941,714,949 | $— | $— | $4,941,714,949 | ||||||||||||
MFS Aggressive Growth Allocation Fund | ||||||||||||||||
Financial Instruments | ||||||||||||||||
Mutual Funds | $1,857,449,545 | $— | $— | $1,857,449,545 |
For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the underlying funds’ shareholder reports for further information regarding the levels used in valuing the underlying funds’ assets or liabilities.
Derivatives – Each fund does not invest in derivatives directly. Each fund does invest in underlying funds that may use 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 underlying funds use 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.
Indemnifications – Under each 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 each fund. Additionally, in the normal course of business, each fund enters into agreements with service providers that may contain indemnification clauses. Each fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against each fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. 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. Distributions of income and capital gains from the underlying funds are recorded on the ex-dividend date. Recognition of net investment income by each fund is affected by the timing of the declaration of distributions by the underlying funds in which each fund invests. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
Each fund and/or the underlying funds may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statements 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 Statements of Operations.
Tax Matters and Distributions – Each 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. Each 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 each 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.
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 5/31/20 | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Ordinary income (including any short-term capital gains) | $66,046,949 | $113,934,440 | $88,944,802 | $24,821,522 | ||||||||||||
Long-term capital gains | 34,039,915 | 133,463,976 | 150,001,752 | 63,599,671 | ||||||||||||
Total distributions | $100,086,864 | $247,398,416 | $238,946,554 | $88,421,193 | ||||||||||||
Year ended 5/31/19 | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Ordinary income (including any short-term capital gains) | $65,209,159 | $113,455,904 | $90,340,261 | $26,158,756 | ||||||||||||
Long-term capital gains | 63,486,006 | 182,901,230 | 182,788,180 | 59,699,856 | ||||||||||||
Total distributions | $128,695,165 | $296,357,134 | $273,128,441 | $85,858,612 |
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Notes to Financial Statements – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Cost of investments | $2,402,004,856 | $3,944,965,834 | $3,247,751,755 | $1,113,676,144 | ||||||||||||
Gross appreciation | 642,515,365 | 1,616,511,591 | 1,830,826,225 | 787,443,464 | ||||||||||||
Gross depreciation | (25,633,434 | ) | (110,693,022 | ) | (136,863,031 | ) | (43,670,063 | ) | ||||||||
Net unrealized appreciation (depreciation) | $616,881,931 | $1,505,818,569 | $1,693,963,194 | $743,773,401 | ||||||||||||
Undistributed ordinary income | 7,767,941 | 11,460,096 | 5,134,268 | 438,266 | ||||||||||||
Undistributed long-term capital gain | 28,387,809 | 82,955,062 | 89,610,367 | 38,877,034 | ||||||||||||
Late year ordinary loss deferral | — | — | — | (1,949,222 | ) |
Multiple Classes of Shares of Beneficial Interest – Each fund offers multiple classes of shares, which differ in their respective distribution, service, and program manager fees. Each 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 529B shares will convert to Class A and Class 529A shares, respectively, approximately eight years after purchase. Class C and Class 529C shares will convert to Class A and Class 529A shares, respectively, approximately ten years after purchase. Each fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
MFS Conservative | MFS Moderate | MFS Growth | MFS Aggressive Growth | |||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||
Class A | $47,576,968 | $58,993,685 | $145,270,997 | $165,852,535 | $145,230,645 | $161,119,061 | $44,373,842 | $42,288,127 | ||||||||
Class B | 2,168,533 | 4,031,465 | 7,035,610 | 11,157,562 | 6,304,726 | 9,708,383 | 1,963,075 | 2,406,474 | ||||||||
Class C | 15,108,015 | 21,270,652 | 35,745,540 | 45,458,183 | 30,264,583 | 36,652,049 | 9,500,453 | 9,476,967 | ||||||||
Class I | 14,978,296 | 17,543,530 | 14,370,339 | 15,686,356 | 13,363,611 | 13,353,618 | 9,520,553 | 7,903,032 | ||||||||
Class R1 | 358,308 | 454,348 | 1,027,258 | 1,359,461 | 883,981 | 1,472,799 | 625,251 | 729,171 | ||||||||
Class R2 | 2,102,707 | 2,994,891 | 5,813,812 | 7,906,835 | 6,163,426 | 8,250,941 | 2,801,149 | 3,261,485 | ||||||||
Class R3 | 3,623,914 | 5,002,912 | 12,752,047 | 15,475,717 | 8,199,347 | 10,834,512 | 4,665,815 | 5,674,293 | ||||||||
Class R4 | 7,544,576 | 10,298,525 | 11,296,581 | 16,766,582 | 12,830,557 | 14,251,187 | 6,394,276 | 5,212,860 | ||||||||
Class 529A | 5,240,037 | 6,233,349 | 11,039,208 | 12,612,161 | 12,655,147 | 13,675,147 | 7,307,911 | 7,369,808 | ||||||||
Class 529B | 149,646 | 252,344 | 298,340 | 489,830 | 403,450 | 556,293 | 145,860 | 204,523 | ||||||||
Class 529C | 1,235,864 | 1,619,464 | 2,748,684 | 3,591,912 | 2,647,081 | 3,254,451 | 1,123,008 | 1,331,872 | ||||||||
Total | $100,086,864 | $128,695,165 | $247,398,416 | $296,357,134 | $238,946,554 | $273,128,441 | $88,421,193 | $85,858,612 |
(3) | Transactions with Affiliates |
Investment Adviser – Each fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the funds. MFS receives no compensation under this agreement; however MFS receives management fees from the underlying MFS funds.
For MFS Conservative Allocation Fund, MFS Moderate Allocation Fund, and MFS Growth Allocation Fund, the investment adviser has agreed in writing to pay a portion of each fund’s operating expenses, excluding distribution and service fees, program manager fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses including fees and expenses associated with investments in investment companies and other similar investment vehicles, such that operating expenses do not exceed 0.10% annually of each fund’s average daily net assets. These written agreements will continue until modified by the funds’ Board of Trustees, but such agreements will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $625,578 for the MFS Growth Allocation Fund, and is included in the reduction of total expenses in the Statements of Operations. For the year ended May 31, 2020, actual operating expenses for the MFS Conservative Allocation Fund and for the MFS Moderate Allocation Fund did not exceed the limit and therefore, the investment adviser did not pay any portion of the funds’ expenses related to these agreements.
The investment adviser has agreed in writing to pay a portion of the MFS Aggressive Growth Allocation Fund’s operating expenses, excluding distribution and service fees, program manager fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses including fees and expenses associated with investments in investment companies and other similar investment vehicles, such that operating expenses do not exceed 0.13% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $507,106 and is included in the reduction of total expenses in the Statements of Operations.
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In addition to the fees and expenses which each fund bears directly, each fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which each fund invests. Accordingly, the expense ratio for each fund reflects only those fees and expenses borne directly by each fund.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received the following amounts for the year ended May 31, 2020, as its portion of the initial sales charge on sales of Class A and Class 529A shares of each fund:
Class A | Class 529A | |||||||
MFS Conservative Allocation Fund | $519,562 | $46,201 | ||||||
MFS Moderate Allocation Fund | 1,045,220 | 119,839 | ||||||
MFS Growth Allocation Fund | 1,180,186 | 183,752 | ||||||
MFS Aggressive Growth Allocation Fund | 454,503 | 157,597 |
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.
Each fund’s distribution plan provides that each 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.
Distribution Plan Fee Table:
Class A | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | — | 0.25% | 0.25% | 0.25% | $3,416,447 | |||||||||||||||
MFS Moderate Allocation Fund | — | 0.25% | 0.25% | 0.25% | 7,900,548 | |||||||||||||||
MFS Growth Allocation Fund | — | 0.25% | 0.25% | 0.25% | 7,423,078 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | — | 0.25% | 0.25% | 0.25% | 2,302,553 | |||||||||||||||
Class B | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | $816,485 | |||||||||||||||
MFS Moderate Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 1,866,839 | |||||||||||||||
MFS Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 1,596,241 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 491,318 | |||||||||||||||
Class C | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | $5,439,833 | |||||||||||||||
MFS Moderate Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 9,159,239 | |||||||||||||||
MFS Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 7,217,274 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 2,312,216 | |||||||||||||||
Class R1 | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | $124,287 | |||||||||||||||
MFS Moderate Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 257,756 | |||||||||||||||
MFS Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 213,396 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 154,905 | |||||||||||||||
Class R2 | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.25% | 0.25% | 0.50% | 0.50% | $311,182 | |||||||||||||||
MFS Moderate Allocation Fund | 0.25% | 0.25% | 0.50% | 0.50% | 665,228 | |||||||||||||||
MFS Growth Allocation Fund | 0.25% | 0.25% | 0.50% | 0.50% | 667,213 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.25% | 0.25% | 0.50% | 0.50% | 306,418 |
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Class R3 | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | — | 0.25% | 0.25% | 0.25% | $256,234 | |||||||||||||||
MFS Moderate Allocation Fund | — | 0.25% | 0.25% | 0.25% | 667,396 | |||||||||||||||
MFS Growth Allocation Fund | — | 0.25% | 0.25% | 0.25% | 414,557 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | — | 0.25% | 0.25% | 0.25% | 240,863 | |||||||||||||||
Class 529A | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | — | 0.25% | 0.25% | 0.24% | $375,867 | |||||||||||||||
MFS Moderate Allocation Fund | — | 0.25% | 0.25% | 0.24% | 604,830 | |||||||||||||||
MFS Growth Allocation Fund | — | 0.25% | 0.25% | 0.24% | 642,951 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | — | 0.25% | 0.25% | 0.24% | 380,446 | |||||||||||||||
Class 529B | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.75% | 0.25% | 1.00% | 0.84% | $45,638 | |||||||||||||||
MFS Moderate Allocation Fund | 0.75% | 0.25% | 1.00% | 0.88% | 71,292 | |||||||||||||||
MFS Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 100,295 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 36,816 | |||||||||||||||
Class 529C | ||||||||||||||||||||
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
MFS Conservative Allocation Fund | 0.75% | 0.25% | 1.00% | 0.99% | $439,743 | |||||||||||||||
MFS Moderate Allocation Fund | 0.75% | 0.25% | 1.00% | 1.00% | 707,012 | |||||||||||||||
MFS Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 0.99% | 613,681 | |||||||||||||||
MFS Aggressive Growth Allocation Fund | 0.75% | 0.25% | 1.00% | 0.99% | 264,492 |
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Total Distribution and Service Fees | $11,225,716 | $21,900,140 | $18,888,686 | $6,490,027 |
(d) | In accordance with the distribution plan for certain classes, each 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 May 31, 2020 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 May 31, 2020, these rebates amounted to the following and are included in the reduction of total expenses in the Statements of Operations: |
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Class A | $16,248 | $85,575 | $70,874 | $35,018 | ||||||||||||
Class B | 791 | 2,856 | 3,001 | 1,506 | ||||||||||||
Class C | 1,617 | 4,840 | 7,512 | 2,306 | ||||||||||||
Class R1 | — | 1 | 11 | — | ||||||||||||
Class R2 | 49 | 306 | 470 | 3 | ||||||||||||
Class 529A | 20,541 | 18,058 | 26,426 | 15,704 | ||||||||||||
Class 529B | 365 | 496 | 460 | 125 | ||||||||||||
Class 529C | 3,986 | 3,136 | 4,123 | 2,922 |
For the MFS Conservative Allocation Fund, for the period from March 1, 2020 through May 31, 2020, and for the MFS Moderate Allocation Fund, for the period from April 1, 2020 through May 31, 2020, the 0.75% distribution fee was not imposed for Class 529B shares of each fund due to the sales charge limitations contained in Financial Industry Regulatory Authority (“FINRA”) Rule 2341. |
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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 and Class 529B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. Class C and Class 529C 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 May 31, 2020, were as follows:
CDSC Imposed | MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | ||||||||||||
Class A | $14,065 | $12,586 | $12,906 | $4,407 | ||||||||||||
Class B | 51,941 | 136,770 | 116,526 | 38,033 | ||||||||||||
Class C | 44,607 | 69,876 | 66,923 | 31,614 | ||||||||||||
Class 529B | 858 | 2,404 | 7,467 | 2,260 | ||||||||||||
Class 529C | 618 | 593 | 1,093 | 329 |
Each fund has entered into and may from time to time enter into contracts with program managers and other parties which administer the tuition programs through which an investment in each fund’s 529 share classes is made. Each fund has entered into an agreement with MFD pursuant to which MFD receives an annual fee of up to 0.05% of the average daily net assets attributable to each 529 share class. The services provided by MFD, or a third party with which MFD contracts, include recordkeeping and tax reporting and account services, as well as services designed to maintain the program’s compliance with the Internal Revenue Code and other regulatory requirements. Program manager fees for the year ended May 31, 2020, were as follows:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Class 529A | $75,174 | $120,966 | $128,590 | $76,089 | ||||||||||||
Class 529B | 2,697 | 4,002 | 5,014 | 1,841 | ||||||||||||
Class 529C | 21,987 | 35,348 | 30,681 | 13,223 | ||||||||||||
Total Program Manager Fees | $99,858 | $160,316 | $164,285 | $91,153 |
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, provides shareholder services and transfer agent services to the funds. Under a Special Servicing Agreement among MFS, certain MFS funds which invest in other MFS funds (“MFS fund-of-funds”) and certain underlying funds in which a MFS fund-of-funds invests (“underlying funds”), each underlying fund may pay a portion of each MFS fund-of-funds’ transfer agent-related expenses, including out-of-pocket and sub-accounting fees, to the extent such payments do not exceed the benefits realized or expected to be realized by the underlying fund from the investment in the underlying fund by the MFS fund-of-funds. For the year ended May 31, 2020, shareholder servicing expenses incurred by the funds, including out-of-pocket expenses, are disclosed in the Statements of Operations.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to each fund. Under an administrative services agreement, each fund reimburses MFS the costs incurred to provide these services. Each fund pays an annual fixed amount of $17,500. The administrative services fee incurred for the year ended May 31, 2020 was equivalent to the following annual effective rates of each fund’s average daily net assets:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Percentage of average daily net assets | 0.0006% | 0.0003% | 0.0003% | 0.0009% |
Trustees’ and Officers’ Compensation – Each fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. Each fund does not pay compensation directly to Trustees or officers of each fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to each fund. Certain officers and Trustees of each fund are officers or directors of MFS, MFD, and MFSC.
Other – These funds and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by each fund under this agreement amounted to the following and is included in “Miscellaneous” expense in the Statements of Operations:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||
$1,241 | $2,748 | $2,570 | $955 |
MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
Each 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.
62
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(4) | Portfolio Securities |
For the year ended May 31, 2020, purchases and sales of shares of underlying funds, excluding the MFS Institutional Money Market Portfolio, aggregated to the following:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Purchases | $366,180,481 | $417,941,119 | $196,486,679 | $105,108,655 | ||||||||||||
Sales | $396,533,270 | $768,256,766 | $435,318,752 | $141,508,219 |
(5) | Shares of Beneficial Interest |
Each 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:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | |||||||||||||||||||||||||||||||
Year ended 5/31/20 | Year ended 5/31/19 | Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | ||||||||||||||||||||||||||||||||
Class A | 17,767,890 | $280,516,970 | 11,247,794 | $172,189,047 | 22,364,662 | $401,359,896 | 18,848,647 | $330,523,324 | ||||||||||||||||||||||||
Class B | 184,283 | 2,860,968 | 395,766 | 6,016,417 | 169,946 | 3,018,628 | 652,022 | 11,292,165 | ||||||||||||||||||||||||
Class C | 6,015,830 | 93,916,198 | 4,708,589 | 70,936,299 | 6,356,099 | 112,813,206 | 6,222,515 | 107,163,097 | ||||||||||||||||||||||||
Class I | 10,661,179 | 166,144,995 | 7,415,078 | 114,320,938 | 6,132,421 | 112,261,977 | 6,002,432 | 106,920,584 | ||||||||||||||||||||||||
Class R1 | 246,476 | 3,765,576 | 171,334 | 2,505,961 | 185,486 | 3,177,286 | 232,137 | 3,923,567 | ||||||||||||||||||||||||
Class R2 | 880,783 | 13,535,427 | 1,379,185 | 20,426,894 | 868,578 | 15,458,949 | 1,104,945 | 18,945,640 | ||||||||||||||||||||||||
Class R3 | 1,809,702 | 28,586,321 | 1,909,472 | 29,062,232 | 3,304,080 | 59,266,545 | 2,928,153 | 51,205,205 | ||||||||||||||||||||||||
Class R4 | 6,993,607 | 110,692,186 | 5,317,873 | 81,052,760 | 5,251,520 | 93,745,729 | 4,402,483 | 77,022,038 | ||||||||||||||||||||||||
Class 529A | 4,610,433 | 72,422,152 | 4,615,377 | 70,059,530 | 3,784,521 | 67,559,275 | 3,705,337 | 64,367,007 | ||||||||||||||||||||||||
Class 529B | 136,723 | 2,126,717 | 198,508 | 2,947,631 | 103,613 | 1,819,476 | 140,598 | 2,415,694 | ||||||||||||||||||||||||
Class 529C | 1,240,039 | 19,194,642 | 1,546,627 | 23,037,095 | 918,874 | 16,208,077 | 1,238,526 | 21,100,878 | ||||||||||||||||||||||||
50,546,945 | $793,762,152 | 38,905,603 | $592,554,804 | 49,439,800 | $886,689,044 | 45,477,795 | $794,879,199 | |||||||||||||||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||||||||||||||||||
Class A | 2,861,638 | $45,731,722 | 3,891,697 | $56,643,994 | 7,607,124 | $140,320,952 | 9,879,928 | $159,659,934 | ||||||||||||||||||||||||
Class B | 129,578 | 2,074,171 | 268,940 | 3,867,917 | 374,146 | 6,872,822 | 690,219 | 10,917,735 | ||||||||||||||||||||||||
Class C | 904,422 | 14,308,836 | 1,416,730 | 20,173,157 | 1,860,008 | 33,869,829 | 2,746,313 | 43,112,755 | ||||||||||||||||||||||||
Class I | 717,871 | 11,557,477 | 918,936 | 13,521,940 | 595,405 | 11,125,090 | 742,462 | 12,192,865 | ||||||||||||||||||||||||
Class R1 | 23,125 | 358,308 | 32,550 | 454,348 | 57,763 | 1,027,258 | 88,469 | 1,359,390 | ||||||||||||||||||||||||
Class R2 | 128,515 | 1,996,686 | 197,386 | 2,783,697 | 307,835 | 5,557,880 | 469,505 | 7,398,652 | ||||||||||||||||||||||||
Class R3 | 228,714 | 3,623,914 | 346,841 | 5,002,621 | 697,097 | 12,752,047 | 965,003 | 15,474,867 | ||||||||||||||||||||||||
Class R4 | 429,329 | 6,851,960 | 673,693 | 9,806,915 | 530,307 | 9,754,679 | 978,106 | 15,809,460 | ||||||||||||||||||||||||
Class 529A | 329,809 | 5,239,784 | 430,870 | 6,233,278 | 601,671 | 11,038,896 | 785,284 | 12,612,161 | ||||||||||||||||||||||||
Class 529B | 9,525 | 149,646 | 17,834 | 252,330 | 16,440 | 298,340 | 31,291 | 489,074 | ||||||||||||||||||||||||
Class 529C | 78,863 | 1,235,764 | 114,998 | 1,619,464 | 152,735 | 2,748,684 | 231,431 | 3,591,912 | ||||||||||||||||||||||||
5,841,389 | $93,128,268 | 8,310,475 | $120,359,661 | 12,800,531 | $235,366,477 | 17,608,011 | $282,618,805 | |||||||||||||||||||||||||
Shares reacquired |
| |||||||||||||||||||||||||||||||
Class A | (15,749,875 | ) | $(246,623,081 | ) | (16,591,042 | ) | $(253,913,400 | ) | (26,943,541 | ) | $(480,475,483 | ) | (27,494,240 | ) | $(482,087,445 | ) | ||||||||||||||||
Class B | (2,400,946 | ) | (37,660,195 | ) | (2,128,596 | ) | (32,364,567 | ) | (4,230,041 | ) | (74,944,401 | ) | (3,781,568 | ) | (65,517,519 | ) | ||||||||||||||||
Class C | (7,638,573 | ) | (118,346,006 | ) | (8,351,356 | ) | (125,895,999 | ) | (11,983,835 | ) | (210,596,363 | ) | (12,143,145 | ) | (209,220,461 | ) | ||||||||||||||||
Class I | (10,109,138 | ) | (158,281,667 | ) | (7,712,592 | ) | (116,995,712 | ) | (5,189,826 | ) | (93,325,251 | ) | (6,023,912 | ) | (106,293,449 | ) | ||||||||||||||||
Class R1 | (294,042 | ) | (4,506,213 | ) | (289,104 | ) | (4,290,783 | ) | (399,257 | ) | (6,916,905 | ) | (361,451 | ) | (6,049,047 | ) | ||||||||||||||||
Class R2 | (1,661,641 | ) | (25,587,773 | ) | (2,079,281 | ) | (30,638,610 | ) | (2,053,177 | ) | (36,419,402 | ) | (3,121,308 | ) | (53,641,154 | ) | ||||||||||||||||
Class R3 | (2,685,221 | ) | (41,925,662 | ) | (2,936,062 | ) | (44,365,863 | ) | (7,224,797 | ) | (127,825,506 | ) | (5,982,734 | ) | (104,185,445 | ) | ||||||||||||||||
Class R4 | (4,405,117 | ) | (70,081,741 | ) | (7,040,601 | ) | (103,512,993 | ) | (3,741,694 | ) | (67,001,944 | ) | (9,074,999 | ) | (151,477,708 | ) | ||||||||||||||||
Class 529A | (4,632,383 | ) | (72,966,813 | ) | (4,281,443 | ) | (65,014,017 | ) | (3,938,669 | ) | (70,784,473 | ) | (4,053,477 | ) | (70,574,642 | ) | ||||||||||||||||
Class 529B | (285,507 | ) | (4,426,814 | ) | (291,080 | ) | (4,350,142 | ) | (225,835 | ) | (4,009,780 | ) | (286,577 | ) | (4,866,705 | ) | ||||||||||||||||
Class 529C | (1,536,617 | ) | (23,384,612 | ) | (1,533,390 | ) | (22,764,716 | ) | (1,550,616 | ) | (26,475,918 | ) | (1,602,483 | ) | (27,162,860 | ) | ||||||||||||||||
(51,399,060 | ) | $(803,790,577 | ) | (53,234,547 | ) | $(804,106,802 | ) | (67,481,288 | ) | $(1,198,775,426 | ) | (73,925,894 | ) | $(1,281,076,435 | ) |
63
Table of Contents
Notes to Financial Statements – continued
MFS Conservative Allocation Fund – continued | MFS Moderate Allocation Fund – continued | |||||||||||||||||||||||||||||||
Year ended 5/31/20 | Year ended 5/31/19 | Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Net change | ||||||||||||||||||||||||||||||||
Class A | 4,879,653 | $79,625,611 | (1,451,551 | ) | $(25,080,359 | ) | 3,028,245 | $61,205,365 | 1,234,335 | $8,095,813 | ||||||||||||||||||||||
Class B | (2,087,085 | ) | (32,725,056 | ) | (1,463,890 | ) | (22,480,233 | ) | (3,685,949 | ) | (65,052,951 | ) | (2,439,327 | ) | (43,307,619 | ) | ||||||||||||||||
Class C | (718,321 | ) | (10,120,972 | ) | (2,226,037 | ) | (34,786,543 | ) | (3,767,728 | ) | (63,913,328 | ) | (3,174,317 | ) | (58,944,609 | ) | ||||||||||||||||
Class I | 1,269,912 | 19,420,805 | 621,422 | 10,847,166 | 1,538,000 | 30,061,816 | 720,982 | 12,820,000 | ||||||||||||||||||||||||
Class R1 | (24,441 | ) | (382,329 | ) | (85,220 | ) | (1,330,474 | ) | (156,008 | ) | (2,712,361 | ) | (40,845 | ) | (766,090 | ) | ||||||||||||||||
Class R2 | (652,343 | ) | (10,055,660 | ) | (502,710 | ) | (7,428,019 | ) | (876,764 | ) | (15,402,573 | ) | (1,546,858 | ) | (27,296,862 | ) | ||||||||||||||||
Class R3 | (646,805 | ) | (9,715,427 | ) | (679,749 | ) | (10,301,010 | ) | (3,223,620 | ) | (55,806,914 | ) | (2,089,578 | ) | (37,505,373 | ) | ||||||||||||||||
Class R4 | 3,017,819 | 47,462,405 | (1,049,035 | ) | (12,653,318 | ) | 2,040,133 | 36,498,464 | (3,694,410 | ) | (58,646,210 | ) | ||||||||||||||||||||
Class 529A | 307,859 | 4,695,123 | 764,804 | 11,278,791 | 447,523 | 7,813,698 | 437,144 | 6,404,526 | ||||||||||||||||||||||||
Class 529B | (139,259 | ) | (2,150,451 | ) | (74,738 | ) | (1,150,181 | ) | (105,782 | ) | (1,891,964 | ) | (114,688 | ) | (1,961,937 | ) | ||||||||||||||||
Class 529C | (217,715 | ) | (2,954,206 | ) | 128,235 | 1,891,843 | (479,007 | ) | (7,519,157 | ) | (132,526 | ) | (2,470,070 | ) | ||||||||||||||||||
4,989,274 | $83,099,843 | (6,018,469 | ) | $(91,192,337 | ) | (5,240,957 | ) | $(76,719,905 | ) | (10,840,088 | ) | $(203,578,431 | ) | |||||||||||||||||||
MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||||||||||||||||||||
Year ended 5/31/20 | Year ended 5/31/19 | Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | ||||||||||||||||||||||||||||||||
Class A | 16,964,557 | $351,755,022 | 15,138,890 | $308,220,750 | 6,359,443 | $148,247,342 | 5,236,894 | $120,732,984 | ||||||||||||||||||||||||
Class B | 44,425 | 941,621 | 546,224 | 11,057,805 | 17,042 | 395,307 | 250,463 | 5,718,259 | ||||||||||||||||||||||||
Class C | 5,543,612 | 112,797,221 | 4,655,082 | 93,234,038 | 2,494,103 | 56,373,562 | 1,839,580 | 41,356,466 | ||||||||||||||||||||||||
Class I | 6,498,049 | 137,930,128 | 4,950,255 | 101,749,384 | 2,896,996 | 69,705,103 | 2,854,662 | 65,654,604 | ||||||||||||||||||||||||
Class R1 | 142,203 | 2,848,859 | 168,467 | 3,301,527 | 65,885 | 1,483,465 | 101,533 | 2,231,527 | ||||||||||||||||||||||||
Class R2 | 734,076 | 14,782,580 | 797,491 | 15,921,895 | 475,221 | 10,970,235 | 523,200 | 11,789,625 | ||||||||||||||||||||||||
Class R3 | 1,343,534 | 28,086,686 | 1,321,370 | 27,062,233 | 933,537 | 21,625,472 | 876,922 | 20,068,918 | ||||||||||||||||||||||||
Class R4 | 3,818,312 | 79,388,651 | 3,287,873 | 66,759,955 | 2,266,309 | 53,105,070 | 1,957,167 | 44,474,804 | ||||||||||||||||||||||||
Class 529A | 2,766,213 | 57,070,560 | 2,611,977 | 52,684,155 | 1,377,747 | 31,542,770 | 1,179,498 | 27,041,771 | ||||||||||||||||||||||||
Class 529B | 45,724 | 934,652 | 92,376 | 1,843,144 | 1,982 | 47,983 | 34,984 | 788,670 | ||||||||||||||||||||||||
Class 529C | 470,627 | 9,556,769 | 564,730 | 11,116,841 | 211,713 | 4,895,956 | 207,708 | 4,678,943 | ||||||||||||||||||||||||
38,371,332 | $796,092,749 | 34,134,735 | $692,951,727 | 17,099,978 | $398,392,265 | 15,062,611 | $344,536,571 | |||||||||||||||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||||||||||||||||||
Class A | 6,473,770 | $141,322,366 | 8,691,032 | $156,525,537 | 1,713,317 | $43,089,927 | 2,030,603 | $40,896,352 | ||||||||||||||||||||||||
Class B | 284,043 | 6,169,440 | 531,584 | 9,515,307 | 78,166 | 1,942,426 | 119,912 | 2,386,256 | ||||||||||||||||||||||||
Class C | 1,366,359 | 29,281,075 | 2,001,210 | 35,401,415 | 374,645 | 9,197,543 | 465,821 | 9,172,009 | ||||||||||||||||||||||||
Class I | 459,961 | 10,132,946 | 530,549 | 9,634,775 | 255,451 | 6,534,435 | 255,411 | 5,225,703 | ||||||||||||||||||||||||
Class R1 | 42,155 | 883,981 | 85,084 | 1,472,799 | 25,880 | 625,251 | 37,625 | 729,171 | ||||||||||||||||||||||||
Class R2 | 282,283 | 6,018,278 | 454,029 | 7,990,914 | 109,794 | 2,702,021 | 158,540 | 3,126,405 | ||||||||||||||||||||||||
Class R3 | 379,073 | 8,199,347 | 607,316 | 10,834,512 | 187,082 | 4,665,815 | 284,141 | 5,674,293 | ||||||||||||||||||||||||
Class R4 | 526,301 | 11,468,094 | 737,115 | 13,245,955 | 224,951 | 5,671,012 | 237,679 | 4,796,364 | ||||||||||||||||||||||||
Class 529A | 584,853 | 12,655,147 | 765,560 | 13,672,902 | 292,752 | 7,307,079 | 368,663 | 7,369,594 | ||||||||||||||||||||||||
Class 529B | 18,791 | 403,450 | 31,411 | 556,293 | 5,944 | 145,860 | 10,408 | 204,523 | ||||||||||||||||||||||||
Class 529C | 125,394 | 2,647,073 | 186,450 | 3,253,558 | 46,481 | 1,122,978 | 68,728 | 1,331,872 | ||||||||||||||||||||||||
10,542,983 | $229,181,197 | 14,621,340 | $262,103,967 | 3,314,463 | $83,004,347 | 4,037,531 | $80,912,542 |
64
Table of Contents
Notes to Financial Statements – continued
MFS Growth Allocation Fund – continued | MFS Aggressive Growth Allocation Fund – continued | |||||||||||||||||||||||||||||||
Year ended 5/31/20 | Year ended 5/31/19 | Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares reacquired |
| |||||||||||||||||||||||||||||||
Class A | (21,047,313 | ) | $(435,278,547 | ) | (19,755,492 | ) | $(403,638,669 | ) | (5,991,736 | ) | $(140,943,679 | ) | (5,733,226 | ) | $(133,460,526 | ) | ||||||||||||||||
Class B | (2,963,735 | ) | (60,988,307 | ) | (2,619,298 | ) | (52,969,870 | ) | (626,418 | ) | (14,493,165 | ) | (681,094 | ) | (15,532,783 | ) | ||||||||||||||||
Class C | (8,383,637 | ) | (170,228,420 | ) | (8,101,489 | ) | (162,296,957 | ) | (2,428,148 | ) | (56,018,476 | ) | (2,266,280 | ) | (51,175,676 | ) | ||||||||||||||||
Class I | (4,395,486 | ) | (89,290,841 | ) | (3,151,975 | ) | (63,884,929 | ) | (2,786,497 | ) | (65,202,379 | ) | (1,879,208 | ) | (43,765,380 | ) | ||||||||||||||||
Class R1 | (392,938 | ) | (7,863,082 | ) | (588,674 | ) | (11,471,258 | ) | (217,609 | ) | (5,018,561 | ) | (121,519 | ) | (2,733,676 | ) | ||||||||||||||||
Class R2 | (1,865,799 | ) | (37,982,178 | ) | (2,124,667 | ) | (41,906,817 | ) | (951,975 | ) | (21,901,836 | ) | (917,049 | ) | (20,707,314 | ) | ||||||||||||||||
Class R3 | (2,946,435 | ) | (61,490,784 | ) | (3,230,880 | ) | (64,338,526 | ) | (1,631,807 | ) | (38,755,584 | ) | (2,743,982 | ) | (61,512,686 | ) | ||||||||||||||||
Class R4 | (2,981,918 | ) | (61,286,577 | ) | (3,566,526 | ) | (70,288,876 | ) | (1,338,976 | ) | (31,849,451 | ) | (1,292,895 | ) | (29,269,235 | ) | ||||||||||||||||
Class 529A | (2,730,280 | ) | (56,954,215 | ) | (2,624,563 | ) | (53,057,990 | ) | (1,365,549 | ) | (32,414,064 | ) | (1,403,103 | ) | (32,033,223 | ) | ||||||||||||||||
Class 529B | (177,510 | ) | (3,654,445 | ) | (163,032 | ) | (3,271,853 | ) | (69,119 | ) | (1,601,953 | ) | (73,213 | ) | (1,631,168 | ) | ||||||||||||||||
Class 529C | (850,876 | ) | (16,659,849 | ) | (1,104,664 | ) | (21,761,656 | ) | (527,485 | ) | (10,964,259 | ) | (402,262 | ) | (8,903,712 | ) | ||||||||||||||||
(48,735,927 | ) | $(1,001,677,245 | ) | (47,031,260 | ) | $(948,887,401 | ) | (17,935,319 | ) | $(419,163,407 | ) | (17,513,831 | ) | $(400,725,379 | ) | |||||||||||||||||
Net change |
| |||||||||||||||||||||||||||||||
Class A | 2,391,014 | $57,798,841 | 4,074,430 | $61,107,618 | 2,081,024 | $50,393,590 | 1,534,271 | $28,168,810 | ||||||||||||||||||||||||
Class B | (2,635,267 | ) | (53,877,246 | ) | (1,541,490 | ) | (32,396,758 | ) | (531,210 | ) | (12,155,432 | ) | (310,719 | ) | (7,428,268 | ) | ||||||||||||||||
Class C | (1,473,666 | ) | (28,150,124 | ) | (1,445,197 | ) | (33,661,504 | ) | 440,600 | 9,552,629 | 39,121 | (647,201 | ) | |||||||||||||||||||
Class I | 2,562,524 | 58,772,233 | 2,328,829 | 47,499,230 | 365,950 | 11,037,159 | 1,230,865 | 27,114,927 | ||||||||||||||||||||||||
Class R1 | (208,580 | ) | (4,130,242 | ) | (335,123 | ) | (6,696,932 | ) | (125,844 | ) | (2,909,845 | ) | 17,639 | 227,022 | ||||||||||||||||||
Class R2 | (849,440 | ) | (17,181,320 | ) | (873,147 | ) | (17,994,008 | ) | (366,960 | ) | (8,229,580 | ) | (235,309 | ) | (5,791,284 | ) | ||||||||||||||||
Class R3 | (1,223,828 | ) | (25,204,751 | ) | (1,302,194 | ) | (26,441,781 | ) | (511,188 | ) | (12,464,297 | ) | (1,582,919 | ) | (35,769,475 | ) | ||||||||||||||||
Class R4 | 1,362,695 | 29,570,168 | 458,462 | 9,717,034 | 1,152,284 | 26,926,631 | 901,951 | 20,001,933 | ||||||||||||||||||||||||
Class 529A | 620,786 | 12,771,492 | 752,974 | 13,299,067 | 304,950 | 6,435,785 | 145,058 | 2,378,142 | ||||||||||||||||||||||||
Class 529B | (112,995 | ) | (2,316,343 | ) | (39,245 | ) | (872,416 | ) | (61,193 | ) | (1,408,110 | ) | (27,821 | ) | (637,975 | ) | ||||||||||||||||
Class 529C | (254,855 | ) | (4,456,007 | ) | (353,484 | ) | (7,391,257 | ) | (269,291 | ) | (4,945,325 | ) | (125,826 | ) | (2,892,897 | ) | ||||||||||||||||
178,388 | $23,596,701 | 1,724,815 | $6,168,293 | 2,479,122 | $62,233,205 | 1,586,311 | $24,723,734 |
Class T shares were not publicly available for sale during the period. Please see each fund’s prospectus for details.
Effective June 1, 2019, purchases of each fund’s Class B and Class 529B shares are closed to new and existing investors subject to certain exceptions. Please see each fund’s prospectus for details.
(6) | Line of Credit |
Each fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. In addition, each 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 May 31, 2020, each fund’s commitment fee and interest expense were as follows and are included in “Miscellaneous” expense in the Statements of Operations:
MFS Conservative Allocation Fund | MFS Moderate Allocation Fund | MFS Growth Allocation Fund | MFS Aggressive Growth Allocation Fund | |||||||||||||
Commitment Fee | $16,036 | $29,539 | $26,091 | $9,999 | ||||||||||||
Interest Expense | 1,355 | — | — | — |
65
Table of Contents
Notes to Financial Statements – continued
(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:
MFS Conservative Allocation Fund | ||||||||||||||||||||||||
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Commodity Strategy Fund | $54,594,424 | $17,936,407 | $1,339,778 | $(879,370) | $(10,781,703) | $59,529,980 | ||||||||||||||||||
MFS Emerging Markets Debt Fund | 85,815,845 | 10,398,277 | 3,336,145 | (133,025) | (1,255,537) | 91,489,415 | ||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 56,833,136 | 9,938,621 | 3,690,741 | (608,131) | (367,674) | 62,105,211 | ||||||||||||||||||
MFS Global Bond Fund | 143,594,334 | 15,026,522 | 13,677,720 | (1,939,005) | 5,199,542 | 148,203,673 | ||||||||||||||||||
MFS Global Real Estate Fund | 56,789,322 | 15,209,591 | 4,957,981 | 202,427 | (6,045,153) | 61,198,206 | ||||||||||||||||||
MFS Government Securities Fund | 287,644,533 | 40,008,659 | 58,707,470 | 74,226 | 17,198,968 | 286,218,916 | ||||||||||||||||||
MFS Growth Fund | 168,855,811 | 19,177,373 | 38,469,233 | 13,820,944 | 23,723,801 | 187,108,696 | ||||||||||||||||||
MFS High Income Fund | 142,294,143 | 18,688,992 | 6,676,742 | (655,287) | (2,732,675) | 150,918,431 | ||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 288,807,931 | 32,226,264 | 43,013,458 | 4,131 | 14,559,113 | 292,583,981 | ||||||||||||||||||
MFS Institutional Money Market Portfolio | 1,939,958 | 117,311,350 | 119,250,541 | (462) | — | 305 | ||||||||||||||||||
MFS International Growth Fund | 55,941,628 | 11,696,858 | 8,428,088 | 418,831 | 1,847,254 | 61,476,483 | ||||||||||||||||||
MFS International Intrinsic Value Fund | 56,317,093 | 11,613,582 | 9,116,594 | (41,498) | 3,572,372 | 62,344,955 | ||||||||||||||||||
MFS Limited Maturity Fund | 285,635,602 | 36,867,248 | 29,814,724 | (798,677) | 2,384,121 | 294,273,570 | ||||||||||||||||||
MFS Mid Cap Growth Fund | 113,733,540 | 16,616,274 | 23,032,296 | 6,150,756 | 14,977,550 | 128,445,824 | ||||||||||||||||||
MFS Mid Cap Value Fund | 110,272,593 | 38,108,165 | 18,753,346 | (292,475) | (2,611,588) | 126,723,349 | ||||||||||||||||||
MFS New Discovery Fund | 27,804,055 | 9,179,586 | 8,580,031 | 524,838 | 3,740,867 | 32,669,315 | ||||||||||||||||||
MFS New Discovery Value Fund | 27,236,038 | 12,366,467 | 6,423,828 | (355,958) | (952,792) | 31,869,927 | ||||||||||||||||||
MFS Research Fund | 167,550,031 | 33,485,433 | 31,304,202 | 1,586,145 | 15,350,412 | 186,667,819 | ||||||||||||||||||
MFS Research International Fund | 111,973,507 | 22,048,495 | 13,813,571 | 728,032 | 3,612,621 | 124,549,084 | ||||||||||||||||||
MFS Total Return Bond Fund | 431,573,001 | 40,616,605 | 47,740,475 | 174,543 | 20,118,862 | 444,742,536 | ||||||||||||||||||
MFS Value Fund | 166,824,657 | 42,378,637 | 25,656,843 | 2,643,276 | (422,616) | 185,767,111 | ||||||||||||||||||
$2,842,031,182 | $570,899,406 | $515,783,807 | $20,624,261 | $101,115,745 | $3,018,886,787 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Commodity Strategy Fund | $1,134,537 | $— | ||||||||||||||||||||||
MFS Emerging Markets Debt Fund | 4,173,814 | — | ||||||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 1,780,717 | — | ||||||||||||||||||||||
MFS Global Bond Fund | 3,481,121 | — | ||||||||||||||||||||||
MFS Global Real Estate Fund | 3,362,933 | — | ||||||||||||||||||||||
MFS Government Securities Fund | 7,261,165 | — | ||||||||||||||||||||||
MFS Growth Fund | — | 2,986,917 | ||||||||||||||||||||||
MFS High Income Fund | 7,466,371 | — | ||||||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 6,765,470 | — | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio | 25,686 | — | ||||||||||||||||||||||
MFS International Growth Fund | 709,371 | 241,185 | ||||||||||||||||||||||
MFS International Intrinsic Value Fund | 753,613 | 1,816,159 | ||||||||||||||||||||||
MFS Limited Maturity Fund | 8,067,352 | — | ||||||||||||||||||||||
MFS Mid Cap Growth Fund | — | 1,008,913 | ||||||||||||||||||||||
MFS Mid Cap Value Fund | 1,865,465 | 1,032,077 | ||||||||||||||||||||||
MFS New Discovery Fund | 713,489 | 1,401,751 | ||||||||||||||||||||||
MFS New Discovery Value Fund | 746,222 | 774,957 | ||||||||||||||||||||||
MFS Research Fund | 2,408,611 | 4,926,417 | ||||||||||||||||||||||
MFS Research International Fund | 2,503,411 | — | ||||||||||||||||||||||
MFS Total Return Bond Fund | 13,510,656 | — | ||||||||||||||||||||||
MFS Value Fund | 4,174,593 | 2,340,293 | ||||||||||||||||||||||
$70,904,597 | $16,528,669 |
66
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Notes to Financial Statements – continued
MFS Moderate Allocation Fund | ||||||||||||||||||||||||
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Commodity Strategy Fund | $154,088,353 | $34,583,920 | $4,200,288 | $(4,362,776) | $(27,067,260) | $153,041,949 | ||||||||||||||||||
MFS Emerging Markets Debt Fund | 163,273,168 | 14,803,460 | 13,527,867 | (697,742) | (2,185,980) | 161,665,039 | ||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 106,124,816 | 9,641,996 | 4,140,809 | (558,753) | (1,404,245) | 109,663,005 | ||||||||||||||||||
MFS Global Bond Fund | 270,899,820 | 22,710,601 | 41,134,642 | (6,104,514) | 11,739,523 | 258,110,788 | ||||||||||||||||||
MFS Global Real Estate Fund | 164,393,483 | 32,354,974 | 18,198,220 | 1,020,900 | (18,306,794) | 161,264,343 | ||||||||||||||||||
MFS Government Securities Fund | 541,667,330 | 56,019,039 | 138,028,727 | (116,201) | 31,892,869 | 491,434,310 | ||||||||||||||||||
MFS Growth Fund | 434,157,611 | 15,697,895 | 82,900,848 | 44,890,574 | 46,287,527 | 458,132,759 | ||||||||||||||||||
MFS High Income Fund | 271,388,203 | 23,810,345 | 19,681,186 | (2,327,903) | (4,463,087) | 268,726,372 | ||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 382,147,360 | 30,847,320 | 67,017,297 | 117,242 | 18,145,092 | 364,239,717 | ||||||||||||||||||
MFS Institutional Money Market Portfolio | 1,744,726 | 128,304,428 | 126,929,573 | (700) | (121) | 3,118,760 | ||||||||||||||||||
MFS International Growth Fund | 161,243,895 | 15,219,797 | 16,681,989 | 2,208,862 | 3,746,429 | 165,736,994 | ||||||||||||||||||
MFS International Intrinsic Value Fund | 162,750,224 | 15,956,239 | 19,770,123 | 1,304,477 | 7,425,113 | 167,665,930 | ||||||||||||||||||
MFS International New Discovery Fund | 53,801,749 | 9,318,434 | 4,806,446 | 79,385 | (1,002,107) | 57,391,015 | ||||||||||||||||||
MFS Mid Cap Growth Fund | 384,959,391 | 20,838,709 | 59,715,905 | 25,628,373 | 41,929,847 | 413,640,415 | ||||||||||||||||||
MFS Mid Cap Value Fund | 369,807,629 | 77,857,648 | 40,210,474 | 3,534,756 | (14,435,210) | 396,554,349 | ||||||||||||||||||
MFS New Discovery Fund | 80,515,743 | 15,624,846 | 15,267,782 | 1,315,456 | 9,854,228 | 92,042,491 | ||||||||||||||||||
MFS New Discovery Value Fund | 77,930,749 | 23,941,325 | 11,525,055 | 147,583 | (4,219,614) | 86,274,988 | ||||||||||||||||||
MFS Research Fund | 430,136,229 | 41,487,588 | 59,815,044 | 5,578,304 | 34,422,276 | 451,809,353 | ||||||||||||||||||
MFS Research International Fund | 322,451,325 | 28,670,888 | 29,469,278 | 2,976,265 | 8,522,054 | 333,151,254 | ||||||||||||||||||
MFS Total Return Bond Fund | 437,415,509 | 34,949,907 | 74,974,023 | (531,900) | 19,845,517 | 416,705,010 | ||||||||||||||||||
MFS Value Fund | 427,540,047 | 56,959,446 | 47,391,871 | 10,066,433 | (6,758,493) | 440,415,562 | ||||||||||||||||||
$5,398,437,360 | $709,598,805 | $895,387,447 | $84,168,121 | $153,967,564 | $5,450,784,403 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Commodity Strategy Fund | $3,155,755 | $— | ||||||||||||||||||||||
MFS Emerging Markets Debt Fund | 7,767,112 | — | ||||||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 3,255,094 | — | ||||||||||||||||||||||
MFS Global Bond Fund | 6,470,573 | — | ||||||||||||||||||||||
MFS Global Real Estate Fund | 9,471,641 | — | ||||||||||||||||||||||
MFS Government Securities Fund | 13,456,057 | — | ||||||||||||||||||||||
MFS Growth Fund | — | 7,505,700 | ||||||||||||||||||||||
MFS High Income Fund | 13,867,026 | — | ||||||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 8,838,576 | — | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio | 44,196 | — | ||||||||||||||||||||||
MFS International Growth Fund | 1,989,320 | 676,367 | ||||||||||||||||||||||
MFS International Intrinsic Value Fund | 2,117,249 | 5,102,433 | ||||||||||||||||||||||
MFS International New Discovery Fund | 770,231 | 847,266 | ||||||||||||||||||||||
MFS Mid Cap Growth Fund | — | 3,300,173 | ||||||||||||||||||||||
MFS Mid Cap Value Fund | 6,094,580 | 3,371,855 | ||||||||||||||||||||||
MFS New Discovery Fund | 1,988,848 | 3,907,375 | ||||||||||||||||||||||
MFS New Discovery Value Fund | 2,090,170 | 2,187,998 | ||||||||||||||||||||||
MFS Research Fund | 6,005,136 | 12,282,509 | ||||||||||||||||||||||
MFS Research International Fund | 7,015,099 | — | ||||||||||||||||||||||
MFS Total Return Bond Fund | 13,406,850 | — | ||||||||||||||||||||||
MFS Value Fund | 10,377,509 | 5,833,647 | ||||||||||||||||||||||
$118,181,022 | $45,015,323 |
67
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Notes to Financial Statements – continued
MFS Growth Allocation Fund | ||||||||||||||||||||||||
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Commodity Strategy Fund | $182,325,116 | $32,011,421 | $480,649 | $(288,022) | $(37,634,580) | $175,933,286 | ||||||||||||||||||
MFS Emerging Markets Debt Fund | 145,076,152 | 14,902,393 | 14,626,938 | (1,358,266) | (2,425,186) | 141,568,155 | ||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 94,081,740 | 9,281,529 | 4,761,998 | (650,798) | (2,019,379) | 95,931,094 | ||||||||||||||||||
MFS Emerging Markets Equity Fund | 45,887,632 | 6,763,519 | 572,392 | 17,888 | (5,126,946) | 46,969,701 | ||||||||||||||||||
MFS Global Bond Fund | 96,308,089 | 9,250,187 | 16,636,665 | (3,380,566) | 4,724,311 | 90,265,356 | ||||||||||||||||||
MFS Global Real Estate Fund | 198,065,141 | 24,630,703 | 12,075,159 | 1,693,268 | (22,851,003) | 189,462,950 | ||||||||||||||||||
MFS Growth Fund | 542,711,851 | 10,329,471 | 99,275,847 | 58,008,270 | 48,493,507 | 560,267,252 | ||||||||||||||||||
MFS High Income Fund | 240,878,355 | 25,936,464 | 20,773,967 | (3,110,512) | (4,824,401) | 238,105,939 | ||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 242,758,781 | 20,920,685 | 38,294,353 | (735,973) | 12,428,355 | 237,077,495 | ||||||||||||||||||
MFS Institutional Money Market Portfolio | 11,732,270 | 121,754,174 | 122,775,507 | 121 | (315) | 10,710,743 | ||||||||||||||||||
MFS International Growth Fund | 243,046,863 | 6,761,693 | 12,737,279 | 324,368 | 6,553,935 | 243,949,580 | ||||||||||||||||||
MFS International Intrinsic Value Fund | 245,634,900 | 12,444,776 | 22,472,288 | 538,700 | 10,481,891 | 246,627,979 | ||||||||||||||||||
MFS International New Discovery Fund | 96,443,387 | 14,229,728 | 6,178,364 | (246,905) | (2,130,446) | 102,117,400 | ||||||||||||||||||
MFS Mid Cap Growth Fund | 450,678,683 | 4,955,331 | 53,583,820 | 27,947,740 | 45,691,333 | 475,689,267 | ||||||||||||||||||
MFS Mid Cap Value Fund | 429,761,038 | 59,680,492 | 22,258,118 | 681,577 | (14,420,173) | 453,444,816 | ||||||||||||||||||
MFS New Discovery Fund | 97,596,153 | 18,673,420 | 19,004,337 | 872,119 | 11,259,455 | 109,396,810 | ||||||||||||||||||
MFS New Discovery Value Fund | 93,565,264 | 21,687,321 | 7,187,623 | (469,671) | (5,006,223) | 102,589,068 | ||||||||||||||||||
MFS Research Fund | 389,967,978 | 17,564,549 | 35,547,912 | 2,516,529 | 29,709,933 | 404,211,077 | ||||||||||||||||||
MFS Research International Fund | 339,364,007 | 18,501,373 | 24,171,171 | 763,775 | 7,827,442 | 342,285,426 | ||||||||||||||||||
MFS Total Return Bond Fund | 145,903,471 | 13,650,735 | 28,130,723 | (1,163,223) | 6,374,339 | 136,634,599 | ||||||||||||||||||
MFS Value Fund | 531,827,882 | 40,097,390 | 33,079,479 | 3,717,388 | (4,086,225) | 538,476,956 | ||||||||||||||||||
$4,863,614,753 | $504,027,354 | $594,624,589 | $85,677,807 | $83,019,624 | $4,941,714,949 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Commodity Strategy Fund | $3,683,005 | $— | ||||||||||||||||||||||
MFS Emerging Markets Debt Fund | 6,928,389 | — | ||||||||||||||||||||||
MFS Emerging Markets Debt Local Currency Fund (a) | 4,924,955 | — | ||||||||||||||||||||||
MFS Emerging Markets Equity Fund | 989,877 | — | ||||||||||||||||||||||
MFS Global Bond Fund | 2,158,152 | 137,401 | ||||||||||||||||||||||
MFS Global Real Estate Fund | 11,425,998 | — | ||||||||||||||||||||||
MFS Growth Fund | — | 9,358,531 | ||||||||||||||||||||||
MFS High Income Fund | 10,372,304 | — | ||||||||||||||||||||||
MFS Inflation-Adjusted Bond Fund | 5,611,918 | — | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio | 186,162 | — | ||||||||||||||||||||||
MFS International Growth Fund | 2,755,891 | 1,274,659 | ||||||||||||||||||||||
MFS International Intrinsic Value Fund | 3,030,369 | 7,882,857 | ||||||||||||||||||||||
MFS International New Discovery Fund | 2,925,891 | — | ||||||||||||||||||||||
MFS Mid Cap Growth Fund | — | 3,841,706 | ||||||||||||||||||||||
MFS Mid Cap Value Fund | 5,863,596 | 5,197,384 | ||||||||||||||||||||||
MFS New Discovery Fund | — | 7,113,418 | ||||||||||||||||||||||
MFS New Discovery Value Fund | 948,016 | 4,220,803 | ||||||||||||||||||||||
MFS Research Fund | 9,713,524 | 6,875,033 | ||||||||||||||||||||||
MFS Research International Fund | 7,432,847 | — | ||||||||||||||||||||||
MFS Total Return Bond Fund | 4,473,327 | — | ||||||||||||||||||||||
MFS Value Fund | 12,828,088 | 7,288,231 | ||||||||||||||||||||||
$96,252,309 | $53,190,023 |
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Notes to Financial Statements – continued
MFS Aggressive Growth Allocation Fund | ||||||||||||||||||||||||
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Commodity Strategy Fund | $87,849,521 | $19,794,668 | $4,260,410 | $(3,574,545) | $(14,820,509) | $84,988,725 | ||||||||||||||||||
MFS Emerging Markets Equity Fund | 35,362,834 | 6,093,668 | 3,227,558 | 71,514 | (3,914,617) | 34,385,841 | ||||||||||||||||||
MFS Global Real Estate Fund | 90,684,955 | 16,846,321 | 8,505,617 | 367,887 | (11,370,757) | 88,022,789 | ||||||||||||||||||
MFS Growth Fund | 231,392,414 | 8,878,770 | 38,910,177 | 20,528,578 | 28,345,282 | 250,234,867 | ||||||||||||||||||
MFS Institutional Money Market Portfolio | 255,445 | 49,856,441 | 47,722,654 | (642) | — | 2,388,590 | ||||||||||||||||||
MFS International Growth Fund | 142,264,568 | 6,789,224 | 6,441,648 | (98,326) | 4,184,211 | 146,698,029 | ||||||||||||||||||
MFS International Intrinsic Value Fund | 143,047,824 | 11,389,008 | 10,833,473 | (670,425) | 8,076,555 | 151,009,489 | ||||||||||||||||||
MFS International New Discovery Fund | 71,668,941 | 8,020,161 | 2,703,616 | 34,689 | (2,549,451) | 74,470,724 | ||||||||||||||||||
MFS Mid Cap Growth Fund | 179,761,816 | 8,231,165 | 22,506,387 | 7,826,054 | 22,418,390 | 195,731,038 | ||||||||||||||||||
MFS Mid Cap Value Fund | 174,800,608 | 24,431,286 | 7,006,483 | 300,518 | (9,628,560) | 182,897,369 | ||||||||||||||||||
MFS New Discovery Fund | 43,984,656 | 6,095,427 | 5,459,868 | 290,130 | 4,987,342 | 49,897,687 | ||||||||||||||||||
MFS New Discovery Value Fund | 43,221,367 | 9,525,827 | 3,192,031 | 126,295 | (3,854,198) | 45,827,260 | ||||||||||||||||||
MFS Research Fund | 159,379,697 | 8,470,112 | 12,614,950 | 521,025 | 12,595,743 | 168,351,627 | ||||||||||||||||||
MFS Research International Fund | 142,689,177 | 8,225,216 | 7,488,169 | 43,071 | 3,463,384 | 146,932,679 | ||||||||||||||||||
MFS Value Fund | 229,535,507 | 16,530,715 | 8,357,832 | 170,870 | (2,266,429) | 235,612,831 | ||||||||||||||||||
$1,775,899,330 | $209,178,009 | $189,230,873 | $25,936,693 | $35,666,386 | $1,857,449,545 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Commodity Strategy Fund | $1,862,095 | $— | ||||||||||||||||||||||
MFS Emerging Markets Equity Fund | 764,490 | — | ||||||||||||||||||||||
MFS Global Real Estate Fund | 5,498,955 | — | ||||||||||||||||||||||
MFS Growth Fund | — | 4,102,942 | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio | 10,783 | — | ||||||||||||||||||||||
MFS International Growth Fund | 1,797,356 | 611,099 | ||||||||||||||||||||||
MFS International Intrinsic Value Fund | 1,917,676 | 4,621,480 | ||||||||||||||||||||||
MFS International New Discovery Fund | 1,042,554 | 1,146,819 | ||||||||||||||||||||||
MFS Mid Cap Growth Fund | — | 1,599,121 | ||||||||||||||||||||||
MFS Mid Cap Value Fund | 2,963,192 | 1,639,400 | ||||||||||||||||||||||
MFS New Discovery Fund | 1,113,800 | 2,188,219 | ||||||||||||||||||||||
MFS New Discovery Value Fund | 1,175,012 | 1,228,598 | ||||||||||||||||||||||
MFS Research Fund | 2,289,868 | 4,683,547 | ||||||||||||||||||||||
MFS Research International Fund | 3,166,669 | — | ||||||||||||||||||||||
MFS Value Fund | 5,582,966 | 3,217,055 | ||||||||||||||||||||||
$29,185,416 | $25,038,280 |
(a) | Amounts reflect the impact of a return of capital distribution adjustment which has the effect of reducing dividend income and increasing realized gain (loss) and/or change in unrealized appreciation (depreciation). |
(8) | Impacts of COVID-19 |
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of each fund’s investments and each fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of MFS Conservative Allocation Fund, MFS Moderate Allocation Fund, MFS Growth Allocation Fund and MFS Aggressive Growth Allocation Fund and the Board of Trustees of MFS Series Trust X
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of MFS Conservative Allocation Fund, MFS Moderate Allocation Fund, MFS Growth Allocation Fund and MFS Aggressive Growth Allocation Fund (collectively referred to as the “MFS Asset Allocation Funds”) (four of the funds constituting MFS Series Trust X (the “Trust”)), including the portfolios of investments, as of May 31, 2020, and the related statements 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 each of the MFS Asset Allocation Funds (four of the funds constituting MFS Series Trust X) at May 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their 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 each of the MFS Asset Allocation Funds’ 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.
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 May 31, 2020, by correspondence with the transfer agent. 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
July 17, 2020
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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 | Principal Occupations the Past Five Years | Other Directorships During | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS | Principal Occupations the Past Five Years | Other Directorships During | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the | Principal Occupations the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
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Trustees and Officers – continued
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618 Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618 Portfolio Manager(s) Joseph Flaherty Natalie Shapiro | Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Independent Registered Public Accounting Firm Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
Each fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. Each fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of each fund. Liquidity risk is the risk that each fund could not meet requests to redeem shares issued by each fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage each fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted each fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in each fund may be subject, can be found in each fund’s prospectus.
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the funds 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 each 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
Each 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. Each fund’s Form N-PORT reports are available on the SEC’s website at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of each fund’s fiscal year at mfs.com/openendfunds by choosing the fund’s name and then selecting the “Resources” tab and clicking on “Prospectus and Reports”.
From time to time, MFS may post important information about each fund or the MFS funds on the MFS web site (mfs.com). This information is available at https://www.mfs.com/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
Each fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 funds will notify shareholders of amounts for use in preparing 2020 income tax forms in January 2021. The following information is provided pursuant to provisions of the Internal Revenue Code.
The funds designate the maximum amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The funds below designated the following amounts as capital gain dividends paid during the fiscal year:
Capital Gains | ||||
MFS Conservative Allocation Fund | $41,722,000 | |||
MFS Moderate Allocation Fund | 157,434,000 | |||
MFS Growth Allocation Fund | 174,863,000 | |||
MFS Aggressive Growth Allocation Fund | 73,432,000 |
For corporate shareholders, the percentages of the ordinary income dividends paid during the fiscal year that qualify for the corporate dividends received deduction are as follows:
Dividends Received Deductions | ||||
MFS Conservative Allocation Fund | 12.59% | |||
MFS Moderate Allocation Fund | 19.55% | |||
MFS Growth Allocation Fund | 29.45% | |||
MFS Aggressive Growth Allocation Fund | 44.54% |
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rev. 3/16
| WHAT DOES MFS DO WITH YOUR
|
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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Save paper with eDelivery.
| MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Blended Research®
Growth Equity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
BRW-ANN
Table of Contents
MFS® Blended Research® Growth Equity Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings |
| |||
Microsoft Corp. | 9.6% | |||
Apple, Inc. | 8.2% | |||
Amazon.com, Inc. | 6.2% | |||
Facebook, Inc., “A” | 4.5% | |||
Mastercard, Inc., “A” | 2.5% | |||
Adobe Systems, Inc. | 2.4% | |||
Alphabet, Inc., “C” | 2.3% | |||
Alphabet, Inc., “A” | 2.2% | |||
Eli Lilly & Co. | 2.0% | |||
NVIDIA Corp. | 1.8% |
GICS sectors (g) |
| |||
Information Technology | 40.0% | |||
Consumer Discretionary | 15.1% | |||
Health Care | 15.0% | |||
Communication Services | 13.4% | |||
Industrials | 7.4% | |||
Consumer Staples | 3.8% | |||
Financials | 1.8% | |||
Utilities | 1.2% | |||
Real Estate | 1.0% | |||
Materials | 0.9% |
(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. |
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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Blended Research Growth Equity Fund (fund) provided a total return of 24.34%, at net asset value. This compares with a return of 26.25% for the fund’s benchmark, the Russell 1000® Growth Index.
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Stock selection within the consumer discretionary, real estate and financials sectors detracted from performance relative to the Russell® 1000 Growth Index. Within the consumer discretionary sector, not owning shares of electric vehicle manufacturer Tesla weakened relative performance as the company reported solid earnings results that met expectations, and free cash flow that was larger than estimated. The fund’s
3
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Management Review – continued
overweight holdings of fitness centers operator Planet Fitness (h), and an underweight position in internet retailer Amazon.com, further held back relative results. The share price of Amazon appreciated after the company reported revenue results that were above consensus estimates, driven by strong performance in its Amazon web services segment. Additionally, the company benefited as millions of customers turned to online deliveries as a way of limiting the spread of the new coronavirus. Although the real estate sector was a top-detracting sector, there were no individual stocks within this sector that were among the fund’s top relative detractors during the reporting period. Within the financials sector, holdings of insurance company MetLife (b) held back relative performance. Despite reporting better-than-expected financial results, MetLife’s share price suffered due to the impact that the current low-interest-rate environment may have on its investment income.
Elsewhere, the fund’s holdings of agricultural equipment and related replacement parts distributor AGCO (b) hurt relative performance. The fund’s underweight positions in strong-performing computer graphics processors maker NVIDIA, network equipment company Cisco Systems and computer and personal electronics maker Apple weighed on relative performance, as all three companies outperformed the benchmark during the reporting period. The fund’s overweight holdings of hospital operator HCA Healthcare and US natural gas transmission company Equitrans Midstream (h) further weakened relative results.
Contributors to Performance
A combination of security selection and an underweight position in the industrials sector benefited relative performance. Here, an underweight position in aerospace company Boeing (h) aided relative performance. The stock price of Boeing declined as the travel and airline industries came under intense pressure amid the outbreak of the COVID-19 virus, which resulted in widespread travel restrictions across the globe and ultimately led the company to suspend production.
Security selection within the information technology sector also contributed to relative returns. Stocks that led the way in this sector included the fund’s overweight positions in global enterprise cloud communications and collaboration solutions provider RingCentral, enterprise cloud computing solutions provider ServiceNow, software company Adobe Systems, identity management services provider Okta, software giant Microsoft and semiconductor chips and electronics engineering solutions provider Applied Materials. Not owning shares of underperforming cloud-based human capital management services provider Automatic Data Processing further supported relative returns.
Within other sectors, not owning shares of beverage maker Coca-Cola, and the timing of the fund’s ownership in shares of hotel operator Marriott International (h), bolstered relative performance.
Respectfully,
Portfolio Manager(s)
Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks
(b) | Security is not a benchmark constituent. |
(h) | Security was not held in the portfolio at period end. |
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Management Review – continued
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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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 (t)
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | Life (t) | |||||||
A | 9/15/15 | 24.34% | 13.31% | |||||||
B | 9/15/15 | 23.42% | 12.47% | |||||||
C | 9/15/15 | 23.44% | 12.46% | |||||||
I | 9/15/15 | 24.71% | 13.60% | |||||||
R1 | 9/15/15 | 23.34% | 12.46% | |||||||
R2 | 9/15/15 | 24.10% | 13.03% | |||||||
R3 | 9/15/15 | 24.35% | 13.32% | |||||||
R4 | 9/15/15 | 24.60% | 13.59% | |||||||
R6 | 9/15/15 | 24.78% | 13.68% | |||||||
Comparative benchmark(s) | ||||||||||
Russell 1000® Growth Index (f) | 26.25% | 16.56% | ||||||||
Average annual with sales charge | ||||||||||
A With Initial Sales Charge (5.75%) | 17.19% | 11.90% | ||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 19.42% | 12.20% | ||||||||
C With CDSC (1% for 12 months) (v) | 22.44% | 12.46% |
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. |
(t) | For the period from the class inception date through the stated period end. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Russell 1000® Growth Index – constructed to provide a comprehensive barometer for growth securities in the large-cap segment of the U.S. equity universe. Companies in this index generally have higher price-to-book ratios and higher forecasted growth values. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this document. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this document.
It is not possible to invest directly in an index.
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Performance Summary – continued
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date.
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.
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Fund expenses borne by the shareholders during the period,
December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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.
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Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.74% | $1,000.00 | $1,082.49 | $3.85 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
B | Actual | 1.49% | $1,000.00 | $1,077.64 | $7.74 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
C | Actual | 1.49% | $1,000.00 | $1,077.69 | $7.74 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
I | Actual | 0.49% | $1,000.00 | $1,083.48 | $2.55 | |||||||||||||
Hypothetical (h) | 0.49% | $1,000.00 | $1,022.55 | $2.48 | ||||||||||||||
R1 | Actual | 1.49% | $1,000.00 | $1,077.67 | $7.74 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
R2 | Actual | 0.99% | $1,000.00 | $1,080.77 | $5.15 | |||||||||||||
Hypothetical (h) | 0.99% | $1,000.00 | $1,020.05 | $5.00 | ||||||||||||||
R3 | Actual | 0.74% | $1,000.00 | $1,082.39 | $3.85 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
R4 | Actual | 0.49% | $1,000.00 | $1,083.34 | $2.55 | |||||||||||||
Hypothetical (h) | 0.49% | $1,000.00 | $1,022.55 | $2.48 | ||||||||||||||
R6 | Actual | 0.38% | $1,000.00 | $1,083.50 | $1.98 | |||||||||||||
Hypothetical (h) | 0.38% | $1,000.00 | $1,023.10 | $1.92 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 99.6% | ||||||||
Aerospace - 3.0% | ||||||||
Honeywell International, Inc. | 12,376 | $ | 1,805,040 | |||||
Huntington Ingalls Industries, Inc. | 2,695 | 538,703 | ||||||
Leidos Holdings, Inc. | 21,442 | 2,257,628 | ||||||
Lockheed Martin Corp. | 1,246 | 483,996 | ||||||
Northrop Grumman Corp. | 3,693 | 1,237,894 | ||||||
|
| |||||||
$ | 6,323,261 | |||||||
Apparel Manufacturers - 0.1% | ||||||||
Skechers USA, Inc., “A” (a) | 5,535 | $ | 173,356 | |||||
Automotive - 0.9% | ||||||||
Copart, Inc. (a) | 7,569 | $ | 676,593 | |||||
Lear Corp. | 11,127 | 1,180,018 | ||||||
|
| |||||||
$ | 1,856,611 | |||||||
Biotechnology - 3.5% | ||||||||
Biogen, Inc. (a) | 8,543 | $ | 2,623,470 | |||||
Illumina, Inc. (a) | 7,197 | 2,612,871 | ||||||
Incyte Corp. (a) | 15,648 | 1,594,688 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 697 | 427,128 | ||||||
|
| |||||||
$ | 7,258,157 | |||||||
Broadcasting - 0.3% | ||||||||
Netflix, Inc. (a) | 1,604 | $ | 673,247 | |||||
Business Services - 4.3% | ||||||||
Accenture PLC, “A” | 9,181 | $ | 1,851,073 | |||||
Fidelity National Information Services, Inc. | 18,964 | 2,632,772 | ||||||
Fiserv, Inc. (a) | 25,207 | 2,691,351 | ||||||
Global Payments, Inc. | 8,085 | 1,451,177 | ||||||
Verisk Analytics, Inc., “A” | 2,089 | 360,729 | ||||||
|
| |||||||
$ | 8,987,102 | |||||||
Cable TV - 1.4% | ||||||||
Charter Communications, Inc., “A” (a) | 5,216 | $ | 2,837,504 | |||||
Chemicals - 0.6% | ||||||||
Eastman Chemical Co. | 17,326 | $ | 1,179,554 | |||||
Computer Software - 14.8% | ||||||||
Adobe Systems, Inc. (a) | 12,722 | $ | 4,918,325 |
11
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Computer Software - continued | ||||||||
Akamai Technologies, Inc. (a) | 2,329 | $ | 246,408 | |||||
Atlassian Corp. PLC, “A” (a) | 791 | 146,572 | ||||||
DocuSign, Inc. (a) | 2,847 | 397,840 | ||||||
Microsoft Corp. | 108,101 | 19,809,508 | ||||||
Okta, Inc. (a) | 8,241 | 1,611,775 | ||||||
Oracle Corp. | 4,840 | 260,247 | ||||||
RingCentral, Inc. (a) | 7,532 | 2,065,651 | ||||||
VeriSign, Inc. (a) | 5,380 | 1,178,274 | ||||||
|
| |||||||
$ | 30,634,600 | |||||||
Computer Software - Systems - 10.2% | ||||||||
Apple, Inc. | 53,446 | $ | 16,992,621 | |||||
Cisco Systems, Inc. | 11,981 | 572,932 | ||||||
ServiceNow, Inc. (a) | 9,196 | 3,567,404 | ||||||
|
| |||||||
$ | 21,132,957 | |||||||
Construction - 0.5% | ||||||||
American Homes 4 Rent, “A”, REIT | 10,733 | $ | 270,901 | |||||
Eagle Materials, Inc. | 4,004 | 267,307 | ||||||
Masco Corp. | 8,821 | 411,500 | ||||||
|
| |||||||
$ | 949,708 | |||||||
Consumer Products - 1.3% | ||||||||
Kimberly-Clark Corp. | 18,763 | $ | 2,653,839 | |||||
Containers - 0.2% | ||||||||
Graphic Packaging Holding Co. | 29,331 | $ | 424,420 | |||||
Electrical Equipment - 1.0% | ||||||||
AMETEK, Inc. | 22,050 | $ | 2,022,205 | |||||
Electronics - 5.2% | ||||||||
Applied Materials, Inc. | 48,209 | $ | 2,708,382 | |||||
Intel Corp. | 31,466 | 1,980,155 | ||||||
NVIDIA Corp. | 10,799 | 3,833,861 | ||||||
Texas Instruments, Inc. | 18,293 | 2,172,111 | ||||||
|
| |||||||
$ | 10,694,509 | |||||||
Food & Beverages - 1.2% | ||||||||
General Mills, Inc. | 10,590 | $ | 667,593 | |||||
PepsiCo, Inc. | 14,234 | 1,872,483 | ||||||
|
| |||||||
$ | 2,540,076 | |||||||
Food & Drug Stores - 0.4% | ||||||||
Wal-Mart Stores, Inc. | 6,443 | $ | 799,319 |
12
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
General Merchandise - 1.3% | ||||||||
Dollar General Corp. | 14,430 | $ | 2,763,489 | |||||
Health Maintenance Organizations - 2.7% | ||||||||
Cigna Corp. | 5,608 | $ | 1,106,571 | |||||
Humana, Inc. | 7,594 | 3,118,476 | ||||||
UnitedHealth Group, Inc. | 4,420 | 1,347,437 | ||||||
|
| |||||||
$ | 5,572,484 | |||||||
Insurance - 0.9% | ||||||||
Hartford Financial Services Group, Inc. | 13,346 | $ | 511,018 | |||||
MetLife, Inc. | 38,111 | 1,372,377 | ||||||
|
| |||||||
$ | 1,883,395 | |||||||
Internet - 9.2% | ||||||||
Alphabet, Inc., “A” (a) | 3,183 | $ | 4,562,894 | |||||
Alphabet, Inc., “C” (a) | 3,317 | 4,739,728 | ||||||
eBay, Inc. | 13,699 | 623,852 | ||||||
Facebook, Inc., “A” (a) | 41,029 | 9,235,218 | ||||||
|
| |||||||
$ | 19,161,692 | |||||||
Leisure & Toys - 2.8% | ||||||||
Activision Blizzard, Inc. | 9,314 | $ | 670,422 | |||||
Electronic Arts, Inc. (a) | 20,375 | 2,503,680 | ||||||
Take-Two Interactive Software, Inc. (a) | 19,398 | 2,641,425 | ||||||
|
| |||||||
$ | 5,815,527 | |||||||
Machinery & Tools - 2.5% | ||||||||
AGCO Corp. | 31,007 | $ | 1,712,517 | |||||
Allison Transmission Holdings, Inc. | 15,953 | 601,747 | ||||||
Cummins, Inc. | 4,761 | 807,466 | ||||||
Eaton Corp. PLC | 15,690 | 1,332,081 | ||||||
Illinois Tool Works, Inc. | 4,292 | 740,198 | ||||||
|
| |||||||
$ | 5,194,009 | |||||||
Medical & Health Technology & Services - 2.3% | ||||||||
AmerisourceBergen Corp. | 2,607 | $ | 248,551 | |||||
HCA Healthcare, Inc. | 11,873 | 1,269,224 | ||||||
IDEXX Laboratories, Inc. (a) | 1,043 | 322,162 | ||||||
McKesson Corp. | 14,250 | 2,261,047 | ||||||
PRA Health Sciences, Inc. (a) | 6,582 | 681,237 | ||||||
|
| |||||||
$ | 4,782,221 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Medical Equipment - 1.5% | ||||||||
Boston Scientific Corp. (a) | 36,477 | $ | 1,385,761 | |||||
Danaher Corp. | 7,334 | 1,221,918 | ||||||
West Pharmaceutical Services, Inc. | 2,029 | 438,345 | ||||||
|
| |||||||
$ | 3,046,024 | |||||||
Network & Telecom - 0.5% | ||||||||
Motorola Solutions, Inc. | 7,204 | $ | 974,917 | |||||
Other Banks & Diversified Financials - 5.0% | ||||||||
Citigroup, Inc. | 4,866 | $ | 233,130 | |||||
Mastercard, Inc., “A” | 17,072 | 5,136,794 | ||||||
S&P Global, Inc. | 3,596 | 1,168,772 | ||||||
Synchrony Financial | 22,240 | 453,029 | ||||||
Visa, Inc., “A” | 17,395 | 3,396,200 | ||||||
|
| |||||||
$ | 10,387,925 | |||||||
Pharmaceuticals - 5.0% | ||||||||
Eli Lilly & Co. | 27,198 | $ | 4,159,934 | |||||
Johnson & Johnson | 17,396 | 2,587,655 | ||||||
Merck & Co., Inc. | 28,019 | 2,261,694 | ||||||
Zoetis, Inc. | 10,542 | 1,469,449 | ||||||
|
| |||||||
$ | 10,478,732 | |||||||
Pollution Control - 0.3% | ||||||||
Waste Management, Inc. | 5,686 | $ | 606,980 | |||||
Railroad & Shipping - 1.0% | ||||||||
CSX Corp. | 10,448 | $ | 747,868 | |||||
Kansas City Southern Co. | 8,495 | 1,278,667 | ||||||
|
| |||||||
$ | 2,026,535 | |||||||
Real Estate - 0.6% | ||||||||
Sun Communities, Inc., REIT | 9,124 | $ | 1,251,722 | |||||
Restaurants - 2.8% | ||||||||
Chipotle Mexican Grill, Inc., “A” (a) | 889 | $ | 892,476 | |||||
Domino’s Pizza, Inc. | 4,560 | 1,759,431 | ||||||
Starbucks Corp. | 41,586 | 3,243,292 | ||||||
|
| |||||||
$ | 5,895,199 | |||||||
Specialty Stores - 9.9% | ||||||||
Amazon.com, Inc. (a) | 5,299 | $ | 12,942,119 | |||||
AutoZone, Inc. (a) | 1,615 | 1,853,794 | ||||||
Burlington Stores, Inc. (a) | 7,845 | 1,644,861 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Specialty Stores - continued | ||||||||
Home Depot, Inc. | 6,018 | $ | 1,495,353 | |||||
Ross Stores, Inc. | 8,227 | 797,690 | ||||||
Target Corp. | 14,926 | 1,825,897 | ||||||
|
| |||||||
$ | 20,559,714 | |||||||
Telecommunications - Wireless - 0.3% | ||||||||
SBA Communications Corp., REIT | 2,058 | $ | 646,480 | |||||
Tobacco - 0.9% | ||||||||
Altria Group, Inc. | 21,929 | $ | 856,328 | |||||
Philip Morris International, Inc. | 13,662 | 1,002,244 | ||||||
|
| |||||||
$ | 1,858,572 | |||||||
Utilities - Electric Power - 1.2% | ||||||||
AES Corp. | 15,672 | $ | 195,743 | |||||
NRG Energy, Inc. | 46,369 | 1,671,603 | ||||||
Vistra Energy Corp. | 30,371 | 620,783 | ||||||
|
| |||||||
$ | 2,488,129 | |||||||
Total Common Stocks (Identified Cost, $145,014,393) | $ | 206,534,171 | ||||||
Investment Companies (h) - 0.4% | ||||||||
Money Market Funds - 0.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $837,501) | 837,417 | $ | 837,500 | |||||
Other Assets, Less Liabilities - (0.0)% | (86,542) | |||||||
Net Assets - 100.0% | $ | 207,285,129 |
(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 $837,500 and $206,534,171, respectively. |
(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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
15
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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, $145,014,393) | $206,534,171 | |||
Investments in affiliated issuers, at value (identified cost, $837,501) | 837,500 | |||
Cash | 11,504 | |||
Receivables for | ||||
Fund shares sold | 98,164 | |||
Dividends | 206,204 | |||
Receivable from investment adviser | 32,424 | |||
Other assets | 568 | |||
Total assets | $207,720,535 | |||
Liabilities | ||||
Payables for | ||||
Fund shares reacquired | $333,903 | |||
Payable to affiliates | ||||
Administrative services fee | 428 | |||
Shareholder servicing costs | 24,760 | |||
Distribution and service fees | 1,690 | |||
Payable for independent Trustees’ compensation | 14 | |||
Accrued expenses and other liabilities | 74,611 | |||
Total liabilities | $435,406 | |||
Net assets | $207,285,129 | |||
Net assets consist of | ||||
Paid-in capital | $141,311,268 | |||
Total distributable earnings (loss) | 65,973,861 | |||
Net assets | $207,285,129 | |||
Shares of beneficial interest outstanding | 13,072,859 |
16
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $57,530,544 | 3,643,863 | $15.79 | |||||||||
Class B | 408,413 | 26,262 | 15.55 | |||||||||
Class C | 612,586 | 39,410 | 15.54 | |||||||||
Class I | 2,366,017 | 149,076 | 15.87 | |||||||||
Class R1 | 87,169 | 5,608 | 15.54 | |||||||||
Class R2 | 266,388 | 16,816 | 15.84 | |||||||||
Class R3 | 90,122 | 5,686 | 15.85 | |||||||||
Class R4 | 91,186 | 5,744 | 15.87 | |||||||||
Class R6 | 145,832,704 | 9,180,394 | 15.89 |
(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 $16.75 [100 /94.25 x $15.79]. 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
17
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $2,259,385 | |||
Dividends from affiliated issuers | 33,102 | |||
Other | 7,404 | |||
Total investment income | $2,299,891 | |||
Expenses | ||||
Management fee | $793,426 | |||
Distribution and service fees | 148,875 | |||
Shareholder servicing costs | 63,282 | |||
Administrative services fee | 37,061 | |||
Independent Trustees’ compensation | 6,504 | |||
Custodian fee | 14,766 | |||
Shareholder communications | 11,661 | |||
Audit and tax fees | 55,892 | |||
Legal fees | 1,984 | |||
Registration fees | 134,176 | |||
Miscellaneous | 31,472 | |||
Total expenses | $1,299,099 | |||
Reduction of expenses by investment adviser and distributor | (316,491 | ) | ||
Net expenses | $982,608 | |||
Net investment income (loss) | $1,317,283 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $12,147,156 | |||
Affiliated issuers | (201 | ) | ||
Net realized gain (loss) | $12,146,955 | |||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $30,271,729 | |||
Affiliated issuers | (169 | ) | ||
Net unrealized gain (loss) | $30,271,560 | |||
Net realized and unrealized gain (loss) | $42,418,515 | |||
Change in net assets from operations | $43,735,798 |
See Notes to Financial Statements
18
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $1,317,283 | $1,547,845 | ||||||
Net realized gain (loss) | 12,146,955 | 4,339,707 | ||||||
Net unrealized gain (loss) | 30,271,560 | (1,582,741 | ) | |||||
Change in net assets from operations | $43,735,798 | $4,304,811 | ||||||
Total distributions to shareholders | $(9,123,061 | ) | $(11,974,130 | ) | ||||
Change in net assets from fund share transactions | $(10,019,311 | ) | $5,352,651 | |||||
Total change in net assets | $24,593,426 | $(2,316,668 | ) | |||||
Net assets | ||||||||
At beginning of period | 182,691,703 | 185,008,371 | ||||||
At end of period | $207,285,129 | $182,691,703 |
See Notes to Financial Statements
19
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.25 | $14.09 | $12.07 | $10.25 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.08 | $0.08 | $0.08 | $0.06 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.12 | (0.03 | )(g) | 2.12 | 1.77 | 0.22 | ||||||||||||||
Total from investment operations | $3.18 | $0.05 | $2.20 | $1.85 | $0.28 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.08 | ) | $(0.07 | ) | $(0.07 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to | $(0.64 | ) | $(0.89 | ) | $(0.18 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $15.79 | $13.25 | $14.09 | $12.07 | $10.25 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.34 | 0.95 | 18.28 | 18.05 | 2.81 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.90 | 0.89 | 0.90 | 1.47 | 5.24 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.69 | (a) | ||||||||||||||
Net investment income (loss) | 0.42 | 0.59 | 0.61 | 0.68 | 0.82 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $57,531 | $52,918 | $55,474 | $1,318 | $352 |
See Notes to Financial Statements
20
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.08 | $13.95 | $11.98 | $10.22 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.05 | ) | $(0.02 | ) | $(0.03 | ) | $(0.01 | ) | $(0.00 | )(w) | ||||||||||
Net realized and unrealized gain (loss) | 3.08 | (0.03 | )(g) | 2.11 | 1.77 | 0.22 | ||||||||||||||
Total from investment operations | $3.03 | $(0.05 | ) | $2.08 | $1.76 | $0.22 | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $(0.00 | )(w) | ||||||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.56 | ) | $(0.82 | ) | $(0.11 | ) | $— | $(0.00 | )(w) | |||||||||||
Net asset value, end of period (x) | $15.55 | $13.08 | $13.95 | $11.98 | $10.22 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 23.42 | 0.17 | 17.40 | 17.22 | 2.27 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.65 | 1.64 | 1.65 | 2.42 | 6.82 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | (0.33 | ) | (0.14 | ) | (0.25 | ) | (0.08 | ) | 0.01 | (a) | ||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $408 | $428 | $333 | $249 | $113 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.07 | $13.95 | $11.97 | $10.22 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.05 | ) | $(0.01 | ) | $(0.03 | ) | $(0.01 | ) | $(0.00 | )(w) | ||||||||||
Net realized and unrealized gain (loss) | 3.08 | (0.05 | )(g) | 2.12 | 1.76 | 0.22 | ||||||||||||||
Total from investment operations | $3.03 | $(0.06 | ) | $2.09 | $1.75 | $0.22 | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $(0.00 | )(w) | $— | $— | $(0.00 | )(w) | |||||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.56 | ) | $(0.82 | ) | $(0.11 | ) | $— | $(0.00 | )(w) | |||||||||||
Net asset value, end of period (x) | $15.54 | $13.07 | $13.95 | $11.97 | $10.22 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 23.44 | 0.13 | 17.50 | 17.12 | 2.26 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.65 | 1.65 | 1.65 | 2.41 | 6.92 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | (0.33 | ) | (0.11 | ) | (0.26 | ) | (0.05 | ) | 0.02 | (a) | ||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $613 | $525 | $338 | $159 | $62 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.31 | $14.17 | $12.10 | $10.26 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.13 | $0.10 | $0.10 | $0.08 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.14 | (0.05 | )(g) | 2.14 | 1.78 | 0.21 | ||||||||||||||
Total from investment operations | $3.24 | $0.08 | $2.24 | $1.88 | $0.29 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.12 | ) | $(0.12 | ) | $(0.06 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.68 | ) | $(0.94 | ) | $(0.17 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $15.87 | $13.31 | $14.17 | $12.10 | $10.26 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.71 | 1.18 | 18.57 | 18.38 | 2.97(n | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.65 | 0.64 | 0.65 | 1.32 | 4.67 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.49 | 0.49 | 0.49 | 0.49 | 0.46 | (a) | ||||||||||||||
Net investment income (loss) | 0.68 | 0.98 | 0.75 | 0.91 | 1.06 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $2,366 | $1,560 | $195 | $673 | $286 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.08 | $13.95 | $11.98 | $10.22 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.05 | ) | $(0.02 | ) | $(0.04 | ) | $(0.01 | ) | $(0.00 | )(w) | ||||||||||
Net realized and unrealized gain (loss) | 3.07 | (0.03 | )(g) | 2.12 | 1.77 | 0.22 | ||||||||||||||
Total from investment operations | $3.02 | $(0.05 | ) | $2.08 | $1.76 | $0.22 | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $(0.00 | )(w) | ||||||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.56 | ) | $(0.82 | ) | $(0.11 | ) | $— | $(0.00 | )(w) | |||||||||||
Net asset value, end of period (x) | $15.54 | $13.08 | $13.95 | $11.98 | $10.22 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 23.34 | 0.18 | 17.40 | 17.22 | 2.26 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.64 | 1.64 | 1.65 | 2.49 | 7.04 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | (0.33 | ) | (0.16 | ) | (0.27 | ) | (0.05 | ) | 0.01 | (a) | ||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $87 | $170 | $166 | $175 | $51 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.29 | $14.10 | $12.06 | $10.24 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $0.04 | $0.03 | $0.05 | $0.04 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.13 | (0.03 | )(g) | 2.14 | 1.77 | 0.22 | ||||||||||||||
Total from investment operations | $3.16 | $0.01 | $2.17 | $1.82 | $0.26 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.05 | ) | $— | $(0.02 | ) | $— | $(0.02 | ) | ||||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.61 | ) | $(0.82 | ) | $(0.13 | ) | $— | $(0.02 | ) | |||||||||||
Net asset value, end of period (x) | $15.84 | $13.29 | $14.10 | $12.06 | $10.24 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.10 | 0.61 | 18.04 | 17.77 | 2.61 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.16 | 1.14 | 1.15 | 2.02 | 6.54 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.99 | 0.99 | 0.99 | 0.96 | (a) | ||||||||||||||
Net investment income (loss) | 0.17 | 0.29 | 0.25 | 0.44 | 0.51 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $266 | $106 | $175 | $130 | $51 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.30 | $14.14 | $12.09 | $10.25 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.08 | $0.07 | $0.07 | $0.05 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.14 | (0.03 | )(g) | 2.13 | 1.79 | 0.23 | ||||||||||||||
Total from investment operations | $3.20 | $0.05 | $2.20 | $1.86 | $0.28 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.07 | ) | $(0.04 | ) | $(0.02 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to shareholders | $(0.65 | ) | $(0.89 | ) | $(0.15 | ) | $(0.02 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $15.85 | $13.30 | $14.14 | $12.09 | $10.25 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.35 | 0.98 | 18.23 | 18.11 | 2.79 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.90 | 0.89 | 0.90 | 1.84 | 6.29 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.71 | (a) | ||||||||||||||
Net investment income (loss) | 0.42 | 0.59 | 0.49 | 0.67 | 0.76 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $90 | $72 | $72 | $61 | $51 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.32 | $14.17 | $12.10 | $10.26 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.12 | $0.10 | $0.10 | $0.07 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.13 | (0.04 | )(g) | 2.15 | 1.78 | 0.22 | ||||||||||||||
Total from investment operations | $3.23 | $0.08 | $2.25 | $1.88 | $0.29 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.12 | ) | $(0.11 | ) | $(0.07 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to | $(0.68 | ) | $(0.93 | ) | $(0.18 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $15.87 | $13.32 | $14.17 | $12.10 | $10.26 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.60 | 1.18 | 18.65 | 18.37 | 2.97 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.65 | 0.64 | 0.65 | 1.58 | 6.04 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.49 | 0.49 | 0.49 | 0.49 | 0.46 | (a) | ||||||||||||||
Net investment income (loss) | 0.67 | 0.84 | 0.74 | 0.93 | 1.01 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $91 | $73 | $72 | $61 | $51 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $13.32 | $14.18 | $12.11 | $10.26 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.11 | $0.13 | $0.11 | $0.11 | $0.07 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.16 | (0.05 | )(g) | 2.15 | 1.78 | 0.22 | ||||||||||||||
Total from investment operations | $3.27 | $0.08 | $2.26 | $1.89 | $0.29 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.14 | ) | $(0.12 | ) | $(0.08 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.56 | ) | (0.82 | ) | (0.11 | ) | — | (0.00 | )(w) | |||||||||||
Total distributions declared to | $(0.70 | ) | $(0.94 | ) | $(0.19 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $15.89 | $13.32 | $14.18 | $12.11 | $10.26 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 24.86 | 1.22 | 18.71 | 18.51 | 2.97 | (n) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.55 | 0.55 | 0.57 | 0.65 | 5.80 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.39 | 0.40 | 0.39 | 0.43 | 0.45 | (a) | ||||||||||||||
Net investment income (loss) | 0.77 | 0.93 | 0.83 | 0.97 | 1.01 | (a) | ||||||||||||||
Portfolio turnover | 61 | 60 | 73 | 57 | 28 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $145,833 | $126,840 | $128,183 | $122,177 | $2,853 |
See Notes to Financial Statements
24
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Financial Highlights – continued
(a) | Annualized. |
(c) | For the period from the commencement of the fund’s investment operations, September 15, 2015, through the stated period end. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(g) | The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. |
(n) | Not annualized. |
(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
25
Table of Contents
(1) Business and Organization
MFS Blended Research Growth Equity Fund (the fund) is a diversified series of MFS Series Trust X (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.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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 – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or
26
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Notes to Financial Statements – continued
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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
27
Table of Contents
Notes to Financial Statements – continued
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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $206,534,171 | $— | $— | $206,534,171 | ||||||||||||
Mutual Funds | 837,500 | — | — | 837,500 | ||||||||||||
Total | $207,371,671 | $— | $— | $207,371,671 |
For further information regarding security characteristics, see the Portfolio of Investments.
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 – Investment transactions are recorded on the trade date. 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.
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.
28
Table of Contents
Notes to Financial Statements – continued
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 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $1,625,026 | $4,464,080 | ||||||
Long-term capital gains | 7,498,035 | 7,510,050 | ||||||
Total distributions | $9,123,061 | $11,974,130 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $146,202,993 | |||
Gross appreciation | 65,286,915 | |||
Gross depreciation | (4,118,237 | ) | ||
Net unrealized appreciation (depreciation) | $61,168,678 | |||
Undistributed ordinary income | 473,102 | |||
Undistributed long-term capital gain | 4,332,081 |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares
29
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Notes to Financial Statements – continued
approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $2,343,673 | $3,176,012 | ||||||
Class B | 14,943 | 25,794 | ||||||
Class C | 22,006 | 35,659 | ||||||
Class I | 84,493 | 59,291 | ||||||
Class R1 | 7,293 | 9,822 | ||||||
Class R2 | 5,012 | 5,719 | ||||||
Class R3 | 3,519 | 4,508 | ||||||
Class R4 | 3,741 | 4,714 | ||||||
Class R6 | 6,638,381 | 8,652,611 | ||||||
Total | $9,123,061 | $11,974,130 |
(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 $1 billion | 0.40 | % | ||
In excess of $1 billion and up to $2.5 billion | 0.375 | % | ||
In excess of $2.5 billion | 0.35 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $20,165, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.39% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | ||||||||||||||||||||||||
0.74% | 1.49% | 1.49% | 0.49% | 1.49% | 0.99% | 0.74% | 0.49% | 0.45% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $296,250, which is included in the reduction of total expenses in the Statement of Operations.
30
Table of Contents
Notes to Financial Statements – continued
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $2,509 for the year ended May 31, 2020, 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.
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% | $136,639 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 4,035 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 5,709 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 1,441 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 848 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 203 | |||||||||||||||
Total Distribution and Service Fees |
| $148,875 |
(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 May 31, 2020 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 May 31, 2020, this rebate amounted to $76 for Class A 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $4 | |||
Class B | 660 | |||
Class C | 10 |
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
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year ended May 31, 2020, the fee was $3,011, which equated to 0.0015% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $60,271.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0187% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $90 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
At May 31, 2020, MFS held approximately 100% of the outstanding shares of Class R1, Class R3, and Class R4.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in sale transactions pursuant to this policy, which amounted to $640,450. The sales transactions resulted in net realized gains (losses) of $(95,961).
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
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securities trades. This agreement may be rescinded at any time. For the year ended May 31, 2020, this reimbursement amounted to $7,404, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $120,238,828 and $135,501,962, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 1,821,174 | $26,290,288 | 1,307,296 | $17,067,035 | ||||||||||||
Class B | 145 | 2,200 | 11,110 | 157,558 | ||||||||||||
Class C | 8,800 | 124,505 | 25,707 | 373,532 | ||||||||||||
Class I | 85,947 | 1,232,685 | 116,377 | 1,629,607 | ||||||||||||
Class R1 | 104 | 2,216 | 252 | 3,413 | ||||||||||||
Class R2 | 9,332 | 141,727 | 798 | 10,669 | ||||||||||||
Class R6 | 1,212,208 | 17,325,820 | 1,867,515 | 25,164,014 | ||||||||||||
3,137,710 | $45,119,441 | 3,329,055 | $44,405,828 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 10,332 | $152,909 | 17,048 | $205,255 | ||||||||||||
Class B | 1,021 | 14,943 | 2,162 | 25,794 | ||||||||||||
Class C | 1,505 | 22,006 | 2,992 | 35,659 | ||||||||||||
Class I | 5,686 | 84,493 | 4,908 | 59,291 | ||||||||||||
Class R1 | 499 | 7,293 | 824 | 9,822 | ||||||||||||
Class R2 | 337 | 5,012 | 473 | 5,719 | ||||||||||||
Class R3 | 237 | 3,519 | 373 | 4,508 | ||||||||||||
Class R4 | 251 | 3,741 | 390 | 4,714 | ||||||||||||
Class R6 | 446,428 | 6,638,381 | 715,683 | 8,652,611 | ||||||||||||
466,296 | $6,932,297 | 744,853 | $9,003,373 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (2,182,341 | ) | $(31,479,205 | ) | (1,266,884 | ) | $(17,869,262 | ) | ||||||||
Class B | (7,591 | ) | (105,958 | ) | (4,490 | ) | (59,994 | ) | ||||||||
Class C | (11,025 | ) | (158,336 | ) | (12,769 | ) | (169,925 | ) | ||||||||
Class I | (59,776 | ) | (885,829 | ) | (17,856 | ) | (244,042 | ) | ||||||||
Class R1 | (7,986 | ) | (119,952 | ) | (8 | ) | (103 | ) | ||||||||
Class R2 | (828 | ) | (12,719 | ) | (5,702 | ) | (77,245 | ) | ||||||||
Class R6 | (1,998,491 | ) | (29,309,050 | ) | (2,105,733 | ) | (29,635,979 | ) | ||||||||
(4,268,038 | ) | $(62,071,049 | ) | (3,413,442 | ) | $(48,056,550 | ) |
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Notes to Financial Statements – continued
Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Class A | (350,835 | ) | $(5,036,008 | ) | 57,460 | $(596,972 | ) | |||||||||
Class B | (6,425 | ) | (88,815 | ) | 8,782 | 123,358 | ||||||||||
Class C | (720 | ) | (11,825 | ) | 15,930 | 239,266 | ||||||||||
Class I | 31,857 | 431,349 | 103,429 | 1,444,856 | ||||||||||||
Class R1 | (7,383 | ) | (110,443 | ) | 1,068 | 13,132 | ||||||||||
Class R2 | 8,841 | 134,020 | (4,431 | ) | (60,857 | ) | ||||||||||
Class R3 | 237 | 3,519 | 373 | 4,508 | ||||||||||||
Class R4 | 251 | 3,741 | 390 | 4,714 | ||||||||||||
Class R6 | (339,855 | ) | (5,344,849 | ) | 477,465 | 4,180,646 | ||||||||||
(664,032 | ) | $(10,019,311 | ) | 660,466 | $5,352,651 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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 Lifetime 2030 Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime Income Fund, the MFS Lifetime 2025 Fund, the MFS Lifetime 2055 Fund, and the MFS Lifetime 2020 Fund were the owners of record of approximately 12%, 12%, 9%, 7%, 7%, 6%, 5%, 4%, and 3%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2060 Fund, was the owner of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $1,010 and $79, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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(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 | $2,759,962 | $33,428,486 | $35,350,578 | $(201 | ) | $(169 | ) | $837,500 | ||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $33,102 | $— |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust X and the Shareholders of MFS Blended Research Growth Equity Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS Blended Research Growth Equity Fund (the “Fund”), including the portfolio of investments, as of May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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 May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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.
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Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 17, 2020
We have served as the auditor of one or more of the MFS investment companies since 1924.
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
Jim Fallon Matt Krummell Jonathan Sage Jed Stocks |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $9,385,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 100% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
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rev. 3/16
| 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. |
45
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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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
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1-800-343-2829
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1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
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Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Blended Research®
Mid Cap Equity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
BMS-ANN
Table of Contents
MFS® Blended Research® Mid Cap Equity Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
1
Table of Contents
Portfolio structure
Top ten holdings |
| |||
Fiserv, Inc. | 2.3% | |||
McKesson Corp. | 1.9% | |||
Incyte Corp. | 1.8% | |||
DocuSign, Inc. | 1.8% | |||
Copart, Inc. | 1.8% | |||
Sempra Energy | 1.7% | |||
CACI International, Inc., “A” | 1.7% | |||
Chipotle Mexican Grill, Inc., “A” | 1.6% | |||
Electronic Arts, Inc. | 1.6% | |||
Cadence Design Systems, Inc. | 1.6% |
GICS sectors (g) |
| |||
Information Technology | 19.4% | |||
Industrials | 14.6% | |||
Health Care | 14.5% | |||
Consumer Discretionary | 11.0% | |||
Financials | 9.1% | |||
Utilities | 8.2% | |||
Real Estate | 8.1% | |||
Materials | 4.5% | |||
Communication Services | 4.5% | |||
Consumer Staples | 3.6% | |||
Energy | 1.9% |
(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. |
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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
2
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Blended Research Mid Cap Equity Fund (fund) provided a total return of 0.51%, at net asset value. This compares with a return of 2.63% for the fund’s benchmark, the Russell Midcap® Index.
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Stock selection in the financials sector was a primary factor of the fund’s underperformance relative to the Russell Midcap® Index. Within this sector, the fund’s overweight positions in life and health reinsurance products company Reinsurance
3
Table of Contents
Management Review – continued
Group of America, financial services company Synchrony Financial, insurance company Lincoln National and financial services provider East West Bancorp (h) detracted from relative results.
Stock selection in the consumer staples sector also held back relative performance, led by the fund’s overweight position in foodservice distributor US Foods Holding (h).
Elsewhere, the fund’s holdings of hotel operator Marriott International (b) weakened relative results. The share price of Marriott International declined over the reporting period as the ongoing situation with the COVID-19 virus unfolded. The US and state stay-at-home orders were particularly impactful to lodging companies, such as Marriott, which were generating close to zero revenue in this environment. In addition, overweight positions in onshore contract drilling services provider Patterson-UTI Energy (h) and real estate investment trusts Spirit Realty Capital, STORE Capital (h) and Brixmor Property Group hindered relative returns. The share price of Patterson-UTI Energy fell due to decreased demand for oil and energy-related services, amid the outbreak of the COVID-19 virus, and as Saudi Arabia and Russia failed to reach an agreement on oil production, which resulted in each country flooding the market with oil, driving down prices globally and pressuring the financial results of US energy companies.
Contributors to Performance
Stock selection in the communication services sector contributed to relative results. Within this sector, the fund’s holdings of video game maker Electronic Arts (b), and overweight positions in Internet and cable service provider Cable One and video game developer Take-Two Interactive Software, benefited relative performance.
Stock selection in the information technology sector also bolstered relative returns. Within this sector, overweight positions in information technology services provider Leidos Holdings, business analytics and software products provider Tableau Software (h) and semiconductor company Lam Research aided relative results. In addition, the timing of the fund’s ownership in shares of software company ServiceNow, and holdings of strong-performing semiconductor manufacturer Cirrus Logic (b), helped relative results. The share price of ServiceNow appreciated after its management reported earnings per share results ahead of market estimates, driven by a larger-than-anticipated increase in subscription billings and revenues.
Stocks in other sectors that supported relative performance included the fund’s overweight positions in quick service Mexican restaurant Chipotle Mexican Grill and railroad company Kansas City Southern. The share price of Chipotle Mexican Grill advanced as the company reported solid financial results, driven by stronger-than-expected same-store sales and margins. Management also raised its 2019 revenue guidance, which further supported the stock.
Respectfully,
Portfolio Manager(s)
Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks
(b) | Security is not a benchmark constituent. |
(h) | Security was not held in the portfolio at period end. |
4
Table of Contents
Management Review – continued
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
Table of Contents
PERFORMANCE SUMMARY THROUGH 5/31/20
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 (t)
6
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | Life (t) | |||||||
A | 8/19/16 | 0.51% | 6.15% | |||||||
B | 8/19/16 | (0.23)% | 5.34% | |||||||
C | 8/19/16 | (0.28)% | 5.34% | |||||||
I | 8/19/16 | 0.71% | 6.39% | |||||||
R1 | 8/19/16 | (0.16)% | 5.35% | |||||||
R2 | 8/19/16 | 0.21% | 5.86% | |||||||
R3 | 8/19/16 | 0.51% | 6.14% | |||||||
R4 | 8/19/16 | 0.73% | 6.39% | |||||||
R6 | 8/19/16 | 0.87% | 6.47% | |||||||
Comparative benchmark(s) | ||||||||||
Russell Midcap® Index (f) | 2.63% | 6.99% | ||||||||
Average annual with sales charge | ||||||||||
A With Initial Sales Charge (5.75%) | (5.27)% | 4.50% | ||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (4.07)% | 4.65% | ||||||||
C With CDSC (1% for 12 months) (v) | (1.24)% | 5.34% |
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. |
(t) | For the period from the class inception date through the stated period end. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Russell Midcap® Index – a market capitalization weighted index representing the smallest 800 companies in the Russell 1000 Index. The range of market caps covered in this 800-member index goes from about $1 billion to roughly $20 billion, with an average market cap of $8 billion to $10 billion, and a median value of $4 billion to $5 billion. The index is reconstituted annually so that stocks that have outgrown the index can be removed and new entries can be added. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this document. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this document.
7
Table of Contents
Performance Summary – continued
It is not possible to invest directly in an index.
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date.
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
Table of Contents
Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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
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Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During | ||||||||||||||
A | Actual | 0.84% | $1,000.00 | $893.59 | $3.98 | |||||||||||||
Hypothetical (h) | 0.84% | $1,000.00 | $1,020.80 | $4.24 | ||||||||||||||
B | Actual | 1.59% | $1,000.00 | $890.05 | $7.51 | |||||||||||||
Hypothetical (h) | 1.59% | $1,000.00 | $1,017.05 | $8.02 | ||||||||||||||
C | Actual | 1.59% | $1,000.00 | $889.80 | $7.51 | |||||||||||||
Hypothetical (h) | 1.59% | $1,000.00 | $1,017.05 | $8.02 | ||||||||||||||
I | Actual | 0.59% | $1,000.00 | $894.16 | $2.79 | |||||||||||||
Hypothetical (h) | 0.59% | $1,000.00 | $1,022.05 | $2.98 | ||||||||||||||
R1 | Actual | 1.59% | $1,000.00 | $890.08 | $7.51 | |||||||||||||
Hypothetical (h) | 1.59% | $1,000.00 | $1,017.05 | $8.02 | ||||||||||||||
R2 | Actual | 1.09% | $1,000.00 | $891.74 | $5.15 | |||||||||||||
Hypothetical (h) | 1.09% | $1,000.00 | $1,019.55 | $5.50 | ||||||||||||||
R3 | Actual | 0.84% | $1,000.00 | $893.75 | $3.98 | |||||||||||||
Hypothetical (h) | 0.84% | $1,000.00 | $1,020.80 | $4.24 | ||||||||||||||
R4 | Actual | 0.59% | $1,000.00 | $894.38 | $2.79 | |||||||||||||
Hypothetical (h) | 0.59% | $1,000.00 | $1,022.05 | $2.98 | ||||||||||||||
R6 | Actual | 0.48% | $1,000.00 | $894.90 | $2.27 | |||||||||||||
Hypothetical (h) | 0.48% | $1,000.00 | $1,022.60 | $2.43 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 99.4% | ||||||||
Aerospace - 4.7% | ||||||||
CACI International, Inc., “A” (a) | 20,924 | $ | 5,247,321 | |||||
Curtiss-Wright Corp. | 2,784 | 279,235 | ||||||
Huntington Ingalls Industries, Inc. | 20,548 | 4,107,340 | ||||||
Leidos Holdings, Inc. | 48,302 | 5,085,717 | ||||||
|
| |||||||
$ | 14,719,613 | |||||||
Alcoholic Beverages - 0.9% | ||||||||
Molson Coors Beverage Co. | 71,743 | $ | 2,723,364 | |||||
Apparel Manufacturers - 0.6% | ||||||||
Skechers USA, Inc., “A” (a) | 64,525 | $ | 2,020,923 | |||||
Automotive - 2.9% | ||||||||
Copart, Inc. (a) | 61,779 | $ | 5,522,425 | |||||
Lear Corp. | 32,596 | 3,456,806 | ||||||
|
| |||||||
$ | 8,979,231 | |||||||
Biotechnology - 1.8% | ||||||||
Incyte Corp. (a) | 55,579 | $ | 5,664,056 | |||||
Business Services - 3.9% | ||||||||
Fidelity National Information Services, Inc. | 32,491 | $ | 4,510,725 | |||||
Fiserv, Inc. (a) | 66,457 | 7,095,614 | ||||||
Verisk Analytics, Inc., “A” | 4,250 | 733,890 | ||||||
|
| |||||||
$ | 12,340,229 | |||||||
Cable TV - 1.6% | ||||||||
Cable One, Inc. | 2,589 | $ | 4,885,158 | |||||
Chemicals - 2.1% | ||||||||
CF Industries Holdings, Inc. | 34,631 | $ | 1,017,113 | |||||
Eastman Chemical Co. | 65,893 | 4,485,995 | ||||||
Huntsman Corp. | 62,673 | 1,137,515 | ||||||
|
| |||||||
$ | 6,640,623 | |||||||
Computer Software - 6.7% | ||||||||
Cadence Design Systems, Inc. (a) | 55,958 | $ | 5,108,406 | |||||
Citrix Systems, Inc. | 15,526 | 2,299,711 | ||||||
DocuSign, Inc. (a) | 40,445 | 5,651,784 | ||||||
Paylocity Holding Corp. (a) | 17,136 | 2,227,766 |
11
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Computer Software - continued | ||||||||
RingCentral, Inc. (a) | 6,188 | $ | 1,697,059 | |||||
VeriSign, Inc. (a) | 18,218 | 3,989,924 | ||||||
|
| |||||||
$ | 20,974,650 | |||||||
Computer Software - Systems - 4.4% | ||||||||
Hewlett Packard Enterprise | 210,013 | $ | 2,039,226 | |||||
Juniper Networks, Inc. | 124,678 | 3,024,688 | ||||||
ServiceNow, Inc. (a) | 9,481 | 3,677,965 | ||||||
TransUnion | 45,914 | 3,961,919 | ||||||
Western Digital Corp. | 28,419 | 1,260,951 | ||||||
|
| |||||||
$ | 13,964,749 | |||||||
Construction - 3.2% | ||||||||
Eagle Materials, Inc. | 36,555 | $ | 2,440,412 | |||||
Masco Corp. | 58,426 | 2,725,573 | ||||||
Pulte Homes, Inc. | 8,211 | 278,927 | ||||||
Taylor Morrison Home Corp. (a) | 75,393 | 1,457,347 | ||||||
Toll Brothers, Inc. | 94,345 | 3,048,287 | ||||||
|
| |||||||
$ | 9,950,546 | |||||||
Containers - 1.5% | ||||||||
Graphic Packaging Holding Co. | 173,166 | $ | 2,505,712 | |||||
Sealed Air Corp. | 71,507 | 2,295,375 | ||||||
|
| |||||||
$ | 4,801,087 | |||||||
Electrical Equipment - 1.8% | ||||||||
AMETEK, Inc. | 17,916 | $ | 1,643,076 | |||||
HD Supply Holdings, Inc. (a) | 66,933 | 2,122,445 | ||||||
Hubbell, Inc. | 14,975 | 1,833,240 | ||||||
|
| |||||||
$ | 5,598,761 | |||||||
Electronics - 2.6% | ||||||||
Analog Devices, Inc. | 3,843 | $ | 434,067 | |||||
Cirrus Logic, Inc. (a) | 33,990 | 2,463,595 | ||||||
Lam Research Corp. | 17,474 | 4,782,109 | ||||||
Silicon Laboratories, Inc. (a) | 4,033 | 377,731 | ||||||
|
| |||||||
$ | 8,057,502 | |||||||
Energy - Independent - 1.4% | ||||||||
EQT Corp. | 96,258 | $ | 1,284,082 | |||||
Marathon Petroleum Corp. | 78,014 | 2,741,412 | ||||||
WPX Energy, Inc. (a) | 95,926 | 543,900 | ||||||
|
| |||||||
$ | 4,569,394 |
12
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Engineering - Construction - 1.1% | ||||||||
Quanta Services, Inc. | 93,439 | $ | 3,450,702 | |||||
Food & Beverages - 2.2% | ||||||||
Ingredion, Inc. | 10,852 | $ | 914,064 | |||||
J.M. Smucker Co. | 32,956 | 3,754,677 | ||||||
Tyson Foods, Inc., “A” | 37,076 | 2,277,949 | ||||||
|
| |||||||
$ | 6,946,690 | |||||||
Food & Drug Stores - 0.5% | ||||||||
Grocery Outlet Holding Corp. (a) | 18,008 | $ | 662,875 | |||||
Sprouts Farmers Market, Inc. (a) | 35,042 | 880,605 | ||||||
|
| |||||||
$ | 1,543,480 | |||||||
Gaming & Lodging - 0.2% | ||||||||
Marriott International, Inc., “A” | 8,716 | $ | 771,366 | |||||
General Merchandise - 1.0% | ||||||||
Dollar General Corp. | 15,805 | $ | 3,026,816 | |||||
Insurance - 4.6% | ||||||||
Ameriprise Financial, Inc. | 7,064 | $ | 989,454 | |||||
Everest Re Group Ltd. | 19,777 | 3,923,955 | ||||||
Hartford Financial Services Group, Inc. | 98,844 | �� | 3,784,737 | |||||
Lincoln National Corp. | 66,955 | 2,539,603 | ||||||
Reinsurance Group of America, Inc. | 34,207 | 3,104,285 | ||||||
|
| |||||||
$ | 14,342,034 | |||||||
Leisure & Toys - 4.2% | ||||||||
Brunswick Corp. | 71,175 | $ | 3,915,337 | |||||
Electronic Arts, Inc. (a) | 41,620 | 5,114,265 | ||||||
Take-Two Interactive Software, Inc. (a) | 31,441 | 4,281,321 | ||||||
|
| |||||||
$ | 13,310,923 | |||||||
Machinery & Tools - 4.7% | ||||||||
AGCO Corp. | 71,335 | $ | 3,939,832 | |||||
Allison Transmission Holdings, Inc. | 49,525 | 1,868,083 | ||||||
Cummins, Inc. | 3,770 | 639,392 | ||||||
ITT, Inc. | 11,344 | 654,549 | ||||||
Regal Beloit Corp. | 60,592 | 4,819,488 | ||||||
Roper Technologies, Inc. | 2,364 | 930,943 | ||||||
Timken Co. | 28,475 | 1,211,326 | ||||||
United Rentals, Inc. (a) | 4,711 | 654,311 | ||||||
|
| |||||||
$ | 14,717,924 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Major Banks - 1.5% | ||||||||
State Street Corp. | 75,961 | $ | 4,630,583 | |||||
Medical & Health Technology & Services - 8.2% | ||||||||
AmerisourceBergen Corp. | 11,363 | $ | 1,083,348 | |||||
Charles River Laboratories International, Inc. (a) | 19,648 | 3,529,960 | ||||||
Chemed Corp. | 5,297 | 2,534,667 | ||||||
IDEXX Laboratories, Inc. (a) | 8,675 | 2,679,534 | ||||||
McKesson Corp. | 37,705 | 5,982,652 | ||||||
PRA Health Sciences, Inc. (a) | 32,337 | 3,346,880 | ||||||
Premier, Inc., “A” (a) | 95,845 | 3,334,448 | ||||||
Universal Health Services, Inc. | 31,888 | 3,362,590 | ||||||
|
| |||||||
$ | 25,854,079 | |||||||
Medical Equipment - 3.0% | ||||||||
Align Technology, Inc. (a) | 5,218 | $ | 1,281,645 | |||||
Avantor, Inc. (a) | 20,646 | 391,655 | ||||||
Envista Holdings Corp. (a) | 71,750 | 1,516,795 | ||||||
PerkinElmer, Inc. | 16,998 | 1,707,789 | ||||||
STERIS PLC | 5,083 | 843,219 | ||||||
West Pharmaceutical Services, Inc. | 17,853 | 3,856,962 | ||||||
|
| |||||||
$ | 9,598,065 | |||||||
Natural Gas - Distribution - 1.7% | ||||||||
Sempra Energy | 42,309 | $ | 5,344,050 | |||||
Network & Telecom - 1.0% | ||||||||
QTS Realty Trust, Inc., REIT, “A” | 45,251 | $ | 3,104,219 | |||||
Oil Services - 0.4% | ||||||||
Halliburton Co. | 115,726 | $ | 1,359,781 | |||||
Other Banks & Diversified Financials - 3.1% | ||||||||
Bank OZK | 52,072 | $ | 1,171,099 | |||||
Navient Corp. | 153,059 | 1,138,759 | ||||||
Northern Trust Corp. | 47,671 | 3,766,486 | ||||||
OneMain Holdings, Inc. | 46,628 | 1,087,831 | ||||||
Synchrony Financial | 130,090 | 2,649,933 | ||||||
|
| |||||||
$ | 9,814,108 | |||||||
Pharmaceuticals - 1.4% | ||||||||
United Therapeutics Corp. (a) | 8,473 | $ | 999,390 | |||||
Zoetis, Inc. | 25,004 | 3,485,308 | ||||||
|
| |||||||
$ | 4,484,698 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Railroad & Shipping - 1.6% | ||||||||
Kansas City Southern Co. | 33,443 | $ | 5,033,840 | |||||
Real Estate - 7.1% | ||||||||
Brixmor Property Group, Inc., REIT | 242,007 | $ | 2,700,798 | |||||
Lexington Realty Trust, REIT | 353,867 | 3,439,587 | ||||||
Life Storage, Inc., REIT | 44,079 | 4,296,821 | ||||||
Medical Properties Trust, Inc., REIT | 142,468 | 2,575,821 | ||||||
Spirit Realty Capital, Inc., REIT | 138,764 | 3,945,061 | ||||||
STAG Industrial, Inc., REIT | 89,110 | 2,397,059 | ||||||
Sun Communities, Inc., REIT | 13,311 | 1,826,136 | ||||||
VICI Properties, Inc., REIT | 63,538 | 1,246,616 | ||||||
|
| |||||||
$ | 22,427,899 | |||||||
Restaurants - 2.6% | ||||||||
Chipotle Mexican Grill, Inc., “A” (a) | 5,161 | $ | 5,181,179 | |||||
Domino’s Pizza, Inc. | 5,825 | 2,247,518 | ||||||
Texas Roadhouse, Inc. | 17,414 | 902,916 | ||||||
|
| |||||||
$ | 8,331,613 | |||||||
Specialty Chemicals - 0.1% | ||||||||
Corteva, Inc. | 16,306 | $ | 445,317 | |||||
Specialty Stores - 2.6% | ||||||||
AutoZone, Inc. (a) | 1,630 | $ | 1,871,012 | |||||
Best Buy Co., Inc. | 12,053 | 941,219 | ||||||
Burlington Stores, Inc. (a) | 5,388 | 1,129,702 | ||||||
Ross Stores, Inc. | 45,212 | 4,383,755 | ||||||
|
| |||||||
$ | 8,325,688 | |||||||
Utilities - Electric Power - 6.5% | ||||||||
AES Corp. | 272,942 | $ | 3,409,045 | |||||
DTE Energy Co. | 16,956 | 1,823,957 | ||||||
FirstEnergy Corp. | 103,234 | 4,362,669 | ||||||
NRG Energy, Inc. | 101,615 | 3,663,221 | ||||||
Vistra Energy Corp. | 148,902 | 3,043,557 | ||||||
Xcel Energy, Inc. | 62,422 | 4,059,303 | ||||||
|
| |||||||
$ | 20,361,752 | |||||||
Total Common Stocks (Identified Cost, $293,135,449) | $ | 313,115,513 |
15
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Investment Companies (h) - 0.7% | ||||||||
Money Market Funds - 0.7% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $2,229,472) | 2,229,249 | $ | 2,229,472 | |||||
Other Assets, Less Liabilities - (0.1)% | (357,028) | |||||||
Net Assets - 100.0% | $ | 314,987,957 |
(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 $2,229,472 and $313,115,513, respectively. |
(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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
16
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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, $293,135,449) | $313,115,513 | |||
Investments in affiliated issuers, at value (identified cost, $2,229,472) | 2,229,472 | |||
Receivables for | ||||
Fund shares sold | 77,183 | |||
Dividends | 384,820 | |||
Receivable from investment adviser | 29,488 | |||
Other assets | 786 | |||
Total assets | $315,837,262 | |||
Liabilities | ||||
Payables for | ||||
Fund shares reacquired | $735,629 | |||
Payable to affiliates | ||||
Administrative services fee | 595 | |||
Shareholder servicing costs | 32,019 | |||
Distribution and service fees | 2,102 | |||
Payable for independent Trustees’ compensation | 14 | |||
Accrued expenses and other liabilities | 78,946 | |||
Total liabilities | $849,305 | |||
Net assets | $314,987,957 | |||
Net assets consist of | ||||
Paid-in capital | $302,059,665 | |||
Total distributable earnings (loss) | 12,928,292 | |||
Net assets | $314,987,957 | |||
Shares of beneficial interest outstanding | 29,377,768 |
17
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $74,842,759 | 6,995,094 | $10.70 | |||||||||
Class B | 92,074 | 8,652 | 10.64 | |||||||||
Class C | 138,469 | 13,012 | 10.64 | |||||||||
Class I | 4,367,675 | 407,640 | 10.71 | |||||||||
Class R1 | 97,772 | 9,184 | 10.65 | |||||||||
Class R2 | 62,039 | 5,797 | 10.70 | |||||||||
Class R3 | 1,015,198 | 94,773 | 10.71 | |||||||||
Class R4 | 684,942 | 63,872 | 10.72 | |||||||||
Class R6 | 233,687,029 | 21,779,744 | 10.73 |
(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 $11.35 [100 / 94.25 x $10.70]. 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
18
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $5,024,096 | |||
Dividends from affiliated issuers | 60,149 | |||
Income on securities loaned | 54,701 | |||
Other | 17,189 | |||
Total investment income | $5,156,135 | |||
Expenses | ||||
Management fee | $1,482,272 | |||
Distribution and service fees | 186,847 | |||
Shareholder servicing costs | 81,681 | |||
Administrative services fee | 50,002 | |||
Independent Trustees’ compensation | 9,427 | |||
Custodian fee | 22,771 | |||
Shareholder communications | 9,516 | |||
Audit and tax fees | 54,898 | |||
Legal fees | 2,998 | |||
Registration fees | 142,831 | |||
Miscellaneous | 31,146 | |||
Total expenses | $2,074,389 | |||
Fees paid indirectly | (23 | ) | ||
Reduction of expenses by investment adviser and distributor | (358,324 | ) | ||
Net expenses | $1,716,042 | |||
Net investment income (loss) | $3,440,093 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $4,683,280 | |||
Affiliated issuers | 1,228 | |||
Net realized gain (loss) | $4,684,508 | |||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $77,859 | |||
Affiliated issuers | (206 | ) | ||
Net unrealized gain (loss) | $77,653 | |||
Net realized and unrealized gain (loss) | $4,762,161 | |||
Change in net assets from operations | $8,202,254 |
See Notes to Financial Statements
19
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $3,440,093 | $3,419,878 | ||||||
Net realized gain (loss) | 4,684,508 | 6,569,369 | ||||||
Net unrealized gain (loss) | 77,653 | (8,518,969 | ) | |||||
Change in net assets from operations | $8,202,254 | $1,470,278 | ||||||
Total distributions to shareholders | $(14,604,385 | ) | $(18,971,268 | ) | ||||
Change in net assets from fund share transactions | $45,074,144 | $18,874,626 | ||||||
Total change in net assets | $38,672,013 | $1,373,636 | ||||||
Net assets | ||||||||
At beginning of period | 276,315,944 | 274,942,308 | ||||||
At end of period | $314,987,957 | $276,315,944 |
See Notes to Financial Statements
20
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.14 | $12.07 | $11.03 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.11 | $0.09 | $0.06 | ||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.27 | ) | 1.36 | 1.01 | |||||||||||
Total from investment operations | $0.12 | $(0.16 | ) | $1.45 | $1.07 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.10 | ) | $(0.09 | ) | $(0.10 | ) | $(0.04 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.56 | ) | $(0.77 | ) | $(0.41 | ) | $(0.04 | ) | ||||||||
Net asset value, end of period (x) | $10.70 | $11.14 | $12.07 | $11.03 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.51 | (0.52 | ) | 13.20 | 10.72 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 0.96 | 0.97 | 0.94 | 0.96 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.84 | 0.84 | 0.84 | 0.81 | (a) | |||||||||||
Net investment income (loss) | 0.89 | 0.96 | 0.71 | 0.76 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $74,843 | $74,051 | $77,738 | $73 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.08 | $12.03 | $10.99 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.02 | $0.02 | $(0.00 | )(w) | $0.00 | (w) | ||||||||||
Net realized and unrealized gain (loss) | 0.01 | (0.26 | ) | 1.35 | 1.00 | |||||||||||
Total from investment operations | $0.03 | $(0.24 | ) | $1.35 | $1.00 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.01 | ) | $(0.03 | ) | $— | $(0.01 | ) | |||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.47 | ) | $(0.71 | ) | $(0.31 | ) | $(0.01 | ) | ||||||||
Net asset value, end of period (x) | $10.64 | $11.08 | $12.03 | $10.99 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (0.23 | ) | (1.27 | ) | 12.35 | 10.02 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.71 | 1.72 | 1.67 | 1.73 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.59 | 1.59 | 1.59 | 1.56 | (a) | |||||||||||
Net investment income (loss) | 0.15 | 0.21 | (0.04 | ) | 0.02 | (a) | ||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $92 | $99 | $66 | $57 | ||||||||||||
Class C | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.10 | $12.03 | $10.99 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.02 | $0.02 | $(0.00 | )(w) | $0.00 | (w) | ||||||||||
Net realized and unrealized gain (loss) | 0.01 | (0.25 | ) | 1.35 | 1.00 | |||||||||||
Total from investment operations | $0.03 | $(0.23 | ) | $1.35 | $1.00 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.03 | ) | $(0.02 | ) | $(0.00 | )(w) | $(0.01 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.49 | ) | $(0.70 | ) | $(0.31 | ) | $(0.01 | ) | ||||||||
Net asset value, end of period (x) | $10.64 | $11.10 | $12.03 | $10.99 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (0.28 | ) | (1.27 | ) | 12.40 | 10.02 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.71 | 1.72 | 1.67 | 1.73 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.59 | 1.59 | 1.59 | 1.56 | (a) | |||||||||||
Net investment income (loss) | 0.16 | 0.21 | (0.04 | ) | 0.01 | (a) | ||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $138 | $109 | $98 | $64 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.16 | $12.11 | $11.04 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.13 | $0.14 | $0.11 | $0.08 | ||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.28 | ) | 1.37 | 1.01 | |||||||||||
Total from investment operations | $0.15 | $(0.14 | ) | $1.48 | $1.09 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.14 | ) | $(0.13 | ) | $(0.10 | ) | $(0.05 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.60 | ) | $(0.81 | ) | $(0.41 | ) | $(0.05 | ) | ||||||||
Net asset value, end of period (x) | $10.71 | $11.16 | $12.11 | $11.04 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.71 | (0.30 | ) | 13.51 | 10.91 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 0.71 | 0.71 | 0.67 | 0.74 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.59 | 0.59 | 0.59 | 0.56 | (a) | |||||||||||
Net investment income (loss) | 1.18 | 1.26 | 0.95 | 1.02 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $4,368 | $2,336 | $69 | $55 | ||||||||||||
Class R1 | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.09 | $12.03 | $10.99 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.02 | $0.02 | $(0.01 | ) | $0.00 | (w) | ||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.26 | ) | 1.36 | 1.00 | |||||||||||
Total from investment operations | $0.04 | $(0.24 | ) | $1.35 | $1.00 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.02 | ) | $(0.02 | ) | $— | $(0.01 | ) | |||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.48 | ) | $(0.70 | ) | $(0.31 | ) | $(0.01 | ) | ||||||||
Net asset value, end of period (x) | $10.65 | $11.09 | $12.03 | $10.99 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (0.16 | ) | (1.31 | ) | 12.35 | 10.02 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.71 | 1.72 | 1.67 | 1.73 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.59 | 1.59 | 1.59 | 1.56 | (a) | |||||||||||
Net investment income (loss) | 0.15 | 0.22 | (0.05 | ) | 0.02 | (a) | ||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $98 | $97 | $62 | $55 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.15 | $12.07 | $11.02 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.07 | $0.08 | $0.05 | $0.04 | ||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.25 | ) | 1.35 | 1.01 | |||||||||||
Total from investment operations | $0.09 | $(0.17 | ) | $1.40 | $1.05 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.08 | ) | $(0.07 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.54 | ) | $(0.75 | ) | $(0.35 | ) | $(0.03 | ) | ||||||||
Net asset value, end of period (x) | $10.70 | $11.15 | $12.07 | $11.02 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.21 | (0.71 | ) | 12.82 | 10.51 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.21 | 1.22 | 1.17 | 1.23 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.09 | 1.09 | 1.09 | 1.06 | (a) | |||||||||||
Net investment income (loss) | 0.65 | 0.70 | 0.45 | 0.52 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $62 | $62 | $62 | $55 | ||||||||||||
Class R3 | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.16 | $12.09 | $11.03 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.07 | $0.11 | $0.08 | $0.06 | ||||||||||||
Net realized and unrealized gain (loss) | 0.05 | (0.26 | ) | 1.36 | 1.01 | |||||||||||
Total from investment operations | $0.12 | $(0.15 | ) | $1.44 | $1.07 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.11 | ) | $(0.10 | ) | $(0.07 | ) | $(0.04 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.57 | ) | $(0.78 | ) | $(0.38 | ) | $(0.04 | ) | ||||||||
Net asset value, end of period (x) | $10.71 | $11.16 | $12.09 | $11.03 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.51 | (0.50 | ) | 13.17 | 10.71 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.00 | 0.97 | 0.92 | 0.98 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.84 | 0.84 | 0.84 | 0.81 | (a) | |||||||||||
Net investment income (loss) | 0.72 | 0.95 | 0.71 | 0.77 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $1,015 | $62 | $63 | $55 |
See Notes to Financial Statements
24
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Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.17 | $12.11 | $11.04 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.13 | $0.14 | $0.11 | $0.08 | ||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.27 | ) | 1.37 | 1.01 | |||||||||||
Total from investment operations | $0.15 | $(0.13 | ) | $1.48 | $1.09 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.14 | ) | $(0.13 | ) | $(0.10 | ) | $(0.05 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.60 | ) | $(0.81 | ) | $(0.41 | ) | $(0.05 | ) | ||||||||
Net asset value, end of period (x) | $10.72 | $11.17 | $12.11 | $11.04 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.73 | (0.30 | ) | 13.51 | 10.91 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 0.71 | 0.72 | 0.67 | 0.74 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.59 | 0.59 | 0.59 | 0.56 | (a) | |||||||||||
Net investment income (loss) | 1.18 | 1.21 | 0.96 | 1.02 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $685 | $63 | $63 | $55 | ||||||||||||
Class R6 | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (c) | |||||||||||||
Net asset value, beginning of period | $11.17 | $12.11 | $11.04 | $10.00 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.14 | $0.15 | $0.12 | $0.09 | ||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.27 | ) | 1.36 | 1.00 | |||||||||||
Total from investment operations | $0.16 | $(0.12 | ) | $1.48 | $1.09 | |||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.14 | ) | $(0.14 | ) | $(0.10 | ) | $(0.05 | ) | ||||||||
From net realized gain | (0.46 | ) | (0.68 | ) | (0.31 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.60 | ) | $(0.82 | ) | $(0.41 | ) | $(0.05 | ) | ||||||||
Net asset value, end of period (x) | $10.73 | $11.17 | $12.11 | $11.04 | ||||||||||||
Total return (%) (r)(s)(t)(x) | 0.87 | (0.17 | ) | 13.52 | 10.91 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 0.61 | 0.61 | 0.62 | 0.60 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.49 | 0.48 | 0.52 | 0.55 | (a) | |||||||||||
Net investment income (loss) | 1.25 | 1.32 | 1.03 | 1.05 | (a) | |||||||||||
Portfolio turnover | 81 | 80 | 84 | 68 | (n) | |||||||||||
Net assets at end of period (000 omitted) | $233,687 | $199,437 | $196,721 | $187,594 |
See Notes to Financial Statements
25
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Financial Highlights – continued
(a) | Annualized. |
(c) | For the period from the commencement of the fund’s investment operations, August 19, 2016, through the stated period end. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(n) | Not annualized. |
(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
26
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(1) Business and Organization
MFS Blended Research Mid Cap Equity Fund (the fund) is a diversified series of MFS Series Trust X (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.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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 – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or
27
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Notes to Financial Statements – continued
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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
28
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Notes to Financial Statements – continued
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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $313,115,513 | $— | $— | $313,115,513 | ||||||||||||
Mutual Funds | 2,229,472 | — | — | 2,229,472 | ||||||||||||
Total | $315,344,985 | $— | $— | $315,344,985 |
For further information regarding security characteristics, see the Portfolio of Investments.
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 May 31, 2020, there were no securities on loan or collateral outstanding.
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Notes to Financial Statements – continued
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 – Investment transactions are recorded on the trade date. 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.
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 May 31, 2020, 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.
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Notes to Financial Statements – continued
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 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $4,617,234 | $6,171,178 | ||||||
Long-term capital gains | 9,987,151 | 12,800,090 | ||||||
Total distributions | $14,604,385 | $18,971,268 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $296,637,422 | |||
Gross appreciation | 42,880,093 | |||
Gross depreciation | (24,172,530 | ) | ||
Net unrealized appreciation (depreciation) | $18,707,563 | |||
Undistributed ordinary income | 1,085,937 | |||
Undistributed long-term capital gain | 8,469 | |||
Post-October capital loss deferral | (6,873,677 | ) |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $3,300,966 | $4,733,960 | ||||||
Class B | 3,896 | 5,973 | ||||||
Class C | 5,124 | 6,091 | ||||||
Class I | 182,704 | 45,595 | ||||||
Class R1 | 4,201 | 5,665 | ||||||
Class R2 | 2,965 | 3,828 | ||||||
Class R3 | 4,017 | 3,994 | ||||||
Class R4 | 34,334 | 4,163 | ||||||
Class R6 | 11,066,178 | 14,161,999 | ||||||
Total | $14,604,385 | $18,971,268 |
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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 $1 billion | 0.50 | % | ||
In excess of $1 billion and up to $2.5 billion | 0.475 | % | ||
In excess of $2.5 billion | 0.45 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $30,165, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.49% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | ||||||||||||||||||||||||
0.84% | 1.59% | 1.59% | 0.59% | 1.59% | 1.09% | 0.84% | 0.59% | 0.55% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $328,049, which is included in the reduction of total expenses in the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $2,155 for the year ended May 31, 2020, 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.
32
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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% | $182,738 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 1,008 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 1,230 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 1,020 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 324 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 527 | |||||||||||||||
Total Distribution and Service Fees |
| $186,847 |
(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 May 31, 2020 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 May 31, 2020, this rebate amounted to $109 and $1 for Class A and Class B, 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $— | |||
Class B | 421 | |||
Class C | — |
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 May 31, 2020, the fee was $1,890, which equated to 0.0006% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $79,791.
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
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Notes to Financial Statements – continued
average daily net assets. The administrative services fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0169% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $138 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
On December 14, 2018, MFS redeemed 5,190 shares of Class A for an aggregate amount of $56,521.
At May 31, 2020, MFS held approximately 66% and 62% of the outstanding shares of Class B and Class R1, respectively. MFS held 100% of the outstanding shares of Class R2.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in purchase transactions pursuant to this policy, which amounted to $1,554,502.
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 May 31, 2020, this reimbursement amounted to $17,189, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $276,234,273 and $237,768,219, respectively.
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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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 3,823,986 | $42,204,128 | 1,894,039 | $20,414,404 | ||||||||||||
Class B | 710 | 8,449 | 3,333 | 40,402 | ||||||||||||
Class C | 3,318 | 36,721 | 1,481 | 17,235 | ||||||||||||
Class I | 264,349 | 3,025,189 | 205,398 | 2,310,343 | ||||||||||||
Class R1 | 183 | 2,105 | 5,088 | 61,913 | ||||||||||||
Class R3 | 89,966 | 808,205 | — | — | ||||||||||||
Class R4 | 59,833 | 707,821 | — | — | ||||||||||||
Class R6 | 5,594,966 | 57,701,440 | 3,560,977 | 40,106,903 | ||||||||||||
9,837,311 | $104,494,058 | 5,670,316 | $62,951,200 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 2,782 | $33,521 | 3,229 | $31,931 | ||||||||||||
Class B | 324 | 3,896 | 605 | 5,973 | ||||||||||||
Class C | 426 | 5,124 | 616 | 6,091 | ||||||||||||
Class I | 15,150 | 182,704 | 4,605 | 45,595 | ||||||||||||
Class R1 | 349 | 4,201 | 573 | 5,665 | ||||||||||||
Class R2 | 246 | 2,965 | 386 | 3,828 | ||||||||||||
Class R3 | 333 | 4,017 | 404 | 3,994 | ||||||||||||
Class R4 | 2,844 | 34,334 | 420 | 4,163 | ||||||||||||
Class R6 | 916,833 | 11,066,178 | 1,430,505 | 14,161,999 | ||||||||||||
939,287 | $11,336,940 | 1,441,343 | $14,269,239 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (3,480,093 | ) | $(41,089,073 | ) | (1,689,231 | ) | $(19,521,039 | ) | ||||||||
Class B | (1,322 | ) | (15,577 | ) | (488 | ) | (5,239 | ) | ||||||||
Class C | (517 | ) | (6,282 | ) | (479 | ) | (5,048 | ) | ||||||||
Class I | (81,218 | ) | (812,162 | ) | (6,380 | ) | (72,726 | ) | ||||||||
Class R1 | (87 | ) | (1,015 | ) | (2,059 | ) | (24,172 | ) | ||||||||
Class R3 | (1,111 | ) | (11,154 | ) | — | — | ||||||||||
Class R4 | (4,423 | ) | (51,279 | ) | — | — | ||||||||||
Class R6 | (2,588,276 | ) | (28,770,312 | ) | (3,379,118 | ) | (38,717,589 | ) | ||||||||
(6,157,047 | ) | $(70,756,854 | ) | (5,077,755 | ) | $(58,345,813 | ) |
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Notes to Financial Statements – continued
Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Class A | 346,675 | $1,148,576 | 208,037 | $925,296 | ||||||||||||
Class B | (288 | ) | (3,232 | ) | 3,450 | 41,136 | ||||||||||
Class C | 3,227 | 35,563 | 1,618 | 18,278 | ||||||||||||
Class I | 198,281 | 2,395,731 | 203,623 | 2,283,212 | ||||||||||||
Class R1 | 445 | 5,291 | 3,602 | 43,406 | ||||||||||||
Class R2 | 246 | 2,965 | 386 | 3,828 | ||||||||||||
Class R3 | 89,188 | 801,068 | 404 | 3,994 | ||||||||||||
Class R4 | 58,254 | 690,876 | 420 | 4,163 | ||||||||||||
Class R6 | 3,923,523 | 39,997,306 | 1,612,364 | 15,551,313 | ||||||||||||
4,619,551 | $45,074,144 | 2,033,904 | $18,874,626 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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 Lifetime 2030 Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime Income Fund, the MFS Lifetime 2025 Fund, the MFS Lifetime 2055 Fund, and the MFS Lifetime 2020 Fund were the owners of record of approximately 15%, 14%, 10%, 8%, 8%, 6%, 5%, 4%, and 3%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2060 Fund was the owner of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $1,529 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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Notes to Financial Statements – continued
(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 | $5,166,093 | $81,840,212 | $84,777,855 | $1,228 | $(206 | ) | $2,229,472 | |||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $60,149 | $— |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust X and the Shareholders of MFS Blended Research Mid Cap Equity Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS Blended Research Mid Cap Equity Fund (the “Fund”), including the portfolio of investments, as of May 31, 2020, 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 three years in the period then ended and for the period from August 19, 2016 (the commencement of the Fund’s investment operations) through May 31, 2017, 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 May 31, 2020, 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 three years in the period then ended and for the period from August 19, 2016 (the commencement of the Fund’s investment operations) through May 31, 2017, 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.
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Report of Independent Registered Public Accounting Firm – continued
Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 17, 2020
We have served as the auditor of one or more of the MFS investment companies since 1924.
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
Jim Fallon Matt Krummell Jonathan Sage Jed Stocks |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $12,260,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 80.28% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Blended Research®
Small Cap Equity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
BRS-ANN
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MFS® Blended Research® Small Cap Equity Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings |
| |||
Five9, Inc. | 1.7% | |||
Prestige Brands Holdings, Inc. | 1.7% | |||
Cable One, Inc. | 1.6% | |||
CACI International, Inc., “A” | 1.6% | |||
Brunswick Corp. | 1.5% | |||
Easterly Government Properties, REIT | 1.5% | |||
Premier, Inc., “A” | 1.5% | |||
Skechers USA, Inc., “A” | 1.4% | |||
Lexington Realty Trust, REIT | 1.4% | |||
Life Storage, Inc., REIT | 1.4% |
GICS sectors (g) |
| |||
Health Care | 23.1% | |||
Industrials | 15.4% | |||
Information Technology | 14.6% | |||
Financials | 13.2% | |||
Consumer Discretionary | 9.9% | |||
Real Estate | 8.1% | |||
Materials | 3.6% | |||
Consumer Staples | 3.6% | |||
Communication Services | 2.9% | |||
Energy | 2.4% | |||
Utilities | 2.1% |
(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. |
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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Blended Research Small Cap Equity Fund (fund) provided a total return of –9.87%, at net asset value. This compares with a return of –3.44% for the fund’s benchmark, the Russell 2000® Index.
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies –a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Stock selection within the health care, industrials and financials sectors was a primary factor in the fund’s underperformance relative to the Russell 2000® Index. Within the health care sector, the fund’s overweight holdings of biopharmaceutical company Acorda Therapeutics (h), and not owning shares of strong-performing telehealthcare services provider Teladoc Health, held back relative results. Within the industrials sector,
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Management Review – continued
the fund’s overweight position in infrastructure products distributor MRC Global (h) detracted from relative performance. Within the financials sector, the fund’s overweight holdings of commercial and banking and financial services provider Hanmi Financial, and the fund’s holdings of banking and financial services provider Wintrust Financial (b), were among the fund’s top relative detractors.
Elsewhere, the fund’s overweight holdings of hydraulic fracturing services provider Liberty Oilfield Services (h), wellhead and pressure control equipment manufacturer Cactus and licensed pop culture products distributor Funko (h) hurt relative performance. The fund’s holdings of real estate investment trust STORE Capital (b) and independent natural gas and oil company WPX Energy (b) further held back relative returns. The share price of STORE Capital declined, despite reporting strong quarterly financial results, on concerns that its retail tenants may not be able to make their lease payments due to COVID-19 related store closures.
Contributors to Performance
Stock selection within the information technology, communication services and utilities sectors contributed to relative performance. Within the information technology sector, the fund’s overweight positions in cloud software provider Five9 and cloud-based software company Paylocity led the way with strong results during the reporting year. The fund’s holding of global enterprise cloud communications and collaboration solutions provider RingCentral (b)(h) further aided relative performance. The share price of RingCentral appreciated during the reporting period, after the company delivered revenue results that grew well ahead of expectations, driven primarily by better-than-expected growth in subscription revenues. Within the communication services sector, the fund’s holding of cable and broadband communications provider Cable One (b) contributed to relative returns. Within the utilities sector, an overweight position in renewable energy services provider Clearway Energy positively affected relative returns.
Within other sectors, the fund’s overweight positions in shares of biotechnology company Akebia Therapeutics, real estate investment trust Easterly Government Properties and pharmaceutical drugs and consumer products company Prestige Consumer Healthcare bolstered relative returns. Holdings of biotechnology reagents and instruments manufacturer Bio-Techne (b) and recreation products manufacturer Brunswick (b) further boosted relative performance.
Respectfully,
Portfolio Manager(s)
Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks
(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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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 (t)
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | Life (t) | |||||||
A | 9/15/15 | (9.87)% | 5.23% | |||||||
B | 9/15/15 | (10.53)% | 4.44% | |||||||
C | 9/15/15 | (10.53)% | 4.44% | |||||||
I | 9/15/15 | (9.65)% | 5.49% | |||||||
R1 | 9/15/15 | (10.59)% | 4.43% | |||||||
R2 | 9/15/15 | (10.07)% | 4.95% | |||||||
R3 | 9/15/15 | (9.92)% | 5.21% | |||||||
R4 | 9/15/15 | (9.68)% | 5.47% | |||||||
R6 | 9/15/15 | (9.59)% | 5.55% | |||||||
529A | 7/14/16 | (9.88)% | 4.32% | |||||||
529B | 7/14/16 | (10.31)% | 3.61% | |||||||
529C | 7/14/16 | (10.56)% | 3.54% | |||||||
Comparative benchmark(s) | ||||||||||
Russell 2000® Index (f) | (3.44)% | 5.58% | ||||||||
Average annual with sales charge | ||||||||||
A With Initial Sales Charge (5.75%) | (15.05)% | 3.91% | ||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (14.07)% | 4.08% | ||||||||
C With CDSC (1% for 12 months) (v) | (11.42)% | 4.44% | ||||||||
529A With Initial Sales Charge (5.75%) | (15.07)% | 2.74% | ||||||||
529B With CDSC (Declining over six years from 4% to 0%) (v) | (13.85)% | 2.91% | ||||||||
529C With CDSC (1% for 12 months) (v) | (11.44)% | 3.54% |
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. |
(t) | For the period from the class inception date through the stated period end. The comparative benchmark performance information provided for the “life” period is from the inception date of the Class A shares. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Russell 2000® Index – constructed to provide a comprehensive barometer for securities in the small-cap segment of the U.S. equity universe. The index includes 2,000 of the
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Performance Summary – continued
smallest U.S. companies based on total market capitalization, representing approximately 10% of the investable U.S. equity market. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this document. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this document.
It is not possible to invest directly in an index.
Notes to Performance Summary
Class 529 shares are only available in conjunction with qualified tuition programs, such as the MFS 529 Savings Plan. There also is an additional fee, which is detailed in the program description, on qualified tuition programs. If this fee was reflected, the performance for Class 529 shares would have been lower. This annual fee is waived for Oregon residents and for those accounts with assets of $25,000 or more.
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable.
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.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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.
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value 5/31/20 | Expenses Paid During | ||||||||||||||
A | Actual | 0.99% | $1,000.00 | $820.98 | $4.51 | |||||||||||||
Hypothetical (h) | 0.99% | $1,000.00 | $1,020.05 | $5.00 | ||||||||||||||
B | Actual | 1.74% | $1,000.00 | $818.42 | $7.91 | |||||||||||||
Hypothetical (h) | 1.74% | $1,000.00 | $1,016.30 | $8.77 | ||||||||||||||
C | Actual | 1.74% | $1,000.00 | $818.39 | $7.91 | |||||||||||||
Hypothetical (h) | 1.74% | $1,000.00 | $1,016.30 | $8.77 | ||||||||||||||
I | Actual | 0.74% | $1,000.00 | $822.14 | $3.37 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
R1 | Actual | 1.74% | $1,000.00 | $817.93 | $7.91 | |||||||||||||
Hypothetical (h) | 1.74% | $1,000.00 | $1,016.30 | $8.77 | ||||||||||||||
R2 | Actual | 1.24% | $1,000.00 | $820.37 | $5.64 | |||||||||||||
Hypothetical (h) | 1.24% | $1,000.00 | $1,018.80 | $6.26 | ||||||||||||||
R3 | Actual | 0.99% | $1,000.00 | $820.84 | $4.51 | |||||||||||||
Hypothetical (h) | 0.99% | $1,000.00 | $1,020.05 | $5.00 | ||||||||||||||
R4 | Actual | 0.74% | $1,000.00 | $821.94 | $3.37 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
R6 | Actual | 0.65% | $1,000.00 | $822.17 | $2.96 | |||||||||||||
Hypothetical (h) | 0.65% | $1,000.00 | $1,021.75 | $3.29 | ||||||||||||||
529A | Actual | 1.02% | $1,000.00 | $821.46 | $4.64 | |||||||||||||
Hypothetical (h) | 1.02% | $1,000.00 | $1,019.90 | $5.15 | ||||||||||||||
529B | Actual | 1.35% | $1,000.00 | $820.37 | $6.14 | |||||||||||||
Hypothetical (h) | 1.35% | $1,000.00 | $1,018.25 | $6.81 | ||||||||||||||
529C | Actual | 1.79% | $1,000.00 | $818.02 | $8.14 | |||||||||||||
Hypothetical (h) | 1.79% | $1,000.00 | $1,016.05 | $9.02 |
(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 183/366 (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
For the period from February 1, 2020 through May 31, 2020, the distribution fee for Class 529B was not imposed. Had the distribution fee been imposed throughout the entire six month period, the annualized expense ratio, the actual expenses paid during the period,
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Expense Table – continued
and the hypothetical expenses paid during the period would have been approximately 1.79%, $8.15, and $9.02 for Class 529B. See Note 3 in the Notes to Financial Statements for additional information.
Each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class 529A shares, this rebate reduced the expense ratio above by 0.02%. See Note 3 in the Notes to Financial Statements for additional information.
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 98.9% | ||||||||
Aerospace - 2.6% | ||||||||
CACI International, Inc., “A” (a) | 16,476 | $ | 4,131,851 | |||||
Curtiss-Wright Corp. | 24,637 | 2,471,091 | ||||||
|
| |||||||
$ | 6,602,942 | |||||||
Apparel Manufacturers - 1.8% | ||||||||
Levi Strauss & Co., “A” | 66,474 | $ | 896,734 | |||||
Skechers USA, Inc., “A” (a) | 119,900 | 3,755,268 | ||||||
|
| |||||||
$ | 4,652,002 | |||||||
Automotive - 0.9% | ||||||||
Stoneridge, Inc. (a) | 116,874 | $ | 2,405,267 | |||||
Biotechnology - 7.4% | ||||||||
Adaptive Biotechnologies Corp. (a) | 17,687 | $ | 684,487 | |||||
Akebia Therapeutics, Inc. (a) | 177,587 | 2,067,113 | ||||||
Coherus BioSciences, Inc. (a) | 97,748 | 1,822,023 | ||||||
Concert Pharmaceuticals, Inc. (a) | 61,619 | 654,394 | ||||||
CytomX Therapeutics, Inc. (a) | 153,578 | 1,360,701 | ||||||
Emergent BioSolutions, Inc. (a) | 18,013 | 1,503,905 | ||||||
Enanta Pharmaceuticals, Inc. (a) | 27,676 | 1,425,037 | ||||||
Esperion Therapeutics, Inc. (a)(l) | 41,951 | 1,777,464 | ||||||
Exelixis, Inc. (a) | 38,720 | 956,771 | ||||||
Jounce Therapeutics, Inc. (a) | 134,311 | 723,936 | ||||||
Macrogenics, Inc. (a) | 113,201 | 2,177,987 | ||||||
Radius Health, Inc. (a) | 43,673 | 552,900 | ||||||
Retrophin, Inc. (a) | 87,477 | 1,372,077 | ||||||
Varex Imaging Corp. (a) | 58,680 | 1,100,837 | ||||||
Voyager Therapeutics, Inc. (a) | 89,044 | 1,077,433 | ||||||
|
| |||||||
$ | 19,257,065 | |||||||
Brokerage & Asset Managers - 0.1% | ||||||||
Virtu Financial, Inc., “A” | 9,911 | $ | 236,377 | |||||
Business Services - 2.6% | ||||||||
BrightView Holdings, Inc. (a) | 146,232 | $ | 2,001,916 | |||||
Forrester Research, Inc. (a) | 71,745 | 2,252,793 | ||||||
Stamps.com, Inc. (a) | 13,036 | 2,583,083 | ||||||
|
| |||||||
$ | 6,837,792 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Cable TV - 1.6% | ||||||||
Cable One, Inc. | 2,215 | $ | 4,179,461 | |||||
Chemicals - 0.9% | ||||||||
Element Solutions, Inc. (a) | 221,182 | $ | 2,408,672 | |||||
Computer Software - 3.4% | ||||||||
Cornerstone OnDemand, Inc. (a) | 73,539 | $ | 2,842,282 | |||||
Everbridge, Inc. (a) | 1,761 | 257,564 | ||||||
Pagerduty, Inc. (a) | 90,651 | 2,406,784 | ||||||
Paylocity Holding Corp. (a) | 25,911 | 3,368,560 | ||||||
|
| |||||||
$ | 8,875,190 | �� | ||||||
Computer Software - Systems - 4.1% | ||||||||
Box, Inc., “A” (a) | 161,898 | $ | 3,234,722 | |||||
Five9, Inc. (a) | 42,043 | 4,380,881 | ||||||
Verint Systems, Inc. (a) | 62,371 | 2,892,143 | ||||||
|
| |||||||
$ | 10,507,746 | |||||||
Construction - 2.0% | ||||||||
Eagle Materials, Inc. | 47,625 | $ | 3,179,445 | |||||
Toll Brothers, Inc. | 3,663 | 118,352 | ||||||
Trex Co., Inc. (a) | 14,875 | 1,786,785 | ||||||
|
| |||||||
$ | 5,084,582 | |||||||
Consumer Products - 1.8% | ||||||||
Edgewell Personal Care Co. (a) | 11,035 | $ | 335,685 | |||||
Prestige Brands Holdings, Inc. (a) | 102,633 | 4,331,112 | ||||||
|
| |||||||
$ | 4,666,797 | |||||||
Consumer Services - 1.2% | ||||||||
Grand Canyon Education, Inc. (a) | 32,991 | $ | 3,219,592 | |||||
Electrical Equipment - 1.3% | ||||||||
TriMas Corp. (a) | 144,783 | $ | 3,424,118 | |||||
Electronics - 4.2% | ||||||||
Amkor Technology, Inc. (a) | 214,692 | $ | 2,271,441 | |||||
Jabil Circuit, Inc. | 67,767 | 2,027,589 | ||||||
Plexus Corp. (a) | 45,208 | 2,903,258 | ||||||
Sanmina Corp. (a) | 46,478 | 1,236,779 | ||||||
Silicon Laboratories, Inc. (a) | 26,589 | 2,490,326 | ||||||
|
| |||||||
$ | 10,929,393 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Energy - Independent - 0.1% | ||||||||
WPX Energy, Inc. (a) | 53,661 | $ | 304,258 | |||||
Engineering - Construction - 3.3% | ||||||||
Great Lakes Dredge & Dock Corp. (a) | 135,467 | $ | 1,255,779 | |||||
KBR, Inc. | 150,206 | 3,522,331 | ||||||
Quanta Services, Inc. | 92,754 | 3,425,405 | ||||||
Tutor Perini Corp. (a) | 25,964 | 272,622 | ||||||
|
| |||||||
$ | 8,476,137 | |||||||
Food & Beverages - 3.0% | ||||||||
Hostess Brands, Inc. (a) | 300,174 | $ | 3,624,601 | |||||
Ingredion, Inc. | 32,301 | 2,720,713 | ||||||
Pilgrim’s Pride Corp. (a) | 69,459 | 1,435,718 | ||||||
|
| |||||||
$ | 7,781,032 | |||||||
Food & Drug Stores - 0.5% | ||||||||
Grocery Outlet Holding Corp. (a) | 32,156 | $ | 1,183,662 | |||||
Forest & Paper Products - 0.4% | ||||||||
Verso Corp., “A” | 70,452 | $ | 1,013,100 | |||||
Gaming & Lodging - 1.0% | ||||||||
Wyndham Hotels & Resorts, Inc. | 55,776 | $ | 2,561,792 | |||||
Insurance - 5.4% | ||||||||
American Equity Investment Life Holding Co. | 87,405 | $ | 1,895,814 | |||||
Brighthouse Financial, Inc. (a) | 38,947 | 1,157,115 | ||||||
CNO Financial Group, Inc. | 250,711 | 3,597,703 | ||||||
Essent Group Ltd. | 52,645 | 1,739,917 | ||||||
HCI Group, Inc. | 27,943 | 1,253,244 | ||||||
Heritage Insurance Holdings, Inc. | 45,942 | 576,113 | ||||||
MGIC Investment Corp. | 50,658 | 415,902 | ||||||
National General Holdings Corp. | 17,626 | 357,808 | ||||||
Radian Group, Inc. | 113,695 | 1,805,477 | ||||||
Third Point Reinsurance Ltd. (a) | 41,769 | 308,255 | ||||||
Universal Insurance Holdings, Inc. | 42,658 | 761,872 | ||||||
|
| |||||||
$ | 13,869,220 | |||||||
Leisure & Toys - 2.4% | ||||||||
Brunswick Corp. | 71,765 | $ | 3,947,793 | |||||
Malibu Boats, Inc., “A” (a) | 47,464 | 2,236,978 | ||||||
|
| |||||||
$ | 6,184,771 |
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Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Machinery & Tools - 4.4% | ||||||||
ACCO Brands Corp. | 81,158 | $ | 502,368 | |||||
AGCO Corp. | 52,195 | 2,882,730 | ||||||
Allison Transmission Holdings, Inc. | 22,662 | 854,811 | ||||||
Enerpac Tool Group Corp. | 111,448 | 1,994,919 | ||||||
ITT, Inc. | 22,455 | 1,295,653 | ||||||
Park-Ohio Holdings Corp. | 21,403 | 312,270 | ||||||
Regal Beloit Corp. | 43,999 | 3,499,680 | ||||||
|
| |||||||
$ | 11,342,431 | |||||||
Medical & Health Technology & Services - 6.3% | ||||||||
Allscripts Healthcare Solutions, Inc. (a) | 27,958 | $ | 176,694 | |||||
HealthEquity, Inc. (a) | 29,233 | 1,811,569 | ||||||
HMS Holdings Corp. (a) | 98,441 | 3,075,297 | ||||||
Medpace Holdings, Inc. (a) | 8,051 | 747,294 | ||||||
Owens & Minor, Inc. | 179,345 | 1,422,206 | ||||||
Premier, Inc., “A” (a) | 109,514 | 3,809,992 | ||||||
Syneos Health, Inc. (a) | 46,988 | 2,865,798 | ||||||
Tenet Healthcare Corp. (a) | 114,897 | 2,500,159 | ||||||
|
| |||||||
$ | 16,409,009 | |||||||
Medical Equipment - 4.3% | ||||||||
AngioDynamics, Inc. (a) | 83,334 | $ | 850,840 | |||||
Avanos Medical, Inc. (a) | 45,090 | 1,310,315 | ||||||
Bio-Techne Corp. | 12,773 | 3,382,290 | ||||||
CONMED Corp. | 28,122 | 2,064,436 | ||||||
Integer Holdings Corp. (a) | 33,658 | 2,665,041 | ||||||
LivaNova PLC (a) | 5,372 | 287,348 | ||||||
Orthofix Medical, Inc. (a) | 18,244 | 621,756 | ||||||
|
| |||||||
$ | 11,182,026 | |||||||
Network & Telecom - 0.2% | ||||||||
QTS Realty Trust, Inc., REIT, “A” | 8,538 | $ | 585,707 | |||||
Oil Services - 1.3% | ||||||||
Cactus, Inc., “A” | 177,433 | $ | 3,385,422 | |||||
Other Banks & Diversified Financials - 8.4% | ||||||||
Bank OZK | 143,917 | $ | 3,236,693 | |||||
Cathay General Bancorp, Inc. | 124,770 | 3,392,496 | ||||||
East West Bancorp, Inc. | 47,195 | 1,649,465 | ||||||
Enova International, Inc. (a) | 71,303 | 1,008,938 | ||||||
First Hawaiian, Inc. | 147,548 | 2,545,203 | ||||||
Hanmi Financial Corp. | 189,189 | 1,708,377 | ||||||
OneMain Holdings, Inc. | 38,839 | 906,114 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Other Banks & Diversified Financials - continued | ||||||||
Popular, Inc. | 36,418 | $ | 1,438,147 | |||||
Regional Management Corp. (a) | 6,205 | 98,411 | ||||||
SLM Corp. | 246,699 | 1,869,978 | ||||||
Triton International Ltd. of Bermuda | 56,231 | 1,715,046 | ||||||
Wintrust Financial Corp. | 50,164 | 2,124,947 | ||||||
|
| |||||||
$ | 21,693,815 | |||||||
Pharmaceuticals - 3.3% | ||||||||
Akcea Therapeutics, Inc. (a) | 53,365 | $ | 795,139 | |||||
Catalent, Inc. (a) | 17,543 | 1,363,617 | ||||||
Collegium Pharmaceutical, Inc. (a) | 62,250 | 1,372,613 | ||||||
Lannett Co., Inc. (a) | 130,400 | 997,560 | ||||||
Phathom Pharmaceuticals, Inc. (a) | 13,126 | 554,967 | ||||||
Phibro Animal Health Corp., “A” | 54,316 | 1,423,079 | ||||||
United Therapeutics Corp. (a) | 17,743 | 2,092,787 | ||||||
|
| |||||||
$ | 8,599,762 | |||||||
Pollution Control - 0.3% | ||||||||
Casella Waste Systems, Inc., “A” (a) | 17,642 | $ | 898,860 | |||||
Railroad & Shipping - 1.0% | ||||||||
Diamond S Shipping, Inc. (a) | 115,539 | $ | 1,265,152 | |||||
Dorian LPG Ltd. (a) | 9,302 | 76,462 | ||||||
Teekay Tankers LTD., “A” (a) | 65,644 | 1,140,893 | ||||||
|
| |||||||
$ | 2,482,507 | |||||||
Real Estate - 7.9% | ||||||||
Brixmor Property Group, Inc., REIT | 29,965 | $ | 334,409 | |||||
Easterly Government Properties, REIT | 155,673 | 3,902,722 | ||||||
Industrial Logistics Properties Trust, REIT | 181,993 | 3,412,369 | ||||||
Lexington Realty Trust, REIT | 375,583 | 3,650,667 | ||||||
Life Storage, Inc., REIT | 37,197 | 3,625,964 | ||||||
Spirit Realty Capital, Inc., REIT | 79,282 | 2,253,987 | ||||||
STAG Industrial, Inc., REIT | 34,067 | 916,402 | ||||||
STORE Capital Corp., REIT | 123,699 | 2,392,339 | ||||||
|
| |||||||
$ | 20,488,859 | |||||||
Restaurants - 1.2% | ||||||||
Texas Roadhouse, Inc. | 61,418 | $ | 3,184,523 | |||||
Specialty Chemicals - 2.3% | ||||||||
Axalta Coating Systems Ltd. (a) | 117,165 | $ | 2,707,683 | |||||
Univar Solutions, Inc. (a) | 216,322 | 3,344,338 | ||||||
|
| |||||||
$ | 6,052,021 |
15
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Specialty Stores - 0.3% | ||||||||
Hudson Ltd., “A” (a) | 101,937 | $ | 513,763 | |||||
Murphy USA, Inc. (a) | 1,522 | 176,704 | ||||||
|
| |||||||
$ | 690,467 | |||||||
Telecommunications - Wireless - 0.4% | ||||||||
Telephone and Data Systems, Inc. | 51,929 | $ | 1,064,025 | |||||
Telephone Services - 0.9% | ||||||||
ATN International, Inc. | 29,677 | $ | 1,762,814 | |||||
Cogent Communications Holdings, Inc. | 6,872 | 525,845 | ||||||
|
| |||||||
$ | 2,288,659 | |||||||
Trucking - 2.2% | ||||||||
Forward Air Corp. | 50,808 | $ | 2,524,141 | |||||
Schneider National, Inc. | 132,553 | 3,203,806 | ||||||
|
| |||||||
$ | 5,727,947 | |||||||
Utilities - Electric Power - 2.2% | ||||||||
Clearway Energy, Inc., “A” | 135,732 | $ | 2,754,002 | |||||
NRG Energy, Inc. | 47,094 | 1,697,739 | ||||||
Spark Energy, Inc., “A” | 135,726 | 1,115,668 | ||||||
|
| |||||||
$ | 5,567,409 | |||||||
Total Common Stocks (Identified Cost, $255,806,748) | $ | 256,304,417 | ||||||
Investment Companies (h) - 1.0% | ||||||||
Money Market Funds - 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $2,526,382) | 2,526,129 | $ | 2,526,382 | |||||
Collateral for Securities Loaned - 0.3% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13% (j) (Identified Cost, $880,950) | 880,950 | $ | 880,950 | |||||
Other Assets, Less Liabilities - (0.2)% | (644,866) | |||||||
Net Assets - 100.0% | $ | 259,066,883 |
(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 $2,526,382 and $257,185,367, 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. |
16
Table of Contents
Portfolio of Investments – continued
(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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
17
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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 $888,711 of securities on loan (identified cost, $256,687,698) | $257,185,367 | |||
Investments in affiliated issuers, at value (identified cost, $2,526,382) | 2,526,382 | |||
Receivables for | ||||
Investments sold | 20,217,930 | |||
Fund shares sold | 669,693 | |||
Interest and dividends | 263,107 | |||
Receivable from investment adviser | 31,466 | |||
Other assets | 696 | |||
Total assets | $280,894,641 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $20,091,725 | |||
Fund shares reacquired | 669,778 | |||
Collateral for securities loaned, at value | 880,950 | |||
Payable to affiliates | ||||
Administrative services fee | 514 | |||
Shareholder servicing costs | 82,356 | |||
Distribution and service fees | 3,143 | |||
Program manager fees | 48 | |||
Payable for independent Trustees’ compensation | 14 | |||
Accrued expenses and other liabilities | 99,230 | |||
Total liabilities | $21,827,758 | |||
Net assets | $259,066,883 | |||
Net assets consist of | ||||
Paid-in capital | $285,805,218 | |||
Total distributable earnings (loss) | (26,738,335 | ) | ||
Net assets | $259,066,883 | |||
Shares of beneficial interest outstanding | 22,792,149 |
18
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $57,133,056 | 5,041,910 | $11.33 | |||||||||
Class B | 387,103 | 34,887 | 11.10 | |||||||||
Class C | 5,132,658 | 462,915 | 11.09 | |||||||||
Class I | 53,562,035 | 4,703,523 | 11.39 | |||||||||
Class R1 | 2,897,298 | 261,142 | 11.09 | |||||||||
Class R2 | 9,315,481 | 822,853 | 11.32 | |||||||||
Class R3 | 537,107 | 47,309 | 11.35 | |||||||||
Class R4 | 19,043,661 | 1,671,165 | 11.40 | |||||||||
Class R6 | 102,331,646 | 8,973,579 | 11.40 | |||||||||
Class 529A | 7,187,890 | 633,893 | 11.34 | |||||||||
Class 529B | 261,236 | 23,520 | 11.11 | |||||||||
Class 529C | 1,277,712 | 115,453 | 11.07 |
(a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Classes A and 529A, for which the maximum offering prices per share were $12.02 [100 / 94.25 x $11.33] and $12.03 [100 / 94.25 x $11.34], respectively. On sales of $50,000 or more, the maximum offering prices of Class A and Class 529A shares are reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class 529B, and Class 529C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, R6, and 529A. |
See Notes to Financial Statements
19
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $3,412,239 | |||
Income on securities loaned | 85,559 | |||
Dividends from affiliated issuers | 56,007 | |||
Other | 44,428 | |||
Foreign taxes withheld | (3,563 | ) | ||
Total investment income | $3,594,670 | |||
Expenses | ||||
Management fee | $1,578,960 | |||
Distribution and service fees | 322,252 | |||
Shareholder servicing costs | 194,423 | |||
Program manager fees | 4,879 | |||
Administrative services fee | 42,905 | |||
Independent Trustees’ compensation | 6,556 | |||
Custodian fee | 19,019 | |||
Shareholder communications | 29,272 | |||
Audit and tax fees | 58,269 | |||
Legal fees | 2,270 | |||
Registration fees | 159,249 | |||
Miscellaneous | 36,007 | |||
Total expenses | $2,454,061 | |||
Reduction of expenses by investment adviser and distributor | (414,210 | ) | ||
Net expenses | $2,039,851 | |||
Net investment income (loss) | $1,554,819 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $(23,467,939 | ) | ||
Affiliated issuers | (494 | ) | ||
Net realized gain (loss) | $(23,468,433 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $(3,474,702 | ) | ||
Affiliated issuers | (214 | ) | ||
Net unrealized gain (loss) | $(3,474,916 | ) | ||
Net realized and unrealized gain (loss) | $(26,943,349 | ) | ||
Change in net assets from operations | $(25,388,530 | ) |
See Notes to Financial Statements
20
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $1,554,819 | $789,598 | ||||||
Net realized gain (loss) | (23,468,433 | ) | 2,590,722 | |||||
Net unrealized gain (loss) | (3,474,916 | ) | (9,190,910 | ) | ||||
Change in net assets from operations | $(25,388,530 | ) | $(5,810,590 | ) | ||||
Total distributions to shareholders | $(4,783,135 | ) | $(7,032,165 | ) | ||||
Change in net assets from fund share transactions | $108,097,955 | $77,114,601 | ||||||
Total change in net assets | $77,926,290 | $64,271,846 | ||||||
Net assets | ||||||||
At beginning of period | 181,140,593 | 116,868,747 | ||||||
At end of period | $259,066,883 | $181,140,593 |
See Notes to Financial Statements
21
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.77 | $13.83 | $11.91 | $10.36 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.06 | $0.05 | $0.05 | $0.04 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.28 | ) | (0.44 | ) | 2.32 | 1.57 | 0.35 | |||||||||||||
Total from investment operations | $(1.22 | ) | $(0.38 | ) | $2.37 | $1.62 | $0.39 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.05 | ) | $(0.04 | ) | $(0.06 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.22 | ) | $(0.68 | ) | $(0.45 | ) | $(0.07 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $11.33 | $12.77 | $13.83 | $11.91 | $10.36 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.87 | ) | (2.28 | ) | 20.15 | 15.63 | 3.89 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.16 | 1.22 | 1.28 | 1.88 | 5.46 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.99 | 0.99 | 0.96 | 0.96 | (a) | ||||||||||||||
Net investment income (loss) | 0.48 | 0.41 | 0.41 | 0.45 | 0.52 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $57,133 | $60,929 | $43,682 | $3,700 | $637 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.56 | $13.67 | $11.81 | $10.33 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $(0.05 | ) | $(0.05 | ) | $(0.04 | ) | $(0.02 | ) | ||||||||||
Net realized and unrealized gain (loss) | (1.26 | ) | (0.42 | ) | 2.30 | 1.56 | 0.35 | |||||||||||||
Total from investment operations | $(1.29 | ) | $(0.47 | ) | $2.25 | $1.52 | $0.33 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $(0.00 | )(w) | ||||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | $(0.00 | )(w) | ||||||||||
Net asset value, end of period (x) | $11.10 | $12.56 | $13.67 | $11.81 | $10.33 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.53 | ) | (3.00 | ) | 19.28 | 14.73 | 3.34 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.91 | 1.97 | 2.07 | 3.04 | 7.17 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.74 | 1.74 | 1.74 | 1.71 | (a) | ||||||||||||||
Net investment income (loss) | (0.27 | ) | (0.36 | ) | (0.39 | ) | (0.34 | ) | (0.25 | )(a) | ||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $387 | $500 | $403 | $243 | $98 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.55 | $13.66 | $11.80 | $10.33 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $(0.03 | ) | $(0.05 | ) | $(0.03 | ) | $(0.02 | ) | ||||||||||
Net realized and unrealized gain (loss) | (1.26 | ) | (0.44 | ) | 2.30 | 1.54 | 0.36 | |||||||||||||
Total from investment operations | $(1.29 | ) | $(0.47 | ) | $2.25 | $1.51 | $0.34 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.00 | )(w) | $(0.00 | )(w) | $— | $— | $(0.01 | ) | ||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | $(0.01 | ) | ||||||||||
Net asset value, end of period (x) | $11.09 | $12.55 | $13.66 | $11.80 | $10.33 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.53 | ) | (2.97 | ) | 19.30 | 14.64 | 3.38 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.91 | 1.97 | 2.07 | 2.87 | 7.03 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.74 | 1.74 | 1.74 | 1.71 | (a) | ||||||||||||||
Net investment income (loss) | (0.26 | ) | (0.21 | ) | (0.40 | ) | (0.28 | ) | (0.24 | )(a) | ||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $5,133 | $3,234 | $406 | $408 | $89 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.83 | $13.90 | $11.94 | $10.38 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.09 | $0.09 | $0.08 | $0.08 | $0.05 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.27 | ) | (0.45 | ) | 2.33 | 1.55 | 0.36 | |||||||||||||
Total from investment operations | $(1.18 | ) | $(0.36 | ) | $2.41 | $1.63 | $0.41 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.07 | ) | $(0.06 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.26 | ) | $(0.71 | ) | $(0.45 | ) | $(0.07 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $11.39 | $12.83 | $13.90 | $11.94 | $10.38 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.58 | ) | (2.06 | ) | 20.49 | 15.77 | 4.14 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.91 | 0.97 | 1.05 | 2.02 | 5.39 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.71 | (a) | ||||||||||||||
Net investment income (loss) | 0.74 | 0.69 | 0.64 | 0.68 | 0.73 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $53,562 | $39,397 | $12,225 | $752 | $351 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.56 | $13.67 | $11.81 | $10.33 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $0.07 | $(0.05 | ) | $(0.04 | ) | $(0.02 | ) | |||||||||||
Net realized and unrealized gain (loss) | (1.27 | ) | (0.54 | )(g) | 2.30 | 1.56 | 0.35 | |||||||||||||
Total from investment operations | $(1.30 | ) | $(0.47 | ) | $2.25 | $1.52 | $0.33 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.00 | )(w) | $— | $— | $— | $(0.00 | )(w) | |||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | $(0.00 | )(w) | ||||||||||
Net asset value, end of period (x) | $11.09 | $12.56 | $13.67 | $11.81 | $10.33 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.59 | ) | (3.00 | ) | 19.28 | 14.73 | 3.33 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.91 | 1.97 | 2.07 | 3.32 | 7.32 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.74 | 1.74 | 1.74 | 1.71 | (a) | ||||||||||||||
Net investment income (loss) | (0.27 | ) | 0.54 | (0.39 | ) | (0.35 | ) | (0.24 | )(a) | |||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $2,897 | $3,339 | $79 | $63 | $52 |
See Notes to Financial Statements
24
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.78 | $13.84 | $11.89 | $10.35 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $0.16 | $0.01 | $0.02 | $0.02 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.27 | ) | (0.58 | )(g) | 2.33 | 1.56 | 0.35 | |||||||||||||
Total from investment operations | $(1.24 | ) | $(0.42 | ) | $2.34 | $1.58 | $0.37 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.05 | ) | $(0.00 | )(w) | $— | $— | $(0.02 | ) | ||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.22 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | $(0.02 | ) | ||||||||||
Net asset value, end of period (x) | $11.32 | $12.78 | $13.84 | $11.89 | $10.35 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.07 | ) | (2.57 | ) | 19.91 | 15.29 | 3.68 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.41 | 1.47 | 1.57 | 2.84 | 6.82 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.24 | 1.24 | 1.24 | 1.24 | 1.21 | (a) | ||||||||||||||
Net investment income (loss) | 0.23 | 1.22 | 0.11 | 0.15 | 0.26 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $9,315 | $9,647 | $72 | $60 | $52 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.83 | $13.88 | $11.92 | $10.36 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.05 | $0.05 | $0.05 | $0.04 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.28 | ) | (0.42 | ) | 2.33 | 1.56 | 0.34 | |||||||||||||
Total from investment operations | $(1.22 | ) | $(0.37 | ) | $2.38 | $1.61 | $0.38 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.04 | ) | $(0.03 | ) | $(0.01 | ) | $(0.02 | ) | ||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.26 | ) | $(0.68 | ) | $(0.42 | ) | $(0.05 | ) | $(0.02 | ) | ||||||||||
Net asset value, end of period (x) | $11.35 | $12.83 | $13.88 | $11.92 | $10.36 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.92 | ) | (2.23 | ) | 20.21 | 15.54 | 3.86 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.16 | 1.21 | 1.32 | 2.59 | 6.57 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.99 | 0.99 | 0.99 | 0.96 | (a) | ||||||||||||||
Net investment income (loss) | 0.52 | 0.38 | 0.36 | 0.40 | 0.51 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $537 | $70 | $72 | $60 | $52 |
See Notes to Financial Statements
25
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.84 | $13.91 | $11.94 | $10.37 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.09 | $0.08 | $0.07 | $0.05 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.28 | ) | (0.45 | ) | 2.34 | 1.57 | 0.35 | |||||||||||||
Total from investment operations | $(1.18 | ) | $(0.36 | ) | $2.42 | $1.64 | $0.40 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.07 | ) | $(0.06 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.26 | ) | $(0.71 | ) | $(0.45 | ) | $(0.07 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $11.40 | $12.84 | $13.91 | $11.94 | $10.37 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.60 | ) | (2.09 | ) | 20.54 | 15.87 | 4.04 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.95 | 0.96 | 1.07 | 2.34 | 6.32 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.71 | (a) | ||||||||||||||
Net investment income (loss) | 0.96 | 0.63 | 0.61 | 0.65 | 0.76 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $19,044 | $71 | $73 | $60 | $52 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.85 | $13.91 | $11.94 | $10.37 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.10 | $0.09 | $0.08 | $0.05 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.28 | ) | (0.44 | ) | 2.34 | 1.57 | 0.35 | |||||||||||||
Total from investment operations | $(1.18 | ) | $(0.34 | ) | $2.43 | $1.65 | $0.40 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.10 | ) | $(0.08 | ) | $(0.07 | ) | $(0.04 | ) | $(0.03 | ) | ||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.27 | ) | $(0.72 | ) | $(0.46 | ) | $(0.08 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $11.40 | $12.85 | $13.91 | $11.94 | $10.37 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.59 | ) | (1.93 | ) | 20.62 | 15.90 | 4.04 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | 0.88 | 0.99 | 1.22 | 6.31 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.65 | 0.66 | 0.65 | 0.69 | 0.70 | (a) | ||||||||||||||
Net investment income (loss) | 0.83 | 0.72 | 0.71 | 0.73 | 0.77 | (a) | ||||||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | 47 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $102,332 | $53,947 | $49,503 | $46,259 | $1,874 |
See Notes to Financial Statements
26
Table of Contents
Financial Highlights – continued
Class 529A | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (i) | |||||||||||||
Net asset value, beginning of period | $12.78 | $13.85 | $11.90 | $10.74 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.05 | $0.02 | $0.04 | ||||||||||||
Net realized and unrealized gain (loss) | (1.28 | ) | (0.44 | ) | 2.35 | 1.19 | ||||||||||
Total from investment operations | $(1.22 | ) | $(0.39 | ) | $2.37 | $1.23 | ||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $(0.05 | ) | $(0.04 | ) | $(0.03 | ) | $(0.03 | ) | ||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | ||||||||
Total distributions declared to shareholders | $(0.22 | ) | $(0.68 | ) | $(0.42 | ) | $(0.07 | ) | ||||||||
Net asset value, end of period (x) | $11.34 | $12.78 | $13.85 | $11.90 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (9.88 | ) | (2.34 | ) | 20.13 | 11.47 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.21 | 1.27 | 1.34 | 1.77 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.02 | 1.02 | 1.03 | 1.04 | (a) | |||||||||||
Net investment income (loss) | 0.45 | 0.35 | 0.17 | 0.36 | (a) | |||||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | ||||||||||||
Net assets at end of period (000 omitted) | $7,188 | $8,049 | $8,175 | $287 | ||||||||||||
Class 529B | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (i) | |||||||||||||
Net asset value, beginning of period | $12.54 | $13.66 | $11.80 | $10.70 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.06 | ) | $(0.07 | ) | $(0.04 | ) | ||||||||
Net realized and unrealized gain (loss) | (1.24 | ) | (0.42 | ) | 2.32 | 1.18 | ||||||||||
Total from investment operations | $(1.26 | ) | $(0.48 | ) | $2.25 | $1.14 | ||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $— | $— | $— | $— | ||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | ||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | ||||||||
Net asset value, end of period (x) | $11.11 | $12.54 | $13.66 | $11.80 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (10.31 | ) | (3.08 | ) | 19.30 | 10.67 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.76 | 2.01 | 2.10 | 2.91 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.59 | 1.79 | 1.79 | 1.79 | (a) | |||||||||||
Net investment income (loss) | (0.12 | ) | (0.43 | ) | (0.54 | ) | (0.42 | )(a) | ||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | ||||||||||||
Net assets at end of period (000 omitted) | $261 | $369 | $459 | $55 |
See Notes to Financial Statements
27
Table of Contents
Financial Highlights – continued
Class 529C | Year ended | |||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 (i) | |||||||||||||
Net asset value, beginning of period | $12.53 | $13.65 | $11.79 | $10.69 | ||||||||||||
Income (loss) from investment operations |
| |||||||||||||||
Net investment income (loss) (d) | $(0.04 | ) | $(0.06 | ) | $(0.08 | ) | $(0.04 | ) | ||||||||
Net realized and unrealized gain (loss) | (1.25 | ) | (0.42 | ) | 2.33 | 1.18 | ||||||||||
Total from investment operations | $(1.29 | ) | $(0.48 | ) | $2.25 | $1.14 | ||||||||||
Less distributions declared to shareholders |
| |||||||||||||||
From net investment income | $— | $— | $— | $— | ||||||||||||
From net realized gain | (0.17 | ) | (0.64 | ) | (0.39 | ) | (0.04 | ) | ||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.64 | ) | $(0.39 | ) | $(0.04 | ) | ||||||||
Net asset value, end of period (x) | $11.07 | $12.53 | $13.65 | $11.79 | ||||||||||||
Total return (%) (r)(s)(t)(x) | (10.56 | ) | (3.08 | ) | 19.31 | 10.68 | (n) | |||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||
Expenses before expense reductions (f) | 1.96 | 2.02 | 2.08 | 2.84 | (a) | |||||||||||
Expenses after expense reductions (f) | 1.79 | 1.79 | 1.79 | 1.79 | (a) | |||||||||||
Net investment income (loss) | (0.32 | ) | (0.43 | ) | (0.61 | ) | (0.39 | )(a) | ||||||||
Portfolio turnover | 75 | 64 | 90 | 90 | ||||||||||||
Net assets at end of period (000 omitted) | $1,278 | $1,588 | $1,721 | $78 |
(a) | Annualized. |
(c) | For the period from the commencement of the fund’s investment operations, September 15, 2015, through the stated period end. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(g) | The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. |
(i) | For Class 529A, Class 529B, and Class 529C, the period is from the class inception, July 14, 2016, through the stated period end. |
(n) | Not annualized. |
(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
28
Table of Contents
(1) Business and Organization
MFS Blended Research Small Cap Equity Fund (the fund) is a diversified series of MFS Series Trust X (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.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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 – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or
29
Table of Contents
Notes to Financial Statements – continued
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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
30
Table of Contents
Notes to Financial Statements – continued
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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $256,304,417 | $— | $— | $256,304,417 | ||||||||||||
Mutual Funds | 3,407,332 | — | — | 3,407,332 | ||||||||||||
Total | $259,711,749 | $— | $— | $259,711,749 |
For further information regarding security characteristics, see the Portfolio of Investments.
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, 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. 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 $888,711. The fair value of the fund’s investment securities on loan and a related liability of $880,950 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The value of the fund’s securities on loan net of the related collateral is $7,761 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
31
Table of Contents
Notes to Financial Statements – continued
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 – Investment transactions are recorded on the trade date. 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.
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 wash sale loss deferrals.
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The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $3,362,096 | $4,687,458 | ||||||
Long-term capital gains | 1,421,039 | 2,344,707 | ||||||
Total distributions | $4,783,135 | $7,032,165 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $263,655,399 | |||
Gross appreciation | 20,525,680 | |||
Gross depreciation | (24,469,330 | ) | ||
Net unrealized appreciation (depreciation) | $(3,943,650 | ) | ||
Undistributed ordinary income | 359,339 | |||
Post-October capital loss deferral | (23,154,024 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution, service, and program manager 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 529B shares will convert to Class A and Class 529A shares, respectively, approximately eight years after purchase. Class C and Class 529C shares will convert to Class A and Class 529A shares, respectively, approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $994,396 | $2,346,262 | ||||||
Class B | 6,379 | 22,802 | ||||||
Class C | 68,104 | 55,241 | ||||||
Class I | 1,366,399 | 1,312,167 | ||||||
Class R1 | 47,825 | 3,829 | ||||||
Class R2 | 165,195 | 3,479 | ||||||
Class R3 | 11,984 | 3,530 | ||||||
Class R4 | 1,532 | 3,729 | ||||||
Class R6 | 1,960,249 | 2,777,870 | ||||||
Class 529A | 135,468 | 402,303 | ||||||
Class 529B | 4,658 | 21,057 | ||||||
Class 529C | 20,946 | 79,896 | ||||||
Total | $4,783,135 | $7,032,165 |
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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 $1 billion | 0.65 | % | ||
In excess of $1 billion and up to $2.5 billion | 0.60 | % | ||
In excess of $2.5 billion | 0.575 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $24,751, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.64% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | 529A | 529B | 529C | |||||||||||||||||||||||||||||||||
0.99% | 1.74% | 1.74% | 0.74% | 1.74% | 1.24% | 0.99% | 0.74% | 0.70% | 1.04% | 1.79% | 1.79% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $387,360, which is included in the reduction of total expenses in the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $14,513 and $3,402 for the year ended May 31, 2020, as its portion of the initial sales charge on sales of Class A and Class 529A shares of the fund, respectively.
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.
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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% | $148,455 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 4,704 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 46,994 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 33,452 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 50,016 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 890 | |||||||||||||||
Class 529A | — | 0.25% | 0.25% | 0.23% | 19,726 | |||||||||||||||
Class 529B | 0.75% | 0.25% | 1.00% | 0.80% | 2,692 | |||||||||||||||
Class 529C | 0.75% | 0.25% | 1.00% | 1.00% | 15,323 | |||||||||||||||
Total Distribution and Service Fees |
| $322,252 |
(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 May 31, 2020 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 May 31, 2020, this rebate amounted to $385, $1,684, $18, and $12 for Class A, Class 529A, Class 529B, and Class 529C, respectively, and is included in the reduction of total expenses in the Statement of Operations. For the period February 1, 2020 through May 31, 2020, the 0.75% distribution fee was not imposed for Class 529B shares due to the sales charge limitations contained in Financial Industry Regulatory Authority (“FINRA”) Rule 2341. |
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 and Class 529B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. Class C and Class 529C 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $1,057 | |||
Class B | 689 | |||
Class C | 1,125 | |||
Class 529B | 200 | |||
Class 529C | 56 |
During the year ended May 31, 2020, to meet the requirements of FINRA Rule 2341, MFD returned $5 of the CDSC collected in the prior fiscal year for Class 529B which had the effect of further reducing the annual effective distribution fee rate for this class by 0.00%.
The fund has entered into and may from time to time enter into contracts with program managers and other parties which administer the tuition programs through which an
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Notes to Financial Statements – continued
investment in the fund’s 529 share classes is made. The fund has entered into an agreement with MFD pursuant to which MFD receives an annual fee of up to 0.05% of the average daily net assets attributable to each 529 share class. The services provided by MFD, or a third party with which MFD contracts, include recordkeeping and tax reporting and account services, as well as services designed to maintain the program’s compliance with the Internal Revenue Code and other regulatory requirements. Program manager fees for the year ended May 31, 2020, were as follows:
Fee | ||||
Class 529A | $3,945 | |||
Class 529B | 168 | |||
Class 529C | 766 | |||
Total Program Manager Fees | $4,879 |
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 May 31, 2020, the fee was $30,480, which equated to 0.0126% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $163,943.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0177% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $91 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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Notes to Financial Statements – continued
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.
On December 14, 2018, MFS redeemed 4,324 shares of Class C, 5,223 shares of Class I, 4,832 shares of Class 529A, and 4,835 shares of Class 529C for an aggregate amount of $242,285.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in purchase transactions pursuant to this policy, which amounted to $3,056,817.
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 May 31, 2020, this reimbursement amounted to $44,428, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $284,681,064 and $179,943,226, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 2,947,246 | $35,152,616 | 3,027,957 | $40,301,997 | ||||||||||||
Class B | 2,217 | 28,276 | 13,338 | 179,637 | ||||||||||||
Class C | 288,444 | 3,498,617 | 249,204 | 3,318,658 | ||||||||||||
Class I | 4,824,238 | 58,982,956 | 3,354,289 | 45,360,138 | ||||||||||||
Class R1 | 81,580 | 1,034,944 | 260,836 | 3,537,709 | ||||||||||||
Class R2 | 328,867 | 4,228,600 | 760,303 | 10,504,387 | ||||||||||||
Class R3 | 44,525 | 601,618 | — | — | ||||||||||||
Class R4 | 2,145,894 | 28,234,586 | — | — | ||||||||||||
Class R6 | 6,042,226 | 74,362,922 | 1,293,935 | 17,102,993 | ||||||||||||
Class 529A | 73,562 | 888,156 | 94,840 | 1,309,336 | ||||||||||||
Class 529B | — | — | 1,179 | 16,239 | ||||||||||||
Class 529C | 14,951 | 185,177 | 19,916 | 278,775 | ||||||||||||
16,793,750 | $207,198,468 | 9,075,797 | $121,909,869 |
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Notes to Financial Statements – continued
Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 29,221 | $412,313 | 53,486 | $626,861 | ||||||||||||
Class B | 460 | 6,379 | 1,973 | 22,802 | ||||||||||||
Class C | 4,917 | 68,104 | 4,787 | 55,241 | ||||||||||||
Class I | 96,409 | 1,366,111 | 111,579 | 1,312,167 | ||||||||||||
Class R1 | 3,451 | 47,825 | 331 | 3,829 | ||||||||||||
Class R2 | 11,708 | 165,195 | 296 | 3,479 | ||||||||||||
Class R3 | 848 | 11,984 | 300 | 3,530 | ||||||||||||
Class R4 | 108 | 1,532 | 317 | 3,729 | ||||||||||||
Class R6 | 137,656 | 1,951,962 | 236,013 | 2,777,870 | ||||||||||||
Class 529A | 9,595 | 135,468 | 34,323 | 402,303 | ||||||||||||
Class 529B | 323 | 4,476 | 1,823 | 21,057 | ||||||||||||
Class 529C | 1,513 | 20,946 | 6,929 | 79,896 | ||||||||||||
296,209 | $4,192,295 | 452,157 | $5,312,764 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (2,705,401 | ) | $(34,562,796 | ) | (1,468,534 | ) | $(19,440,723 | ) | ||||||||
Class B | (7,625 | ) | (85,235 | ) | (4,935 | ) | (65,723 | ) | ||||||||
Class C | (88,189 | ) | (1,038,234 | ) | (25,941 | ) | (334,651 | ) | ||||||||
Class I | (3,286,638 | ) | (39,224,188 | ) | (1,275,656 | ) | (16,172,289 | ) | ||||||||
Class R1 | (89,781 | ) | (1,112,560 | ) | (1,058 | ) | (13,832 | ) | ||||||||
Class R2 | (272,281 | ) | (3,464,069 | ) | (11,218 | ) | (151,483 | ) | ||||||||
Class R3 | (3,560 | ) | (50,247 | ) | — | — | ||||||||||
Class R4 | (480,377 | ) | (4,923,233 | ) | — | — | ||||||||||
Class R6 | (1,404,880 | ) | (17,428,205 | ) | (889,299 | ) | (12,258,750 | ) | ||||||||
Class 529A | (79,114 | ) | (995,061 | ) | (89,758 | ) | (1,233,254 | ) | ||||||||
Class 529B | (6,230 | ) | (80,280 | ) | (7,216 | ) | (95,029 | ) | ||||||||
Class 529C | (27,715 | ) | (328,700 | ) | (26,257 | ) | (342,298 | ) | ||||||||
(8,451,791 | ) | $(103,292,808 | ) | (3,799,872 | ) | $(50,108,032 | ) | |||||||||
Net change | ||||||||||||||||
Class A | 271,066 | $1,002,133 | 1,612,909 | $21,488,135 | ||||||||||||
Class B | (4,948 | ) | (50,580 | ) | 10,376 | 136,716 | ||||||||||
Class C | 205,172 | 2,528,487 | 228,050 | 3,039,248 | ||||||||||||
Class I | 1,634,009 | 21,124,879 | 2,190,212 | 30,500,016 | ||||||||||||
Class R1 | (4,750 | ) | (29,791 | ) | 260,109 | 3,527,706 | ||||||||||
Class R2 | 68,294 | 929,726 | 749,381 | 10,356,383 | ||||||||||||
Class R3 | 41,813 | 563,355 | 300 | 3,530 | ||||||||||||
Class R4 | 1,665,625 | 23,312,885 | 317 | 3,729 | ||||||||||||
Class R6 | 4,775,002 | 58,886,679 | 640,649 | 7,622,113 | ||||||||||||
Class 529A | 4,043 | 28,563 | 39,405 | 478,385 | ||||||||||||
Class 529B | (5,907 | ) | (75,804 | ) | (4,214 | ) | (57,733 | ) | ||||||||
Class 529C | (11,251 | ) | (122,577 | ) | 588 | 16,373 | ||||||||||
8,638,168 | $108,097,955 | 5,728,082 | $77,114,601 |
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Notes to Financial Statements – continued
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B and Class 529B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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 Lifetime 2040 Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime Income Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime 2025 Fund, the MFS Lifetime 2020 Fund, and the MFS Lifetime 2055 Fund were the owners of record of approximately 4%, 4%, 3%, 2%, 2%, 2%, 1%, 1%, and 1%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2060 Fund was the owner of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $1,225 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 | $4,381,041 | $127,758,230 | $129,612,181 | $(494 | ) | $(214 | ) | $2,526,382 | ||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $56,007 | $— |
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Notes to Financial Statements – continued
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust X and the Shareholders of MFS Blended Research Small Cap Equity Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS Blended Research Small Cap Equity Fund (the “Fund”), including the portfolio of investments, as of May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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 May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers; when replies were not received from
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Report of Independent Registered Public Accounting Firm – continued
brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 17, 2020
We have served as the auditor of one or more of the MFS investment companies since 1924.
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
Jim Fallon Matt Krummell Jonathan Sage Jed Stocks |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $1,564,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 48.59% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
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rev. 3/16
| 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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MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Blended Research®
Value Equity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
BRU-ANN
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MFS® Blended Research® Value Equity Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings | ||||
Johnson & Johnson | 3.8% | |||
Intel Corp. | 3.1% | |||
Bank of America Corp. | 2.7% | |||
Medtronic PLC | 2.3% | |||
Verizon Communications, Inc. | 2.0% | |||
Citigroup, Inc. | 1.9% | |||
Procter & Gamble Co. | 1.8% | |||
Morgan Stanley | 1.8% | |||
Eaton Corp. PLC | 1.7% | |||
Charter Communications, Inc., “A” | 1.7% |
GICS sectors (g) | ||||
Financials | 20.6% | |||
Health Care | 15.1% | |||
Consumer Staples | 9.5% | |||
Industrials | 9.2% | |||
Communication Services | 8.8% | |||
Utilities | 8.2% | |||
Information Technology | 7.1% | |||
Consumer Discretionary | 6.0% | |||
Energy | 6.0% | |||
Real Estate | 4.7% | |||
Materials | 3.6% |
(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. |
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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Blended Research Value Equity Fund (fund) provided a total return of –3.04%, at net asset value. This compares with a return of –1.64% for the fund’s benchmark, the Russell 1000® Value Index.
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Stock selection within both the utilities and real estate sectors hindered performance relative to the Russell 1000® Value Index. Within the utilities sector, not owning shares of electricity provider NextEra Energy detracted from relative results. The share price of NextEra rose as the company reported financial results that were well ahead of expectations, driven by strong electricity results and the integration of Gulf Power.
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Management Review – continued
Within the real estate sector, the fund’s overweight holdings of real estate investment trusts STORE Capital and EPR Properties held back relative returns. Despite strong financial results, STORE Capital’s shares declined on concerns that its retail tenants may not be able to make their lease payments due to the coronavirus-related store closures.
Elsewhere, the fund’s overweight positions in natural gas transmission company Equitrans Midstream, energy exploration and production company EOG Resources, direct banking and payment services provider Discover Financial Services, insurance and financial services provider Hartford Financial Services Group, oil field services company Schlumberger, casual dining restaurants operator Darden Restaurants and diversified financial services firm Citigroup held back relative performance. The share price of Equitrans Midstream suffered after the company revised its full-year guidance downward due to delays in its Mountain Valley Pipeline joint venture. The company increased the estimated total costs of the joint venture and delayed its opening-service date to mid-2020, due to regulatory and legal issues facing the 300-mile natural gas pipeline project.
Contributors to Performance
Security selection within the industrials sector was a primary contributor to relative returns. However, there were no individual stocks within this sector that were among the fund’s top relative contributors during the reporting period.
Stock selection within the communication services sector also helped relative performance. Here, the fund’s overweight position in cable services provider Charter Communications supported relative results as the company reported solid financial results on the back of better-than-anticipated net growth in broadband subscribers, paired with stronger revenues and free cash flows.
Security selection within the consumer discretionary sector aided relative returns. Within this sector, the fund’s overweight holdings of general merchandising retailer Target and discount merchandise retailer Dollar General led the way. The share price of Target appreciated during the reporting period after the company reported adjusted earnings that beat consensus estimates on the back of solid top-line and margin performance. Gross margins expanded due to merchandising incentives and changes in product mix. Company management raised its full-year guidance more than expected, which further supported the stock.
Within other sectors, the fund’s overweight positions in software giant Microsoft, pharmaceutical company Eli Lilly, health services and information technology company McKesson, biotechnology company Biogen, diversified financial services firm Wells Fargo and semiconductor chips and electronics engineering solutions provider Applied Materials bolstered relative performance. An underweight position in integrated oil and gas company Exxon Mobil further contributed to relative results.
Respectfully,
Portfolio Manager(s)
Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks
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Management Review – continued
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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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 (t)
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | Life (t) | |||||||
A | 9/15/15 | (3.04)% | 5.50% | |||||||
B | 9/15/15 | (3.87)% | 4.71% | |||||||
C | 9/15/15 | (3.76)% | 4.71% | |||||||
I | 9/15/15 | (2.84)% | 5.76% | |||||||
R1 | 9/15/15 | (3.79)% | 4.72% | |||||||
R2 | 9/15/15 | (3.31)% | 5.24% | |||||||
R3 | 9/15/15 | (3.09)% | 5.51% | |||||||
R4 | 9/15/15 | (2.86)% | 5.76% | |||||||
R6 | 9/15/15 | (2.69)% | 5.86% | |||||||
Comparative benchmark(s) | ||||||||||
Russell 1000® Value Index (f) | (1.64)% | 6.77% | ||||||||
Average annual with sales charge | ||||||||||
A With Initial Sales Charge (5.75%) | (8.62)% | 4.18% | ||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (7.67)% | 4.35% | ||||||||
C With CDSC (1% for 12 months) (v) | (4.71)% | 4.71% |
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. |
(t) | For the period from the class inception date through the stated period end. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Russell 1000® Value Index – constructed to provide a comprehensive barometer for the value securities in the large-cap segment of the U.S. equity universe. Companies in this index generally have lower price-to-book ratios and lower forecasted growth values. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this document. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this document.
It is not possible to invest directly in an index.
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Performance Summary – continued
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date.
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.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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
Table of Contents
Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.74% | $1,000.00 | $859.88 | $3.44 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
B | Actual | 1.49% | $1,000.00 | $856.28 | $6.91 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
C | Actual | 1.49% | $1,000.00 | $856.50 | $6.92 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
I | Actual | 0.49% | $1,000.00 | $860.90 | $2.28 | |||||||||||||
Hypothetical (h) | 0.49% | $1,000.00 | $1,022.55 | $2.48 | ||||||||||||||
R1 | Actual | 1.49% | $1,000.00 | $856.90 | $6.92 | |||||||||||||
Hypothetical (h) | 1.49% | $1,000.00 | $1,017.55 | $7.52 | ||||||||||||||
R2 | Actual | 0.99% | $1,000.00 | $858.34 | $4.60 | |||||||||||||
Hypothetical (h) | 0.99% | $1,000.00 | $1,020.05 | $5.00 | ||||||||||||||
R3 | Actual | 0.74% | $1,000.00 | $859.96 | $3.44 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.30 | $3.74 | ||||||||||||||
R4 | Actual | 0.49% | $1,000.00 | $860.75 | $2.28 | |||||||||||||
Hypothetical (h) | 0.49% | $1,000.00 | $1,022.55 | $2.48 | ||||||||||||||
R6 | Actual | 0.38% | $1,000.00 | $861.72 | $1.77 | |||||||||||||
Hypothetical (h) | 0.38% | $1,000.00 | $1,023.10 | $1.92 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
10
Table of Contents
5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 98.8% | ||||||||
Aerospace - 2.4% | ||||||||
Honeywell International, Inc. | 18,062 | $ | 2,634,343 | |||||
Huntington Ingalls Industries, Inc. | 4,506 | 900,704 | ||||||
L3Harris Technologies, Inc. | 5,656 | 1,128,089 | ||||||
|
| |||||||
$ | 4,663,136 | |||||||
Automotive - 1.2% | ||||||||
Lear Corp. | 22,373 | $ | 2,372,657 | |||||
Biotechnology - 1.3% | ||||||||
Biogen, Inc. (a) | 8,334 | $ | 2,559,288 | |||||
Broadcasting - 0.3% | ||||||||
Walt Disney Co. | 4,787 | $ | 561,515 | |||||
Brokerage & Asset Managers - 0.8% | ||||||||
Charles Schwab Corp. | 45,088 | $ | 1,619,110 | |||||
Business Services - 1.4% | ||||||||
Fidelity National Information Services, Inc. | 2,324 | $ | 322,641 | |||||
Fiserv, Inc. (a) | 22,452 | 2,397,200 | ||||||
|
| |||||||
$ | 2,719,841 | |||||||
Cable TV - 3.0% | ||||||||
Charter Communications, Inc., “A” (a) | 6,127 | $ | 3,333,088 | |||||
Comcast Corp., “A” | 62,799 | 2,486,840 | ||||||
|
| |||||||
$ | 5,819,928 | |||||||
Chemicals - 1.6% | ||||||||
Eastman Chemical Co. | 27,122 | $ | 1,846,466 | |||||
PPG Industries, Inc. | 13,209 | 1,342,959 | ||||||
|
| |||||||
$ | 3,189,425 | |||||||
Computer Software - 1.4% | ||||||||
Microsoft Corp. | 14,752 | $ | 2,703,304 | |||||
Construction - 2.2% | ||||||||
AvalonBay Communities, Inc., REIT | 3,766 | $ | 587,534 | |||||
Masco Corp. | 14,100 | 657,765 | ||||||
Mid-America Apartment Communities, Inc., REIT | 5,264 | 612,519 | ||||||
Toll Brothers, Inc. | 72,349 | 2,337,596 | ||||||
|
| |||||||
$ | 4,195,414 |
11
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Consumer Products - 3.4% | ||||||||
Colgate-Palmolive Co. | 9,110 | $ | 658,926 | |||||
Kimberly-Clark Corp. | 17,022 | 2,407,592 | ||||||
Procter & Gamble Co. | 30,178 | 3,498,234 | ||||||
|
| |||||||
$ | 6,564,752 | |||||||
Electrical Equipment - 0.5% | ||||||||
Johnson Controls International PLC | 21,783 | $ | 684,204 | |||||
Reynolds Consumer Products, Inc. | 9,633 | 321,646 | ||||||
|
| |||||||
$ | 1,005,850 | |||||||
Electronics - 4.3% | ||||||||
Applied Materials, Inc. | 41,763 | $ | 2,346,245 | |||||
Intel Corp. | 95,977 | 6,039,833 | ||||||
|
| |||||||
$ | 8,386,078 | |||||||
Energy - Independent - 3.3% | ||||||||
ConocoPhillips | 42,423 | $ | 1,789,402 | |||||
EOG Resources, Inc. | 14,050 | 716,128 | ||||||
Marathon Petroleum Corp. | 43,840 | 1,540,538 | ||||||
Valero Energy Corp. | 35,088 | 2,338,264 | ||||||
|
| |||||||
$ | 6,384,332 | |||||||
Energy - Integrated - 1.5% | ||||||||
Chevron Corp. | 12,125 | $ | 1,111,862 | |||||
Exxon Mobil Corp. | 41,195 | 1,873,137 | ||||||
|
| |||||||
$ | 2,984,999 | |||||||
Engineering - Construction - 0.4% | ||||||||
Quanta Services, Inc. | 20,420 | $ | 754,111 | |||||
Food & Beverages - 2.3% | ||||||||
Ingredion, Inc. | 6,792 | $ | 572,090 | |||||
J.M. Smucker Co. | 18,689 | 2,129,238 | ||||||
PepsiCo, Inc. | 13,445 | 1,768,690 | ||||||
|
| |||||||
$ | 4,470,018 | |||||||
Food & Drug Stores - 1.7% | ||||||||
Wal-Mart Stores, Inc. | 26,746 | $ | 3,318,109 | |||||
General Merchandise - 1.1% | ||||||||
Dollar General Corp. | 11,540 | $ | 2,210,025 | |||||
Health Maintenance Organizations - 1.5% | ||||||||
Cigna Corp. | 3,664 | $ | 722,980 | |||||
Humana, Inc. | 5,452 | 2,238,864 | ||||||
|
| |||||||
$ | 2,961,844 |
12
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Insurance - 6.4% | ||||||||
Allstate Corp. | 7,491 | $ | 732,695 | |||||
Berkshire Hathaway, Inc., “B” (a) | 17,203 | 3,192,533 | ||||||
Chubb Ltd. | 18,401 | 2,243,818 | ||||||
Equitable Holdings, Inc. | 41,560 | 794,211 | ||||||
Hartford Financial Services Group, Inc. | 55,227 | 2,114,642 | ||||||
MetLife, Inc. | 57,309 | 2,063,697 | ||||||
Prudential Financial, Inc. | 6,562 | 400,019 | ||||||
Reinsurance Group of America, Inc. | 9,965 | 904,324 | ||||||
|
| |||||||
$ | 12,445,939 | |||||||
Internet - 0.6% | ||||||||
Facebook, Inc., “A” (a) | 5,602 | $ | 1,260,954 | |||||
Leisure & Toys - 1.4% | ||||||||
Activision Blizzard, Inc. | 18,330 | $ | 1,319,394 | |||||
Electronic Arts, Inc. (a) | 12,240 | 1,504,051 | ||||||
|
| |||||||
$ | 2,823,445 | |||||||
Machinery & Tools - 3.9% | ||||||||
AGCO Corp. | 34,966 | $ | 1,931,172 | |||||
Eaton Corp. PLC | 39,357 | 3,341,409 | ||||||
Regal Beloit Corp. | 20,685 | 1,645,285 | ||||||
Trane Technologies PLC | 6,415 | 578,697 | ||||||
|
| |||||||
$ | 7,496,563 | |||||||
Major Banks - 9.8% | ||||||||
Bank of America Corp. | 221,216 | $ | 5,335,730 | |||||
Goldman Sachs Group, Inc. | 8,847 | 1,738,347 | ||||||
JPMorgan Chase & Co. | 29,736 | 2,893,610 | ||||||
Morgan Stanley | 78,825 | 3,484,065 | ||||||
PNC Financial Services Group, Inc. | 26,414 | 3,012,252 | ||||||
State Street Corp. | 8,510 | 518,770 | ||||||
Wells Fargo & Co. | 77,678 | 2,056,137 | ||||||
|
| |||||||
$ | 19,038,911 | |||||||
Medical & Health Technology & Services - 1.8% | ||||||||
HCA Healthcare, Inc. | 14,229 | $ | 1,521,080 | |||||
McKesson Corp. | 12,258 | 1,944,977 | ||||||
|
| |||||||
$ | 3,466,057 | |||||||
Medical Equipment - 3.0% | ||||||||
Boston Scientific Corp. (a) | 24,937 | $ | 947,357 | |||||
Danaher Corp. | 2,712 | 451,846 | ||||||
Medtronic PLC | 45,166 | 4,452,464 | ||||||
|
| |||||||
$ | 5,851,667 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Natural Gas - Distribution - 1.1% | ||||||||
Sempra Energy | 17,571 | $ | 2,219,393 | |||||
Natural Gas - Pipeline - 0.4% | ||||||||
Equitrans Midstream Corp. | 99,449 | $ | 804,542 | |||||
Oil Services - 0.7% | ||||||||
Schlumberger Ltd. | 78,832 | $ | 1,456,027 | |||||
Other Banks & Diversified Financials - 3.6% | ||||||||
American Express Co. | 11,691 | $ | 1,111,463 | |||||
Citigroup, Inc. | 78,801 | 3,775,356 | ||||||
Discover Financial Services | 10,627 | 504,889 | ||||||
Synchrony Financial | 27,693 | 564,107 | ||||||
U.S. Bancorp | 30,697 | 1,091,585 | ||||||
|
| |||||||
$ | 7,047,400 | |||||||
Pharmaceuticals - 7.5% | ||||||||
Eli Lilly & Co. | 16,590 | $ | 2,537,441 | |||||
Johnson & Johnson | 49,968 | 7,432,740 | ||||||
Merck & Co., Inc. | 30,877 | 2,492,391 | ||||||
Pfizer, Inc. | 53,717 | 2,051,452 | ||||||
|
| |||||||
$ | 14,514,024 | |||||||
Railroad & Shipping - 1.9% | ||||||||
CSX Corp. | 20,094 | $ | 1,438,329 | |||||
Kansas City Southern Co. | 5,439 | 818,678 | ||||||
Union Pacific Corp. | 8,550 | 1,452,303 | ||||||
|
| |||||||
$ | 3,709,310 | |||||||
Real Estate - 4.1% | ||||||||
Brixmor Property Group, Inc., REIT | 50,762 | $ | 566,504 | |||||
EPR Properties, REIT | 9,996 | 315,574 | ||||||
Life Storage, Inc., REIT | 9,246 | 901,300 | ||||||
Medical Properties Trust, Inc., REIT | 140,404 | 2,538,504 | ||||||
Public Storage, Inc., REIT | 3,071 | 622,614 | ||||||
Spirit Realty Capital, Inc., REIT | 40,428 | 1,149,368 | ||||||
STORE Capital Corp., REIT | 64,603 | 1,249,422 | ||||||
W.P. Carey, Inc., REIT | 9,060 | 542,785 | ||||||
|
| |||||||
$ | 7,886,071 | |||||||
Restaurants - 0.6% | ||||||||
Darden Restaurants, Inc. | 8,414 | $ | 646,700 | |||||
Yum China Holdings, Inc. | 10,290 | 476,839 | ||||||
|
| |||||||
$ | 1,123,539 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Specialty Chemicals - 2.0% | ||||||||
Corteva, Inc. | 39,557 | $ | 1,080,302 | |||||
DuPont de Nemours, Inc. | 29,603 | 1,501,760 | ||||||
Linde PLC | 6,082 | 1,230,632 | ||||||
|
| |||||||
$ | 3,812,694 | |||||||
Specialty Stores - 1.9% | ||||||||
Home Depot, Inc. | 5,870 | $ | 1,458,577 | |||||
Target Corp. | 18,015 | 2,203,775 | ||||||
|
| |||||||
$ | 3,662,352 | |||||||
Telecommunications - Wireless - 0.3% | ||||||||
T-Mobile U.S., Inc. (a) | 5,240 | $ | 524,210 | |||||
Telephone Services - 3.2% | ||||||||
AT&T, Inc. | 77,585 | $ | 2,394,273 | |||||
Verizon Communications, Inc. | 66,544 | 3,818,295 | ||||||
|
| |||||||
$ | 6,212,568 | |||||||
Tobacco - 2.0% | ||||||||
Altria Group, Inc. | 14,700 | $ | 574,035 | |||||
Philip Morris International, Inc. | 44,613 | 3,272,810 | ||||||
|
| |||||||
$ | 3,846,845 | |||||||
Utilities - Electric Power - 7.0% | ||||||||
AES Corp. | 90,864 | $ | 1,134,891 | |||||
American Electric Power Co., Inc. | 18,185 | 1,550,271 | ||||||
Edison International | 12,140 | 705,455 | ||||||
Exelon Corp. | 76,302 | 2,923,130 | ||||||
FirstEnergy Corp. | 23,421 | 989,772 | ||||||
NRG Energy, Inc. | 34,059 | 1,227,827 | ||||||
Southern Co. | 25,418 | 1,450,605 | ||||||
Vistra Energy Corp. | 64,289 | 1,314,067 | ||||||
Xcel Energy, Inc. | 35,759 | 2,325,408 | ||||||
|
| |||||||
$ | 13,621,426 | |||||||
Total Common Stocks (Identified Cost, $183,839,137) | $ | 192,267,673 | ||||||
Investment Companies (h) - 1.0% | ||||||||
Money Market Funds - 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $1,980,316) | 1,980,118 | $ | 1,980,316 | |||||
Other Assets, Less Liabilities - 0.2% | 299,560 | |||||||
Net Assets - 100.0% | $ | 194,547,549 |
15
Table of Contents
Portfolio of Investments – continued
(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 $1,980,316 and $192,267,673, respectively. |
(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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
16
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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, $183,839,137) | $192,267,673 | |||
Investments in affiliated issuers, at value (identified cost, $1,980,316) | 1,980,316 | |||
Cash | 28,731 | |||
Receivables for | ||||
Fund shares sold | 27,421 | |||
Dividends | 552,041 | |||
Receivable from investment adviser | 32,136 | |||
Other assets | 556 | |||
Total assets | $194,888,874 | |||
Liabilities | ||||
Payables for | ||||
Fund shares reacquired | $241,156 | |||
Payable to affiliates | ||||
Administrative services fee | 412 | |||
Shareholder servicing costs | 22,723 | |||
Distribution and service fees | 1,523 | |||
Payable for independent Trustees’ compensation | 14 | |||
Accrued expenses and other liabilities | 75,497 | |||
Total liabilities | $341,325 | |||
Net assets | $194,547,549 | |||
Net assets consist of | ||||
Paid-in capital | $190,432,857 | |||
Total distributable earnings (loss) | 4,114,692 | |||
Net assets | $194,547,549 | |||
Shares of beneficial interest outstanding | 16,865,653 |
17
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $52,734,554 | 4,593,470 | $11.48 | |||||||||
Class B | 131,652 | 11,483 | 11.46 | |||||||||
Class C | 456,048 | 39,835 | 11.45 | |||||||||
Class I | 487,727 | 42,256 | 11.54 | |||||||||
Class R1 | 62,136 | 5,428 | 11.45 | |||||||||
Class R2 | 76,941 | 6,689 | 11.50 | |||||||||
Class R3 | 70,531 | 6,117 | 11.53 | |||||||||
Class R4 | 65,131 | 5,642 | 11.54 | |||||||||
Class R6 | 140,462,829 | 12,154,733 | 11.56 |
(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 $12.18 [100 / 94.25 x $11.48]. 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
18
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $5,056,737 | |||
Dividends from affiliated issuers | 49,299 | |||
Other | 6,609 | |||
Total investment income | $5,112,645 | |||
Expenses | ||||
Management fee | $756,262 | |||
Distribution and service fees | 139,653 | |||
Shareholder servicing costs | 58,339 | |||
Administrative services fee | 35,834 | |||
Independent Trustees’ compensation | 6,490 | |||
Custodian fee | 14,375 | |||
Shareholder communications | 9,360 | |||
Audit and tax fees | 55,889 | |||
Legal fees | 1,916 | |||
Registration fees | 137,121 | |||
Miscellaneous | 31,126 | |||
Total expenses | $1,246,365 | |||
Reduction of expenses by investment adviser and distributor | (315,958 | ) | ||
Net expenses | $930,407 | |||
Net investment income (loss) | $4,182,238 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $(5,145,851 | ) | ||
Affiliated issuers | 705 | |||
Net realized gain (loss) | $(5,145,146 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $(1,500,688 | ) | ||
Affiliated issuers | (121 | ) | ||
Net unrealized gain (loss) | $(1,500,809 | ) | ||
Net realized and unrealized gain (loss) | $(6,645,955 | ) | ||
Change in net assets from operations | $(2,463,717 | ) |
See Notes to Financial Statements
19
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $4,182,238 | $3,748,399 | ||||||
Net realized gain (loss) | (5,145,146 | ) | 883,449 | |||||
Net unrealized gain (loss) | (1,500,809 | ) | (6,043,532 | ) | ||||
Change in net assets from operations | $(2,463,717 | ) | $(1,411,684 | ) | ||||
Total distributions to shareholders | $(4,275,227 | ) | $(7,727,193 | ) | ||||
Change in net assets from fund share transactions | $25,805,690 | $8,742,578 | ||||||
Total change in net assets | $19,066,746 | $(396,299 | ) | |||||
Net assets | ||||||||
At beginning of period | 175,480,803 | 175,877,102 | ||||||
At end of period | $194,547,549 | $175,480,803 |
See Notes to Financial Statements
20
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.07 | $12.84 | $11.85 | $10.57 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.24 | $0.23 | $0.22 | $0.18 | $0.12 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.57 | ) | (0.47 | ) | 1.22 | 1.16 | 0.55 | |||||||||||||
Total from investment operations | $(0.33 | ) | $(0.24 | ) | $1.44 | $1.34 | $0.67 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.22 | ) | $(0.16 | ) | $(0.06 | ) | $(0.06 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.26 | ) | $(0.53 | ) | $(0.45 | ) | $(0.06 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $11.48 | $12.07 | $12.84 | $11.85 | $10.57 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.04 | ) | (1.62 | ) | 12.18 | 12.71 | 6.70 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.91 | 0.90 | 0.91 | 1.90 | 5.03 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.71 | (a) | ||||||||||||||
Net investment income (loss) | 1.96 | 1.83 | 1.72 | 1.59 | 1.74 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $52,735 | $51,642 | $53,388 | $1,012 | $420 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.07 | $12.81 | $11.79 | $10.55 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.15 | $0.14 | $0.10 | $0.10 | $0.07 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.59 | ) | (0.45 | ) | 1.24 | 1.15 | 0.55 | |||||||||||||
Total from investment operations | $(0.44 | ) | $(0.31 | ) | $1.34 | $1.25 | $0.62 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.17 | ) | $(0.12 | ) | $(0.03 | ) | $(0.01 | ) | $(0.03 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.43 | ) | $(0.32 | ) | $(0.01 | ) | $(0.07 | ) | ||||||||||
Net asset value, end of period (x) | $11.46 | $12.07 | $12.81 | $11.79 | $10.55 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.87 | ) | (2.26 | ) | 11.36 | 11.80 | 6.20 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.65 | 1.64 | 1.66 | 2.53 | 6.53 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | 1.20 | 1.08 | 0.80 | 0.84 | 0.94 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $132 | $163 | $164 | $148 | $60 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.05 | $12.76 | $11.74 | $10.53 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.15 | $0.14 | $0.10 | $0.10 | $0.07 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.58 | ) | (0.46 | ) | 1.23 | 1.14 | 0.54 | |||||||||||||
Total from investment operations | $(0.43 | ) | $(0.32 | ) | $1.33 | $1.24 | $0.61 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.17 | ) | $(0.08 | ) | $(0.02 | ) | $(0.03 | ) | $(0.04 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.39 | ) | $(0.31 | ) | $(0.03 | ) | $(0.08 | ) | ||||||||||
Net asset value, end of period (x) | $11.45 | $12.05 | $12.76 | $11.74 | $10.53 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.76 | ) | (2.32 | ) | 11.33 | 11.81 | 6.16(n | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.66 | 1.65 | 1.67 | 2.33 | 6.15 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | 1.20 | 1.07 | 0.77 | 0.83 | 0.91 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $456 | $470 | $539 | $586 | $137 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.13 | $12.91 | $11.89 | $10.60 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.28 | $0.27 | $0.23 | $0.21 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.58 | ) | (0.48 | ) | 1.24 | 1.16 | 0.56 | |||||||||||||
Total from investment operations | $(0.30 | ) | $(0.21 | ) | $1.47 | $1.37 | $0.70 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.29 | ) | $(0.26 | ) | $(0.16 | ) | $(0.08 | ) | $(0.06 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.29 | ) | $(0.57 | ) | $(0.45 | ) | $(0.08 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $11.54 | $12.13 | $12.91 | $11.89 | $10.60 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (2.84 | ) | (1.37 | ) | 12.40 | 12.96 | 7.02 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.65 | 0.65 | 0.67 | 1.43 | 5.02 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.49 | 0.49 | 0.49 | 0.49 | 0.46 | (a) | ||||||||||||||
Net investment income (loss) | 2.18 | 2.14 | 1.81 | 1.84 | 1.95 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $488 | $923 | $822 | $533 | $189 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.05 | $12.81 | $11.80 | $10.55 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.15 | $0.14 | $0.10 | $0.10 | $0.07 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.58 | ) | (0.47 | ) | 1.24 | 1.15 | 0.55 | |||||||||||||
Total from investment operations | $(0.43 | ) | $(0.33 | ) | $1.34 | $1.25 | $0.62 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.17 | ) | $(0.12 | ) | $(0.04 | ) | $— | $(0.03 | ) | |||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.17 | ) | $(0.43 | ) | $(0.33 | ) | $— | $(0.07 | ) | |||||||||||
Net asset value, end of period (x) | $11.45 | $12.05 | $12.81 | $11.80 | $10.55 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.79 | ) | (2.35 | ) | 11.37 | 11.85 | 6.20 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.65 | 1.64 | 1.66 | 3.03 | 6.58 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 1.49 | 1.49 | 1.49 | 1.49 | 1.46 | (a) | ||||||||||||||
Net investment income (loss) | 1.21 | 1.09 | 0.78 | 0.85 | 0.95 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $62 | $65 | $66 | $59 | $53 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.10 | $12.87 | $11.85 | $10.57 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.21 | $0.20 | $0.16 | $0.15 | $0.10 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.57 | ) | (0.47 | ) | 1.25 | 1.16 | 0.55 | |||||||||||||
Total from investment operations | $(0.36 | ) | $(0.27 | ) | $1.41 | $1.31 | $0.65 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.24 | ) | $(0.19 | ) | $(0.10 | ) | $(0.03 | ) | $(0.04 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.24 | ) | $(0.50 | ) | $(0.39 | ) | $(0.03 | ) | $(0.08 | ) | ||||||||||
Net asset value, end of period (x) | $11.50 | $12.10 | $12.87 | $11.85 | $10.57 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.31 | ) | (1.85 | ) | 11.93 | 12.38 | 6.56 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.16 | 1.14 | 1.16 | 2.53 | 6.08 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.99 | 0.99 | 0.99 | 0.96 | (a) | ||||||||||||||
Net investment income (loss) | 1.71 | 1.59 | 1.29 | 1.35 | 1.45 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $77 | $78 | $69 | $60 | $53 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.13 | $12.90 | $11.87 | $10.58 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.25 | $0.23 | $0.21 | $0.18 | $0.12 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.58 | ) | (0.47 | ) | 1.24 | 1.16 | 0.55 | |||||||||||||
Total from investment operations | $(0.33 | ) | $(0.24 | ) | $1.45 | $1.34 | $0.67 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.27 | ) | $(0.22 | ) | $(0.13 | ) | $(0.05 | ) | $(0.05 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.27 | ) | $(0.53 | ) | $(0.42 | ) | $(0.05 | ) | $(0.09 | ) | ||||||||||
Net asset value, end of period (x) | $11.53 | $12.13 | $12.90 | $11.87 | $10.58 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (3.09 | ) | (1.64 | ) | 12.24 | 12.72 | 6.74 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.90 | 0.90 | 0.91 | 2.27 | 5.83 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.74 | 0.74 | 0.74 | 0.71 | (a) | ||||||||||||||
Net investment income (loss) | 1.93 | 1.77 | 1.64 | 1.60 | 1.70 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $71 | $122 | $187 | $60 | $53 |
See Notes to Financial Statements
24
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.14 | $12.91 | $11.88 | $10.59 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.28 | $0.27 | $0.23 | $0.21 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.58 | ) | (0.48 | ) | 1.25 | 1.16 | 0.55 | |||||||||||||
Total from investment operations | $(0.30 | ) | $(0.21 | ) | $1.48 | $1.37 | $0.69 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.30 | ) | $(0.25 | ) | $(0.16 | ) | $(0.08 | ) | $(0.06 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.30 | ) | $(0.56 | ) | $(0.45 | ) | $(0.08 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $11.54 | $12.14 | $12.91 | $11.88 | $10.59 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (2.86 | ) | (1.33 | ) | 12.49 | 12.96 | 6.92 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.66 | 0.64 | 0.66 | 2.02 | 5.58 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.49 | 0.49 | 0.49 | 0.49 | 0.46 | (a) | ||||||||||||||
Net investment income (loss) | 2.21 | 2.09 | 1.78 | 1.85 | 1.95 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $65 | $67 | $68 | $60 | $53 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 (c) | ||||||||||||||||
Net asset value, beginning of period | $12.15 | $12.92 | $11.89 | $10.59 | $10.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.29 | $0.28 | $0.24 | $0.22 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.57 | ) | (0.47 | ) | 1.25 | 1.16 | 0.55 | |||||||||||||
Total from investment operations | $(0.28 | ) | $(0.19 | ) | $1.49 | $1.38 | $0.69 | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.31 | ) | $(0.27 | ) | $(0.17 | ) | $(0.08 | ) | $(0.06 | ) | ||||||||||
From net realized gain | — | (0.31 | ) | (0.29 | ) | — | (0.04 | ) | ||||||||||||
Total distributions declared to shareholders | $(0.31 | ) | $(0.58 | ) | $(0.46 | ) | $(0.08 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $11.56 | $12.15 | $12.92 | $11.89 | $10.59 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (2.69 | ) | (1.23 | ) | 12.55 | 13.08 | 6.92 | (n) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.56 | 0.55 | 0.57 | 0.65 | 5.57 | (a) | ||||||||||||||
Expenses after expense reductions (f) | 0.39 | 0.39 | 0.39 | 0.45 | 0.45 | (a) | ||||||||||||||
Net investment income (loss) | 2.32 | 2.18 | 1.87 | 1.88 | 1.96 | (a) | ||||||||||||||
Portfolio turnover | 45 | 43 | 61 | 51 | 33 | (n) | ||||||||||||||
Net assets at end of period (000 omitted) | $140,463 | $121,952 | $120,575 | $115,619 | $1,925 |
See Notes to Financial Statements
25
Table of Contents
Financial Highlights – continued
(a) | Annualized. |
(c) | For the period from the commencement of the fund’s investment operations, September 15, 2015, through the stated period end. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(n) | Not annualized. |
(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
26
Table of Contents
(1) Business and Organization
MFS Blended Research Value Equity Fund (the fund) is a diversified series of MFS Series Trust X (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.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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 – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or
27
Table of Contents
Notes to Financial Statements – continued
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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
28
Table of Contents
Notes to Financial Statements – continued
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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $192,267,673 | $— | $— | $192,267,673 | ||||||||||||
Mutual Funds | 1,980,316 | — | — | 1,980,316 | ||||||||||||
Total | $194,247,989 | $— | $— | $194,247,989 |
For further information regarding security characteristics, see the Portfolio of Investments.
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 – Investment transactions are recorded on the trade date. 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.
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
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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.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $4,275,227 | $5,302,135 | ||||||
Long-term capital gains | — | 2,425,058 | ||||||
Total distributions | $4,275,227 | $7,727,193 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $186,405,923 | |||
Gross appreciation | 21,657,288 | |||
Gross depreciation | (13,815,222 | ) | ||
Net unrealized appreciation (depreciation) | $7,842,066 | |||
Undistributed ordinary income | 1,521,570 | |||
Capital loss carryforwards | (5,248,944 | ) |
As of May 31, 2020, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
Short-Term | $(2,929,738 | ) | ||
Long-Term | (2,319,206 | ) | ||
Total | $(5,248,944 | ) |
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
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differences in separate class expenses. Class B shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $1,051,815 | $2,140,828 | ||||||
Class B | 2,221 | 4,790 | ||||||
Class C | 6,791 | 11,593 | ||||||
Class I | 17,348 | 81,156 | ||||||
Class R1 | 913 | 2,260 | ||||||
Class R2 | 1,523 | 2,890 | ||||||
Class R3 | 2,653 | 6,742 | ||||||
Class R4 | 1,643 | 2,987 | ||||||
Class R6 | 3,190,320 | 5,473,947 | ||||||
Total | $4,275,227 | $7,727,193 |
(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 $1 billion | 0.40 | % | ||
In excess of $1 billion and up to $2.5 billion | 0.375 | % | ||
In excess of $2.5 billion | 0.35 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $19,213, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.39% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | ||||||||||||||||||||||||
0.74% | 1.49% | 1.49% | 0.49% | 1.49% | 0.99% | 0.74% | 0.49% | 0.45% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $296,744, which is included in the reduction of total expenses in the Statement of Operations.
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Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $2,262 for the year ended May 31, 2020, 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.
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% | $131,772 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 1,636 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 4,872 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 672 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 408 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 293 | |||||||||||||||
Total Distribution and Service Fees |
| $139,653 |
(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 May 31, 2020 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 May 31, 2020, this rebate amounted to $1 for Class A 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $4 | |||
Class B | — | |||
Class C | 46 |
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
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year ended May 31, 2020, the fee was $1,497, which equated to 0.0008% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of- pocket expenses, sub-accounting and other shareholder servicing costs amounted to $56,842.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0189% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $89 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
On December 14, 2018, MFS redeemed 4,259 and 4,244 shares of Class A and Class I, respectively, for an aggregate amount of $104,881.
At May 31, 2020, MFS held approximately 83% and 91% of the outstanding shares of Class R2 and Class R3, respectively, and 100% of the outstanding shares of Class R1 and Class R4.
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 May 31, 2020, this reimbursement amounted to $6,609, which is included in “Other” income in the Statement of Operations.
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(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $110,715,224 and $84,372,892, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 2,522,641 | $30,373,323 | 1,186,414 | $14,636,824 | ||||||||||||
Class B | — | — | 3,068 | 38,298 | ||||||||||||
Class C | 6,473 | 76,714 | 12,176 | 148,053 | ||||||||||||
Class I | 14,917 | 158,176 | 113,172 | 1,469,251 | ||||||||||||
Class R2 | 173 | 2,155 | 759 | 9,829 | ||||||||||||
Class R3 | 229 | 2,735 | 5,025 | 64,686 | ||||||||||||
Class R6 | 3,156,025 | 36,841,779 | 2,075,317 | 26,042,905 | ||||||||||||
5,700,458 | $67,454,882 | 3,395,931 | $42,409,846 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 4,802 | $65,063 | 8,353 | $95,808 | ||||||||||||
Class B | 163 | 2,221 | 417 | 4,790 | ||||||||||||
Class C | 501 | 6,791 | 1,009 | 11,593 | ||||||||||||
Class I | 1,275 | 17,348 | 7,045 | 81,156 | ||||||||||||
Class R1 | 68 | 913 | 197 | 2,260 | ||||||||||||
Class R2 | 112 | 1,523 | 251 | 2,890 | ||||||||||||
Class R3 | 195 | 2,653 | 585 | 6,742 | ||||||||||||
Class R4 | 121 | 1,643 | 259 | 2,987 | ||||||||||||
Class R6 | 234,238 | 3,190,320 | 474,757 | 5,473,947 | ||||||||||||
241,475 | $3,288,475 | 492,873 | $5,682,173 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (2,210,914 | ) | $(28,350,259 | ) | (1,075,429 | ) | $(13,730,031 | ) | ||||||||
Class B | (2,191 | ) | (22,754 | ) | (2,740 | ) | (34,367 | ) | ||||||||
Class C | (6,099 | ) | (74,556 | ) | (16,436 | ) | (216,451 | ) | ||||||||
Class I | (50,013 | ) | (601,667 | ) | (107,761 | ) | (1,353,830 | ) | ||||||||
Class R2 | (1 | ) | (10 | ) | — | — | ||||||||||
Class R3 | (4,348 | ) | (42,807 | ) | (10,057 | ) | (128,536 | ) | ||||||||
Class R6 | (1,271,527 | ) | (15,845,614 | ) | (1,843,146 | ) | (23,886,226 | ) | ||||||||
(3,545,093 | ) | $(44,937,667 | ) | (3,055,569 | ) | $(39,349,441 | ) |
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Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Class A | 316,529 | $2,088,127 | 119,338 | $1,002,601 | ||||||||||||
Class B | (2,028 | ) | (20,533 | ) | 745 | 8,721 | ||||||||||
Class C | 875 | 8,949 | (3,251 | ) | (56,805 | ) | ||||||||||
Class I | (33,821 | ) | (426,143 | ) | 12,456 | 196,577 | ||||||||||
Class R1 | 68 | 913 | 197 | 2,260 | ||||||||||||
Class R2 | 284 | 3,668 | 1,010 | 12,719 | ||||||||||||
Class R3 | (3,924 | ) | (37,419 | ) | (4,447 | ) | (57,108 | ) | ||||||||
Class R4 | 121 | 1,643 | 259 | 2,987 | ||||||||||||
Class R6 | 2,118,736 | 24,186,485 | 706,928 | 7,630,626 | ||||||||||||
2,396,840 | $25,805,690 | 833,235 | $8,742,578 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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 Lifetime 2040 Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime Income Fund, the MFS Lifetime 2025 Fund, the MFS Lifetime 2020 Fund, and the MFS Lifetime 2055 Fund were the owners of record of approximately 13%, 13%, 10%, 8%, 8%, 6%, 6%, 4%, and 4%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2060 Fund was the owner of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $983 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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(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 (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Institutional Money Market Portfolio | $1,726,163 | $49,496,957 | $49,243,388 | $705 | $(121 | ) | $1,980,316 | |||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $49,299 | $— |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust X and the Shareholders of MFS Blended Research Value Equity Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS Blended Research Value Equity Fund (the “Fund”), including the portfolio of investments, as of May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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 May 31, 2020, 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 four years in the period then ended and for the period from September 15, 2015 (the commencement of the Fund’s investment operations) through May 31, 2016, 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.
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Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 17, 2020
We have served as the auditor of one or more of the MFS investment companies since 1924.
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
Jim Fallon Matt Krummell Jonathan Sage Jed Stocks |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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.
For corporate shareholders, 93.96% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Emerging Markets Equity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
FEM-ANN
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MFS® Emerging Markets Equity Fund
Contact information | 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
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LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
��
Top ten holdings |
| |||
Tencent Holdings Ltd. | 7.8% | |||
Taiwan Semiconductor Manufacturing Co. Ltd. | 5.9% | |||
Samsung Electronics Co. Ltd. | 5.7% | |||
Alibaba Group Holding Ltd., ADR | 4.5% | |||
Housing Development Finance Corp. Ltd. | 2.7% | |||
Yum China Holdings, Inc. | 2.6% | |||
AIA Group Ltd. | 2.5% | |||
NAVER Corp. | 2.4% | |||
LUKOIL PJSC, ADR | 2.4% | |||
China Construction Bank | 2.2% |
GICS equity sectors (g) |
| |||
Financials | 19.9% | |||
Information Technology | 16.3% | |||
Communication Services | 16.1% | |||
Consumer Discretionary | 12.5% | |||
Consumer Staples | 12.1% | |||
Industrials | 8.0% | |||
Energy | 4.2% | |||
Materials | 2.6% | |||
Utilities | 2.2% | |||
Real Estate | 2.1% | |||
Health Care | 0.8% | |||
Issuer country weightings (x) |
| |||
China | 31.6% | |||
South Korea | 14.0% | |||
India | 10.3% | |||
Taiwan | 8.6% | |||
Hong Kong | 7.6% | |||
Brazil | 5.3% | |||
Russia | 5.0% | |||
United States | 3.3% | |||
Indonesia | 2.3% | |||
Other Countries | 12.0% | |||
Currency exposure weightings (y) |
| |||
Hong Kong Dollar | 20.7% | |||
Chinese Renminbi | 14.7% | |||
South Korean Won | 14.0% | |||
Indian Rupee | 9.3% | |||
United States Dollar | 8.7% | |||
Taiwan Dollar | 8.6% | |||
Brazilian Real | 5.3% | |||
Russian Ruble | 5.0% | |||
Indonesian Rupiah | 2.3% | |||
Other Currencies | 11.4% |
2
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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. |
(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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS Emerging Markets Equity Fund (fund) provided a total return of –9.55%, at net asset value. This compares with a return of –4.39% for the fund’s benchmark, the MSCI Emerging Markets Index (net div).
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Security selection in the consumer discretionary sector was a primary factor that detracted from performance relative to the MSCI Emerging Markets Index. Within this sector, the fund’s underweight position in online and mobile commerce company Alibaba Group Holding (China) weakened relative results as the stock outperformed the benchmark over the reporting period due to robust ecommerce demand experienced during the pandemic.
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Management Review – continued
Stock selection and, to a lesser extent, an overweight position in the financials sector also held back relative performance. Notably, overweight positions in financial services firms ABSA Group (South Africa), Banco Bradesco (Brazil), Shriram Transport Finance (h) (India), Metropolitan Bank & Trust (Philippines), Kasikornbank (h) (Thailand) and Housing Development Finance Corp. (India) weighed on relative returns. Stocks in the financial services industry generally came under pressure at the onset of the pandemic, as central banks across the global reduced interest rates and provided other forms of stimulus in response to a rapid deterioration of economic conditions.
Stocks in other sectors that further hindered relative returns included the fund’s overweight position in beverage manufacturer AmBev (Brazil), holding shares of enterprise software solutions provider Linx (b) (Brazil) and the timing of the fund’s position in power plant and steam generator constructor Bharat Heavy Electricals (b)(h) (India).
Contributors to Performance
Stock selection in both the communication services and consumer staples sectors benefited relative performance over the reporting period. Within the communication services sector, overweight positions in shares of internet search engine and online computer games provider NAVER (South Korea) and internet-based multiple services company Tencent Holdings (China) lifted relative returns. The stock price of NAVER rose steadily throughout the period on the back of solid earnings, which were driven primarily by strength in search and display advertising revenue. Within the consumer staples sector, overweight positions in snack manufacturer Orion (South Korea), brewing company China Resources Beer (China) and wine producer Kweichow Moutai (China) contributed positively to relative results.
Elsewhere, the fund’s overweight positions in shares of Taiwan Semiconductor Manufacturing, fast food restaurant operator Yum China Holdings and securities exchange services provider Moscow Exchange MIXCEX-RTS (Russia) helped relative returns. Taiwan Semiconductor Manufacturing’s stock price rose on increased demand for smartphone technology, notably for its 7nm processor chips. Later in the period, the company agreed to build a new manufacturing plant in Arizona to help alleviate some of the US-related supply chain concerns brought on during the pandemic. Holding shares of electronic power tools manufacturer Techtronic Industries (b) (China), and not holding shares of banking services provider Itau Unibanco (h) (Brazil), were also supportive of relative performance.
During the reporting period, the fund’s relative currency exposure, resulting primarily from exposure differences between the fund and the benchmark to holdings of securities denominated in foreign currencies, was a contributor to relative performance. All of MFS’ investment decisions are driven by the fundamentals of each individual opportunity and as such, it is common for our portfolios to have different currency exposure than the benchmark.
Respectfully,
Portfolio Manager(s)
Jose Luis Garcia, Robert Lau, and Harry Purcell
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Management Review – continued
(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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 10/24/95 | (9.55)% | 0.77% | 1.45% | N/A | |||||||||
B | 10/24/95 | (10.24)% | 0.01% | 0.69% | N/A | |||||||||
C | 6/27/96 | (10.23)% | 0.01% | 0.69% | N/A | |||||||||
I | 1/02/97 | (9.32)% | 1.01% | 1.70% | N/A | |||||||||
R1 | 10/01/08 | (10.22)% | 0.00% | 0.68% | N/A | |||||||||
R2 | 10/01/08 | (9.80)% | 0.51% | 1.19% | N/A | |||||||||
R3 | 10/01/08 | (9.55)% | 0.77% | 1.45% | N/A | |||||||||
R4 | 10/01/08 | (9.31)% | 1.02% | 1.70% | N/A | |||||||||
R6 | 6/01/12 | (9.23)% | 1.13% | N/A | 1.51% | |||||||||
Comparative benchmark(s) | ||||||||||||||
MSCI Emerging Markets Index (net div) (f) | (4.39)% | 0.88% | 2.47% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With Initial Sales Charge (5.75%) | (14.75)% | (0.42)% | 0.85% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (13.80)% | (0.39)% | 0.69% | N/A | ||||||||||
C With CDSC (1% for 12 months) (v) | (11.12)% | 0.01% | 0.69% | N/A |
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. |
(t) | For the period from the class inception date through the stated period end (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
MSCI Emerging Markets Index (net div) – a market capitalization-weighted index that is designed to measure equity market performance in the global emerging markets. 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.
It is not possible to invest directly in an index.
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class
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Performance Summary – continued
has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
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.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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.
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 1.32% | $1,000.00 | $853.49 | $6.12 | |||||||||||||
Hypothetical (h) | 1.32% | $1,000.00 | $1,018.40 | $6.66 | ||||||||||||||
B | Actual | 2.07% | $1,000.00 | $850.12 | $9.57 | |||||||||||||
Hypothetical (h) | 2.07% | $1,000.00 | $1,014.65 | $10.43 | ||||||||||||||
C | Actual | 2.07% | $1,000.00 | $850.27 | $9.58 | |||||||||||||
Hypothetical (h) | 2.07% | $1,000.00 | $1,014.65 | $10.43 | ||||||||||||||
I | Actual | 1.07% | $1,000.00 | $854.41 | $4.96 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.65 | $5.40 | ||||||||||||||
R1 | Actual | 2.07% | $1,000.00 | $850.07 | $9.57 | |||||||||||||
Hypothetical (h) | 2.07% | $1,000.00 | $1,014.65 | $10.43 | ||||||||||||||
R2 | Actual | 1.57% | $1,000.00 | $852.13 | $7.27 | |||||||||||||
Hypothetical (h) | 1.57% | $1,000.00 | $1,017.15 | $7.92 | ||||||||||||||
R3 | Actual | 1.32% | $1,000.00 | $853.25 | $6.12 | |||||||||||||
Hypothetical (h) | 1.32% | $1,000.00 | $1,018.40 | $6.66 | ||||||||||||||
R4 | Actual | 1.07% | $1,000.00 | $854.52 | $4.96 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.65 | $5.40 | ||||||||||||||
R6 | Actual | 0.95% | $1,000.00 | $855.03 | $4.41 | |||||||||||||
Hypothetical (h) | 0.95% | $1,000.00 | $1,020.25 | $4.80 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
11
Table of Contents
5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 96.8% | ||||||||
Airlines - 0.9% | ||||||||
Shanghai International Air Co., Ltd. | 3,265,074 | $ | 33,077,517 | |||||
Alcoholic Beverages - 4.2% | ||||||||
Ambev S.A., ADR | 19,680,049 | $ | 45,460,913 | |||||
China Resources Beer Holdings Co. Ltd. | 9,964,000 | 52,766,845 | ||||||
Kweichow Moutai Co. Ltd., “A” | 279,554 | 53,464,859 | �� | |||||
|
| |||||||
$ | 151,692,617 | |||||||
Apparel Manufacturers - 0.4% | ||||||||
Shenzhou International Group Holdings Ltd. | 1,182,000 | $ | 14,051,642 | |||||
Automotive - 2.8% | ||||||||
Hero MotoCorp Ltd. | 979,173 | $ | 30,571,214 | |||||
Mahindra & Mahindra Ltd. | 4,685,218 | 27,036,449 | ||||||
PT United Tractors Tbk | 39,407,000 | 42,347,016 | ||||||
|
| |||||||
$ | 99,954,679 | |||||||
Brokerage & Asset Managers - 1.7% | ||||||||
B3 Brasil Bolsa Balcao S.A. | 2,298,500 | $ | 19,619,713 | |||||
Moscow Exchange MICEX-RTS PJSC | 26,081,037 | 42,375,556 | ||||||
|
| |||||||
$ | 61,995,269 | |||||||
Business Services - 2.1% | ||||||||
Tata Consultancy Services Ltd. | 2,906,649 | $ | 75,816,100 | |||||
Computer Software - Systems - 0.5% | ||||||||
Linx S.A. | 4,542,400 | $ | 17,450,143 | |||||
Construction - 1.7% | ||||||||
Techtronic Industries Co. Ltd. | 7,209,000 | $ | 62,031,904 | |||||
Consumer Products - 0.3% | ||||||||
Dabur India Ltd. | 1,649,730 | $ | 10,176,603 | |||||
Consumer Services - 2.7% | ||||||||
51job, Inc., ADR (a) | 925,136 | $ | 59,662,020 | |||||
MakeMyTrip Ltd. (a) | 2,262,730 | 35,049,688 | ||||||
|
| |||||||
$ | 94,711,708 | |||||||
Electrical Equipment - 0.9% | ||||||||
LS Industrial Systems Co. Ltd. | 892,094 | $ | 32,811,080 |
12
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Electronics - 12.9% | ||||||||
Samsung Electronics Co. Ltd. | 5,000,725 | $ | 204,721,028 | |||||
Silicon Motion Technology Corp., ADR | 985,054 | 44,396,384 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 21,643,695 | 210,489,890 | ||||||
|
| |||||||
$ | 459,607,302 | |||||||
Energy - Integrated - 2.9% | ||||||||
LUKOIL PJSC, ADR | 1,127,196 | $ | 84,243,121 | |||||
Petroleo Brasileiro S.A., ADR | 2,687,558 | 20,506,068 | ||||||
|
| |||||||
$ | 104,749,189 | |||||||
Food & Beverages - 5.9% | ||||||||
AVI Ltd. | 4,599,406 | $ | 18,951,685 | |||||
Inner Mongolia Yili Industrial Group Co. Ltd., “A” (a) | 12,957,574 | 51,590,207 | ||||||
Orion Corp. | 688,097 | 73,340,711 | ||||||
Tata Consumer Products Ltd. | 3,575,757 | 17,350,044 | ||||||
Tingyi (Cayman Islands) Holding Corp. | 28,976,000 | 49,791,694 | ||||||
|
| |||||||
$ | 211,024,341 | |||||||
Forest & Paper Products - 0.7% | ||||||||
Suzano S.A. (a) | 3,258,000 | $ | 23,114,870 | |||||
Furniture & Appliances - 0.8% | ||||||||
Gree Electric Appliances, Inc. | 3,626,104 | $ | 28,894,755 | |||||
Gaming & Lodging - 1.5% | ||||||||
Genting Berhad | 40,934,500 | $ | 37,662,565 | |||||
Kangwon Land, Inc. | 856,180 | 16,730,232 | ||||||
|
| |||||||
$ | 54,392,797 | |||||||
General Merchandise - 1.1% | ||||||||
Bim Birlesik Magazalar A.S. | 2,005,774 | $ | 19,126,393 | |||||
Walmart de Mexico S.A.B. de C.V. | 7,747,503 | 19,338,623 | ||||||
|
| |||||||
$ | 38,465,016 | |||||||
Insurance - 4.3% | ||||||||
AIA Group Ltd. | 10,967,800 | $ | 88,928,108 | |||||
Samsung Fire & Marine Insurance Co. Ltd. | 433,586 | 63,893,936 | ||||||
|
| |||||||
$ | 152,822,044 | |||||||
Internet - 18.6% | ||||||||
Alibaba Group Holding Ltd., ADR (a) | 780,111 | $ | 161,787,220 | |||||
Baidu, Inc., ADR (a) | 598,926 | 63,815,565 | ||||||
NAVER Corp. | 472,188 | 86,167,781 | ||||||
NetEase.com, Inc., ADR | 195,266 | 74,767,351 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Internet - continued | ||||||||
Tencent Holdings Ltd. | 5,266,300 | $ | 278,822,102 | |||||
|
| |||||||
$ | 665,360,019 | |||||||
Machinery & Tools - 1.6% | ||||||||
Doosan Bobcat, Inc. | 1,178,114 | $ | 22,545,361 | |||||
Haitian International Holdings Ltd. | 16,380,000 | 34,570,960 | ||||||
|
| |||||||
$ | 57,116,321 | |||||||
Major Banks - 4.3% | ||||||||
ABSA Group Ltd. | 7,037,978 | $ | 32,699,085 | |||||
Abu Dhabi Commercial Bank | 9,247,126 | 11,076,965 | ||||||
Banco Bradesco S.A., ADR | 9,351,896 | 32,357,560 | ||||||
China Construction Bank | 98,527,490 | 77,408,555 | ||||||
|
| |||||||
$ | 153,542,165 | |||||||
Metals & Mining - 1.2% | ||||||||
Lundin Mining Corp. | 4,880,500 | $ | 22,473,305 | |||||
Vale S.A., ADR | 2,109,993 | 20,593,532 | ||||||
|
| |||||||
$ | 43,066,837 | |||||||
Network & Telecom - 0.8% | ||||||||
VTech Holdings Ltd. | 4,971,900 | $ | 29,985,980 | |||||
Oil Services - 0.1% | ||||||||
Lamprell PLC (a) | 9,696,016 | $ | 1,975,805 | |||||
Other Banks & Diversified Financials - 9.5% | ||||||||
Banco de Chile | 255,352,337 | $ | 21,697,292 | |||||
Credicorp Ltd. | 162,967 | 22,460,112 | ||||||
E.Sun Financial Holding Co. Ltd. | 59,602,059 | 52,902,410 | ||||||
Grupo Financiero Inbursa S.A. de C.V. (a) | 21,710,140 | 14,881,694 | ||||||
Housing Development Finance Corp. Ltd. | 4,326,111 | 94,907,980 | ||||||
Komercni Banka A.S. (a) | 988,599 | 21,164,865 | ||||||
Metropolitan Bank & Trust Co. | 43,907,331 | 30,532,162 | ||||||
Public Bank Berhad | 10,892,851 | 36,731,270 | ||||||
Sberbank of Russia | 16,131,432 | 45,980,050 | ||||||
|
| |||||||
$ | 341,257,835 | |||||||
Pharmaceuticals - 0.8% | ||||||||
Genomma Lab Internacional S.A., “B” (a) | 32,052,980 | $ | 29,213,318 | |||||
Real Estate - 2.1% | ||||||||
Aldar Properties PJSC | 31,425,822 | $ | 14,886,659 | |||||
Hang Lung Properties Ltd. | 16,430,000 | 34,549,313 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Real Estate - continued | ||||||||
Multiplan Empreendimentos Imobiliarios S.A. | 2,774,115 | $ | 10,755,849 | |||||
Swire Properties Ltd. | 7,108,600 | 15,828,477 | ||||||
|
| |||||||
$ | 76,020,298 | |||||||
Restaurants - 2.7% | ||||||||
Yum China Holdings, Inc. | 2,042,685 | $ | 94,658,023 | |||||
Specialty Chemicals - 0.8% | ||||||||
PTT Global Chemical PLC | 19,923,900 | $ | 26,932,653 | |||||
Specialty Stores - 1.1% | ||||||||
Jardine Strategic Holdings Ltd. | 2,039,000 | $ | 40,678,050 | |||||
Telecommunications - Wireless - 0.2% | ||||||||
Mobile TeleSystems PJSC, ADR | 746,931 | $ | 6,640,217 | |||||
Telephone Services - 1.9% | ||||||||
Hellenic Telecommunications Organization S.A. | 3,471,646 | $ | 48,787,868 | |||||
PT Telekomunikasi Indonesia | 84,417,700 | 18,200,941 | ||||||
|
| |||||||
$ | 66,988,809 | |||||||
Tobacco - 0.6% | ||||||||
PT Hanjaya Mandala Sampoerna Tbk | 162,118,200 | $ | 21,526,989 | |||||
Utilities - Electric Power - 2.2% | ||||||||
CESC Ltd. | 4,271,953 | $ | 31,205,108 | |||||
NTPC Ltd. | 36,283,829 | 46,952,509 | ||||||
|
| |||||||
$ | 78,157,617 | |||||||
Total Common Stocks (Identified Cost, $3,490,703,156) | $ | 3,459,960,512 | ||||||
Investment Companies (h) - 2.0% | ||||||||
Money Market Funds - 2.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $72,638,536) | 72,632,158 | $ | 72,639,421 | |||||
Other Assets, Less Liabilities - 1.2% | 43,932,964 | |||||||
Net Assets - 100.0% | $ | 3,576,532,897 |
(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 $72,639,421 and $3,459,960,512, respectively. |
15
Table of Contents
Portfolio of Investments – continued
(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 |
See Notes to Financial Statements
16
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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, $3,490,703,156) | $3,459,960,512 | |||
Investments in affiliated issuers, at value (identified cost, $72,638,536) | 72,639,421 | |||
Cash | 572,225 | |||
Foreign currency, at value (identified cost, $920,490) | 920,530 | |||
Receivables for | ||||
Investments sold | 2,493,380 | |||
Fund shares sold | 41,349,599 | |||
Interest and dividends | 4,363,657 | |||
Receivable from investment adviser | 115,298 | |||
Other assets | 6,768 | |||
Total assets | $3,582,421,390 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $3,736,327 | |||
Fund shares reacquired | 489,523 | |||
Payable to affiliates | ||||
Administrative services fee | 5,497 | |||
Shareholder servicing costs | 160,403 | |||
Distribution and service fees | 4,710 | |||
Payable for independent Trustees’ compensation | 24 | |||
Accrued expenses and other liabilities | 1,492,009 | |||
Total liabilities | $5,888,493 | |||
Net assets | $3,576,532,897 | |||
Net assets consist of | ||||
Paid-in capital | $3,949,592,707 | |||
Total distributable earnings (loss) | (373,059,810 | ) | ||
Net assets | $3,576,532,897 | |||
Shares of beneficial interest outstanding | 120,916,927 |
17
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $118,726,038 | 4,220,305 | $28.13 | |||||||||
Class B | 2,393,107 | 92,810 | 25.78 | |||||||||
Class C | 10,081,895 | 400,848 | 25.15 | |||||||||
Class I | 94,349,988 | 3,182,789 | 29.64 | |||||||||
Class R1 | 1,742,061 | 70,238 | 24.80 | |||||||||
Class R2 | 3,430,835 | 133,833 | 25.64 | |||||||||
Class R3 | 6,246,248 | 223,447 | 27.95 | |||||||||
Class R4 | 2,673,459 | 95,391 | 28.03 | |||||||||
Class R6 | 3,336,889,266 | 112,497,266 | 29.66 |
(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 $29.85 [100 / 94.25 x $28.13]. 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
18
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $86,499,178 | |||
Non-cash dividends | 21,600,028 | |||
Dividends from affiliated issuers | 1,112,637 | |||
Other | 569,297 | |||
Interest | 10,135 | |||
Income on securities loaned | 5,330 | |||
Foreign taxes withheld | (8,924,465 | ) | ||
Total investment income | $100,872,140 | |||
Expenses | ||||
Management fee | $30,773,822 | |||
Distribution and service fees | 542,929 | |||
Shareholder servicing costs | 413,079 | |||
Administrative services fee | 447,068 | |||
Independent Trustees’ compensation | 39,293 | |||
Custodian fee | 2,095,584 | |||
Shareholder communications | 45,200 | |||
Audit and tax fees | 98,011 | |||
Legal fees | 28,852 | |||
Miscellaneous | 453,475 | |||
Total expenses | $34,937,313 | |||
Reduction of expenses by investment adviser and distributor | (2,706,928 | ) | ||
Net expenses | $32,230,385 | |||
Net investment income (loss) | $68,641,755 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers (net of $699,305 country tax) | $(281,411,111 | ) | ||
Affiliated issuers | 1,680 | |||
Foreign currency | (2,918,199 | ) | ||
Net realized gain (loss) | $(284,327,630 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers (net of $289,856 decrease in deferred country tax) | $(169,831,399 | ) | ||
Affiliated issuers | (2,926 | ) | ||
Translation of assets and liabilities in foreign currencies | 96,680 | |||
Net unrealized gain (loss) | $(169,737,645 | ) | ||
Net realized and unrealized gain (loss) | $(454,065,275 | ) | ||
Change in net assets from operations | $(385,423,520 | ) |
See Notes to Financial Statements
19
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $68,641,755 | $17,656,050 | ||||||
Net realized gain (loss) | (284,327,630 | ) | (7,991,778 | ) | ||||
Net unrealized gain (loss) | (169,737,645 | ) | (172,008,054 | ) | ||||
Change in net assets from operations | $(385,423,520 | ) | $(162,343,782 | ) | ||||
Total distributions to shareholders | $(68,825,844 | ) | $(13,400,377 | ) | ||||
Change in net assets from fund share transactions | $1,989,747,868 | $632,270,778 | ||||||
Total change in net assets | $1,535,498,504 | $456,526,619 | ||||||
Net assets | ||||||||
At beginning of period | 2,041,034,393 | 1,584,507,774 | ||||||
At end of period | $3,576,532,897 | $2,041,034,393 |
See Notes to Financial Statements
20
Table of Contents
Financial Statements
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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $31.63 | $34.99 | $30.39 | $24.05 | $27.87 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.58 | $0.24 | $0.10 | $0.16 | (c) | $0.16 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.50 | ) | (3.46 | ) | 4.53 | 6.32 | (3.95 | ) | ||||||||||||
Total from investment operations | $(2.92 | ) | $(3.22 | ) | $4.63 | $6.48 | $(3.79 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.58 | ) | $(0.14 | ) | $(0.03 | ) | $(0.14 | ) | $(0.03 | ) | ||||||||||
Net asset value, end of period (x) | $28.13 | $31.63 | $34.99 | $30.39 | $24.05 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.55 | ) | (9.19 | ) | 15.24 | 27.04 | (c) | (13.59 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.39 | 1.44 | 1.49 | 1.63 | (c) | 1.73 | ||||||||||||||
Expenses after expense reductions (f) | 1.30 | 1.42 | 1.48 | 1.61 | (c) | 1.70 | ||||||||||||||
Net investment income (loss) | 1.82 | 0.72 | 0.28 | 0.60 | (c) | 0.64 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $118,726 | $120,862 | $154,713 | $116,512 | $114,533 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $29.01 | $32.18 | $28.15 | $22.32 | $26.03 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.35 | $(0.01 | ) | $(0.15 | ) | $(0.05 | )(c) | $(0.01 | ) | |||||||||||
Net realized and unrealized gain (loss) | (3.26 | ) | (3.16 | ) | 4.18 | 5.88 | (3.70 | ) | ||||||||||||
Total from investment operations | $(2.91 | ) | $(3.17 | ) | $4.03 | $5.83 | $(3.71 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.32 | ) | $— | $— | $— | $— | ||||||||||||||
Net asset value, end of period (x) | $25.78 | $29.01 | $32.18 | $28.15 | $22.32 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.24 | ) | (9.85 | ) | 14.32 | 26.12 | (c) | (14.25 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 2.13 | 2.19 | 2.24 | 2.38 | (c) | 2.48 | ||||||||||||||
Expenses after expense reductions (f) | 2.06 | 2.17 | 2.23 | 2.37 | (c) | 2.45 | ||||||||||||||
Net investment income (loss) | 1.19 | (0.04 | ) | (0.48 | ) | (0.20 | )(c) | (0.03 | ) | |||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,393 | $3,672 | $5,385 | $5,786 | $5,777 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $28.33 | $31.42 | $27.49 | $21.80 | $25.42 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.33 | $(0.01 | ) | $(0.15 | ) | $(0.05 | )(c) | $(0.01 | ) | |||||||||||
Net realized and unrealized gain (loss) | (3.17 | ) | (3.08 | ) | 4.08 | 5.74 | (3.61 | ) | ||||||||||||
Total from investment operations | $(2.84 | ) | $(3.09 | ) | $3.93 | $5.69 | $(3.62 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.34 | ) | $— | $— | $— | $— | ||||||||||||||
Net asset value, end of period (x) | $25.15 | $28.33 | $31.42 | $27.49 | $21.80 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.23 | ) | (9.83 | ) | 14.30 | 26.10 | (c) | (14.24 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 2.13 | 2.19 | 2.24 | 2.38 | (c) | 2.48 | ||||||||||||||
Expenses after expense reductions (f) | 2.06 | 2.17 | 2.23 | 2.37 | (c) | 2.45 | ||||||||||||||
Net investment income (loss) | 1.16 | (0.04 | ) | (0.49 | ) | (0.21 | )(c) | (0.04 | ) | |||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $10,082 | $14,116 | $17,790 | $22,567 | $20,132 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $33.29 | $36.85 | $32.00 | $25.31 | $29.31 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.66 | $0.32 | $0.21 | $0.21 | (c) | $0.30 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.65 | ) | (3.63 | ) | 4.74 | 6.69 | (4.22 | ) | ||||||||||||
Total from investment operations | $(2.99 | ) | $(3.31 | ) | $4.95 | $6.90 | $(3.92 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.66 | ) | $(0.25 | ) | $(0.10 | ) | $(0.21 | ) | $(0.08 | ) | ||||||||||
Net asset value, end of period (x) | $29.64 | $33.29 | $36.85 | $32.00 | $25.31 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.32 | ) | (8.96 | ) | 15.48 | 27.41 | (c) | (13.38 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.15 | 1.20 | 1.24 | 1.38 | (c) | 1.47 | ||||||||||||||
Expenses after expense reductions (f) | 1.06 | 1.17 | 1.23 | 1.36 | (c) | 1.45 | ||||||||||||||
Net investment income (loss) | 1.98 | 0.92 | 0.59 | 0.74 | (c) | 1.18 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $94,350 | $69,443 | $62,565 | $33,855 | $19,942 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $27.97 | $31.17 | $27.26 | $21.62 | $25.21 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.30 | $(0.05 | ) | $(0.14 | ) | $(0.05 | )(c) | $(0.00 | )(w) | |||||||||||
Net realized and unrealized gain (loss) | (3.09 | ) | (3.04 | ) | 4.05 | 5.69 | (3.59 | ) | ||||||||||||
Total from investment operations | $(2.79 | ) | $(3.09 | ) | $3.91 | $5.64 | $(3.59 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.38 | ) | $(0.11 | ) | $— | $— | $— | |||||||||||||
Net asset value, end of period (x) | $24.80 | $27.97 | $31.17 | $27.26 | $21.62 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.22 | ) | (9.89 | ) | 14.34 | 26.09 | (c) | (14.24 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 2.14 | 2.19 | 2.24 | 2.38 | (c) | 2.48 | ||||||||||||||
Expenses after expense reductions (f) | 2.06 | 2.17 | 2.24 | 2.37 | (c) | 2.46 | ||||||||||||||
Net investment income (loss) | 1.08 | (0.18 | ) | (0.45 | ) | (0.23 | )(c) | (0.02 | ) | |||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,742 | $1,844 | $637 | $457 | $376 |
See Notes to Financial Statements
23
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Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $28.87 | $31.96 | $27.81 | $22.05 | $25.61 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.49 | $0.14 | $0.01 | $0.05 | (c) | $0.06 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.22 | ) | (3.15 | ) | 4.14 | 5.82 | (3.59 | ) | ||||||||||||
Total from investment operations | $(2.73 | ) | $(3.01 | ) | $4.15 | $5.87 | $(3.53 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.50 | ) | $(0.08 | ) | $— | $(0.11 | ) | $(0.03 | ) | |||||||||||
Net asset value, end of period (x) | $25.64 | $28.87 | $31.96 | $27.81 | $22.05 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.76 | ) | (9.42 | ) | 14.92 | 26.72 | (c) | (13.80 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.63 | 1.69 | 1.74 | 1.88 | (c) | 1.98 | ||||||||||||||
Expenses after expense reductions (f) | 1.56 | 1.67 | 1.73 | 1.87 | (c) | 1.96 | ||||||||||||||
Net investment income (loss) | 1.68 | 0.48 | 0.03 | 0.21 | (c) | 0.27 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $3,431 | $4,614 | $6,067 | $4,643 | $3,358 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $31.47 | $34.84 | $30.27 | $23.94 | $27.70 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.51 | $0.21 | $0.09 | $0.16 | (c) | $0.24 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.41 | ) | (3.42 | ) | 4.51 | 6.29 | (4.00 | ) | ||||||||||||
Total from investment operations | $(2.90 | ) | $(3.21 | ) | $4.60 | $6.45 | $(3.76 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.62 | ) | $(0.16 | ) | $(0.03 | ) | $(0.12 | ) | $— | |||||||||||
Net asset value, end of period (x) | $27.95 | $31.47 | $34.84 | $30.27 | $23.94 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.55 | ) | (9.19 | ) | 15.20 | 27.06 | (c) | (13.57 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.39 | 1.44 | 1.49 | 1.63 | (c) | 1.72 | ||||||||||||||
Expenses after expense reductions (f) | 1.31 | 1.42 | 1.48 | 1.62 | (c) | 1.70 | ||||||||||||||
Net investment income (loss) | 1.64 | 0.66 | 0.26 | 0.61 | (c) | 0.97 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $6,246 | $2,405 | $2,465 | $2,072 | $1,947 |
See Notes to Financial Statements
24
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Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $31.47 | $34.85 | $30.26 | $23.96 | $27.77 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.81 | $0.30 | $0.17 | $0.21 | (c) | $0.22 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.63 | ) | (3.43 | ) | 4.52 | 6.30 | (3.93 | ) | ||||||||||||
Total from investment operations | $(2.82 | ) | $(3.13 | ) | $4.69 | $6.51 | $(3.71 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.62 | ) | $(0.25 | ) | $(0.10 | ) | $(0.21 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $28.03 | $31.47 | $34.85 | $30.26 | $23.96 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.31 | ) | (8.97 | ) | 15.52 | 27.32 | (c) | (13.35 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.13 | 1.19 | 1.24 | 1.38 | (c) | 1.48 | ||||||||||||||
Expenses after expense reductions (f) | 1.06 | 1.17 | 1.23 | 1.37 | (c) | 1.46 | ||||||||||||||
Net investment income (loss) | 2.54 | 0.93 | 0.49 | 0.77 | (c) | 0.90 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,673 | $6,917 | $7,023 | $4,817 | $3,940 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $33.30 | $36.86 | $32.00 | $25.32 | $29.34 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.70 | $0.37 | $0.23 | $0.24 | (c) | $0.25 | ||||||||||||||
Net realized and unrealized gain (loss) | (3.64 | ) | (3.65 | ) | 4.76 | 6.67 | (4.14 | ) | ||||||||||||
Total from investment operations | $(2.94 | ) | $(3.28 | ) | $4.99 | $6.91 | $(3.89 | ) | ||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.70 | ) | $(0.28 | ) | $(0.13 | ) | $(0.23 | ) | $(0.13 | ) | ||||||||||
Net asset value, end of period (x) | $29.66 | $33.30 | $36.86 | $32.00 | $25.32 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (9.21 | ) | (8.86 | ) | 15.60 | 27.49 | (c) | (13.25 | ) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.03 | 1.06 | 1.14 | 1.28 | (c) | 1.36 | ||||||||||||||
Expenses after expense reductions (f) | 0.95 | 1.04 | 1.13 | 1.26 | (c) | 1.34 | ||||||||||||||
Net investment income (loss) | 2.10 | 1.07 | 0.64 | 0.86 | (c) | 0.99 | ||||||||||||||
Portfolio turnover | 32 | 27 | 24 | 43 | 55 | |||||||||||||||
Net assets at end of period (000 omitted) | $3,336,889 | $1,817,161 | $1,327,862 | $875,711 | $588,772 |
See Notes to Financial Statements
25
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Financial Highlights – continued
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(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
26
Table of Contents
(1) Business and Organization
MFS Emerging Markets Equity Fund (the fund) is a diversified series of MFS Series Trust X (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 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, 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, and accounting systems, and greater political, social, and economic instability than developed markets.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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
27
Table of Contents
Notes to Financial Statements – continued
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 – 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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
28
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Notes to Financial Statements – continued
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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
China | $1,129,129,315 | $— | $— | $1,129,129,315 | ||||||||||||
South Korea | 500,210,129 | — | — | 500,210,129 | ||||||||||||
India | 369,065,695 | — | — | 369,065,695 | ||||||||||||
Taiwan | 307,788,684 | — | — | 307,788,684 | ||||||||||||
Hong Kong | 272,001,832 | — | — | 272,001,832 | ||||||||||||
Brazil | 189,858,648 | — | — | 189,858,648 | ||||||||||||
Russia | 6,640,217 | 172,598,727 | — | 179,238,944 | ||||||||||||
Indonesia | 82,074,946 | — | — | 82,074,946 | ||||||||||||
Malaysia | 74,393,835 | — | — | 74,393,835 | ||||||||||||
Other Countries | 277,615,061 | 78,583,423 | — | 356,198,484 | ||||||||||||
Mutual Funds | 72,639,421 | — | — | 72,639,421 | ||||||||||||
Total | $3,281,417,783 | $251,182,150 | $— | $3,532,599,933 |
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.
29
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Notes to Financial Statements – continued
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, 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 May 31, 2020, 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 – Investment transactions are recorded on the trade date. 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.
30
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Notes to Financial Statements – continued
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 wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $68,825,844 | $13,400,377 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $3,612,034,478 | |||
Gross appreciation | 447,883,846 | |||
Gross depreciation | (527,318,391 | ) | ||
Net unrealized appreciation (depreciation) | $(79,434,545 | ) | ||
Undistributed ordinary income | 12,713,136 | |||
Capital loss carryforwards | (305,958,625 | ) | ||
Other temporary differences | (379,776 | ) |
31
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Notes to Financial Statements – continued
As of May 31, 2020, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
Short-Term | $133,926,259 | |||
Long-Term | 172,032,366 | |||
Total | $305,958,625 |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $2,319,285 | $520,307 | ||||||
Class B | 35,142 | — | ||||||
Class C | 156,722 | — | ||||||
Class I | 1,762,494 | 476,211 | ||||||
Class R1 | 25,621 | 7,588 | ||||||
Class R2 | 75,352 | 12,943 | ||||||
Class R3 | 128,665 | 12,533 | ||||||
Class R4 | 57,249 | 53,866 | ||||||
Class R6 | 64,265,314 | 12,316,929 | ||||||
Total | $68,825,844 | $13,400,377 |
(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 | 1.05 | % | ||
In excess of $500 million and up to $1 billion | 0.95 | % | ||
In excess of $1 billion and up to $4 billion | 0.90 | % | ||
In excess of $4 billion | 0.85 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $337,360, which is included in the reduction of total expenses in the
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Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.92% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | ||||||||||||||||||||||||
1.31% | 2.06% | 2.06% | 1.06% | 2.06% | 1.56% | 1.31% | 1.06% | 0.95% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $2,362,726, which is included in the reduction of total expenses in the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $67,057 for the year ended May 31, 2020, 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.
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% | $322,193 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 32,778 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 132,552 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 19,185 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 21,818 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 14,403 | |||||||||||||||
Total Distribution and Service Fees |
| $542,929 |
(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 May 31, 2020 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 |
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affiliates’ seed money. For the year ended May 31, 2020, this rebate amounted to $6,638, $49, and $155 for Class A, Class B, and Class C, 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $1,790 | |||
Class B | 3,107 | |||
Class C | 1,246 |
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 May 31, 2020, the fee was $87,162, which equated to 0.0026% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $325,917.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0135% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $1,046 and is included in “Miscellaneous” expense in
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the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
On December 14, 2018, MFS redeemed 1,770 shares of Class R1 for an aggregate amount of $47,360.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $11,096,830 and $78,486, respectively. The sales transactions resulted in net realized gains (losses) of $16,215.
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 May 31, 2020, this reimbursement amounted to $569,297, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $2,914,847,193 and $1,005,709,055, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 1,190,435 | $37,819,440 | 1,483,096 | $48,759,114 | ||||||||||||
Class B | 935 | 29,943 | 12,037 | 360,450 | ||||||||||||
Class C | 63,962 | 1,887,319 | 135,082 | 3,970,092 | ||||||||||||
Class I | 2,368,864 | 79,671,976 | 1,668,710 | 56,239,873 | ||||||||||||
Class R1 | 6,990 | 196,313 | 94,894 | 2,869,121 | ||||||||||||
Class R2 | 48,382 | 1,428,605 | 39,335 | 1,186,896 | ||||||||||||
Class R3 | 196,269 | 6,193,038 | 26,468 | 884,424 | ||||||||||||
Class R4 | 32,464 | 982,320 | 48,111 | 1,570,272 | ||||||||||||
Class R6 | 61,542,850 | 2,061,826,062 | 19,525,400 | 672,872,420 | ||||||||||||
65,451,151 | $2,190,035,016 | 23,033,133 | $788,712,662 |
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Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 64,558 | $2,205,955 | 16,637 | $508,270 | ||||||||||||
Class B | 1,098 | 34,499 | — | — | ||||||||||||
Class C | 4,234 | 129,803 | — | — | ||||||||||||
Class I | 41,583 | 1,495,334 | 11,955 | 384,001 | ||||||||||||
Class R1 | 848 | 25,621 | 280 | 7,588 | ||||||||||||
Class R2 | 2,324 | 72,434 | 445 | 12,415 | ||||||||||||
Class R3 | 3,790 | 128,665 | 412 | 12,533 | ||||||||||||
Class R4 | 1,684 | 57,249 | 1,774 | 53,866 | ||||||||||||
Class R6 | 1,778,620 | 63,959,158 | 379,363 | 12,185,130 | ||||||||||||
1,898,739 | $68,108,718 | 410,866 | $13,163,803 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (856,185 | ) | $(26,625,828 | ) | (2,100,219 | ) | $(66,580,385 | ) | ||||||||
Class B | (35,822 | ) | (1,026,904 | ) | (52,762 | ) | (1,570,886 | ) | ||||||||
Class C | (165,669 | ) | (4,665,492 | ) | (202,906 | ) | (5,937,457 | ) | ||||||||
Class I | (1,313,702 | ) | (40,785,503 | ) | (1,292,303 | ) | (44,543,086 | ) | ||||||||
Class R1 | (3,539 | ) | (98,749 | ) | (49,681 | ) | (1,468,701 | ) | ||||||||
Class R2 | (76,705 | ) | (2,265,930 | ) | (69,814 | ) | (2,103,798 | ) | ||||||||
Class R3 | (53,024 | ) | (1,668,144 | ) | (21,214 | ) | (679,281 | ) | ||||||||
Class R4 | (158,577 | ) | (5,091,946 | ) | (31,606 | ) | (1,037,399 | ) | ||||||||
Class R6 | (5,386,290 | ) | (186,167,370 | ) | (1,364,810 | ) | (45,684,694 | ) | ||||||||
(8,049,513 | ) | $(268,395,866 | ) | (5,185,315 | ) | $(169,605,687 | ) | |||||||||
Net change | ||||||||||||||||
Class A | 398,808 | $13,399,567 | (600,486 | ) | $(17,313,001 | ) | ||||||||||
Class B | (33,789 | ) | (962,462 | ) | (40,725 | ) | (1,210,436 | ) | ||||||||
Class C | (97,473 | ) | (2,648,370 | ) | (67,824 | ) | (1,967,365 | ) | ||||||||
Class I | 1,096,745 | 40,381,807 | 388,362 | 12,080,788 | ||||||||||||
Class R1 | 4,299 | 123,185 | 45,493 | 1,408,008 | ||||||||||||
Class R2 | (25,999 | ) | (764,891 | ) | (30,034 | ) | (904,487 | ) | ||||||||
Class R3 | 147,035 | 4,653,559 | 5,666 | 217,676 | ||||||||||||
Class R4 | (124,429 | ) | (4,052,377 | ) | 18,279 | 586,739 | ||||||||||
Class R6 | 57,935,180 | 1,939,617,850 | 18,539,953 | 639,372,856 | ||||||||||||
59,300,377 | $1,989,747,868 | 18,258,684 | $632,270,778 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B and Class 529B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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
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management or control. At the end of the period, the MFS International Diversification Fund and the MFS Growth Allocation Fund were the owners of record of approximately 89%, and 1% of the value of outstanding voting shares of the fund. In addition,the MFS Aggresive Growth Allocation 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, and the MFS Lifetime 2060 Fund were each owners of record of less than 1% of the value of the outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $16,088 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 | $60,319,149 | $1,175,659,727 | $1,163,338,209 | $1,680 | $(2,926 | ) | $72,639,421 | |||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $1,112,637 | $— |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of MFS Emerging Markets Equity Fund and the Board of Trustees of MFS Series Trust X
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS Emerging Markets Equity Fund (the “Fund”) (one of the funds constituting MFS Series Trust X (the “Trust”)), including the portfolio of investments, as of May 31, 2020, 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 X) at May 31, 2020, 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.
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 May 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included
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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
July 17, 2020
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
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) | ||
Jose Luis Garcia Robert Lau Harry Purcell |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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.
Income derived from foreign sources was $107,288,375. The fund intends to pass through foreign tax credits of $9,249,816 for the fiscal year.
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® International
DiversificationSM Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
MDI-ANN
Table of Contents
MFS® International Diversification SM Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio target allocation
Portfolio holdings |
| |||
MFS Research International Fund | 29.9% | |||
MFS International Intrinsic Value Fund | 22.5% | |||
MFS International Growth Fund | 22.4% | |||
MFS Emerging Markets Equity Fund | 14.8% | |||
MFS International New Discovery Fund | 10.1% | |||
Cash & Cash Equivalents | 0.3% |
Portfolio actual allocation
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the Statements 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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS International Diversification Fund (fund) provided a total return of 2.80%, at net asset value. This compares with a return of –3.43% for the fund’s benchmark, the MSCI All Country World (ex-US) Index (net div).
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies –a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Factors Affecting Performance
During the reporting period, the fund benefited from its exposure to the MFS International Intrinsic Value Fund, MFS Research International Fund and MFS International New Discovery Fund as all three funds outperformed their respective
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Management Review – continued
market segments. The fund’s exposure to the MFS International Growth Fund further supported results. Conversely, the fund’s exposure to the MFS Emerging Markets Equity Fund held back relative returns.
Respectfully,
Portfolio Manager(s)
Camille Humphries Lee
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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 9/30/04 | 2.80% | 4.22% | 7.14% | N/A | |||||||||
B | 9/30/04 | 2.08% | 3.44% | 6.34% | N/A | |||||||||
C | 9/30/04 | 2.04% | 3.45% | 6.34% | N/A | |||||||||
I | 9/30/04 | 3.04% | 4.48% | 7.41% | N/A | |||||||||
R1 | 4/01/05 | 2.04% | 3.44% | 6.33% | N/A | |||||||||
R2 | 9/30/04 | 2.60% | 3.97% | 6.87% | N/A | |||||||||
R3 | 4/01/05 | 2.83% | 4.23% | 7.14% | N/A | |||||||||
R4 | 4/01/05 | 3.04% | 4.48% | 7.40% | N/A | |||||||||
R6 | 10/02/17 | 3.17% | N/A | N/A | 2.69% | |||||||||
Comparative benchmark(s) | ||||||||||||||
MSCI All Country World (ex-US) Index (net div) (f) | (3.43)% | 0.79% | 4.38% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With Initial Sales Charge (5.75%) | (3.12)% | 2.99% | 6.50% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (1.92)% | 3.09% | 6.34% | N/A | ||||||||||
C With CDSC (1% for 12 months) (v) | 1.04% | 3.45% | 6.34% | N/A |
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. |
(t) | For the period from the class inception date through the stated period end (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
MSCI All Country World (ex-US) Index (net div) – a market capitalization-weighted index that is designed to measure equity market performance in the developed and emerging markets, excluding the U.S. 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.
It is not possible to invest directly in an index.
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class
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Performance Summary – continued
has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
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.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 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.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Because the underlying funds have varied expenses and fee levels and the fund may own different proportions of the underlying funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. If these transactional and indirect costs were included, your costs would have been higher.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2019 through May 31, 2020.
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.
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Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value 12/01/19 | Ending Account Value 5/31/20 | Expenses Paid During Period (p) 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.36% | $1,000.00 | $936.83 | $1.74 | |||||||||||||
Hypothetical (h) | 0.36% | $1,000.00 | $1,023.20 | $1.82 | ||||||||||||||
B | Actual | 1.11% | $1,000.00 | $933.49 | $5.37 | |||||||||||||
Hypothetical (h) | 1.11% | $1,000.00 | $1,019.45 | $5.60 | ||||||||||||||
C | Actual | 1.11% | $1,000.00 | $933.58 | $5.37 | |||||||||||||
Hypothetical (h) | 1.11% | $1,000.00 | $1,019.45 | $5.60 | ||||||||||||||
I | Actual | 0.11% | $1,000.00 | $938.14 | $0.53 | |||||||||||||
Hypothetical (h) | 0.11% | $1,000.00 | $1,024.45 | $0.56 | ||||||||||||||
R1 | Actual | 1.11% | $1,000.00 | $933.22 | $5.36 | |||||||||||||
Hypothetical (h) | 1.11% | $1,000.00 | $1,019.45 | $5.60 | ||||||||||||||
R2 | Actual | 0.61% | $1,000.00 | $935.95 | $2.95 | |||||||||||||
Hypothetical (h) | 0.61% | $1,000.00 | $1,021.95 | $3.08 | ||||||||||||||
R3 | Actual | 0.36% | $1,000.00 | $937.02 | $1.74 | |||||||||||||
Hypothetical (h) | 0.36% | $1,000.00 | $1,023.20 | $1.82 | ||||||||||||||
R4 | Actual | 0.11% | $1,000.00 | $937.88 | $0.53 | |||||||||||||
Hypothetical (h) | 0.11% | $1,000.00 | $1,024.45 | $0.56 | ||||||||||||||
R6 | Actual | 0.00% | $1,000.00 | $938.86 | $0.00 | |||||||||||||
Hypothetical (h) | 0.00% | $1,000.00 | $1,025.00 | $0.00 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Investment Companies (h) - 99.9% | ||||||||
International Stock Funds - 99.6% | ||||||||
MFS Emerging Markets Equity Fund - Class R6 | 108,003,550 | $ | 3,203,385,279 | |||||
MFS International Growth Fund - Class R6 | 143,134,821 | 4,837,956,951 | ||||||
MFS International Intrinsic Value Fund - Class R6 | 109,122,234 | 4,870,125,294 | ||||||
MFS International New Discovery Fund - Class R6 | 69,303,281 | 2,189,290,663 | ||||||
MFS Research International Fund - Class R6 | 366,107,454 | 6,472,779,783 | ||||||
|
| |||||||
$ | 21,573,537,970 | |||||||
Money Market Funds - 0.3% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 58,826,826 | $ | 58,832,709 | |||||
Total Investment Companies (Identified Cost, $20,507,319,414) | $ | 21,632,370,679 | ||||||
Other Assets, Less Liabilities - 0.1% | 13,384,749 | |||||||
Net Assets - 100.0% | $ | 21,645,755,428 |
(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 value of the fund’s investments in affiliated issuers was $21,632,370,679. |
(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. |
See Notes to Financial Statements
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Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets | ||||
Investments in affiliated issuers, at value (identified cost, $20,507,319,414) | $21,632,370,679 | |||
Receivables for | ||||
Fund shares sold | 95,146,331 | |||
Receivable from investment adviser | 1,153,016 | |||
Other assets | 34,202 | |||
Total assets | $21,728,704,228 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $51,874,427 | |||
Fund shares reacquired | 22,234,141 | |||
Payable to affiliates | ||||
Administrative services fee | 193 | |||
Shareholder servicing costs | 7,174,100 | |||
Distribution and service fees | 146,340 | |||
Payable for independent Trustees’ compensation | 12 | |||
Accrued expenses and other liabilities | 1,519,587 | |||
Total liabilities | $82,948,800 | |||
Net assets | $21,645,755,428 | |||
Net assets consist of | ||||
Paid-in capital | $20,536,074,820 | |||
Total distributable earnings (loss) | 1,109,680,608 | |||
Net assets | $21,645,755,428 | |||
Shares of beneficial interest outstanding | 1,141,549,702 |
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Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $2,778,815,301 | 147,774,706 | $18.80 | |||||||||
Class B | 20,423,953 | 1,097,561 | 18.61 | |||||||||
Class C | 419,044,607 | 22,823,918 | 18.36 | |||||||||
Class I | 9,936,595,216 | 522,602,769 | 19.01 | |||||||||
Class R1 | 7,756,377 | 429,930 | 18.04 | |||||||||
Class R2 | 53,110,394 | 2,873,017 | 18.49 | |||||||||
Class R3 | �� | 724,023,291 | 38,806,198 | 18.66 | ||||||||
Class R4 | 721,937,053 | 38,094,009 | 18.95 | |||||||||
Class R6 | 6,984,049,236 | 367,047,594 | 19.03 |
(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 $19.95 [100 / 94.25 x $18.80]. 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
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Financial Statements
Year ended 5/31/20
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 from affiliated issuers | $328,748,793 | |||
Expenses | ||||
Distribution and service fees | $13,648,591 | |||
Shareholder servicing costs | 14,715,020 | |||
Administrative services fee | 17,500 | |||
Independent Trustees’ compensation | 141,386 | |||
Custodian fee | 102,339 | |||
Shareholder communications | 1,941,721 | |||
Audit and tax fees | 43,278 | |||
Legal fees | 179,683 | |||
Miscellaneous | 1,618,161 | |||
Total expenses | $32,407,679 | |||
Reduction of expenses by investment adviser and distributor | (4,612,210 | ) | ||
Net expenses | $27,795,469 | |||
Net investment income (loss) | $300,953,324 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments in affiliated issuers | $(92,320,953 | ) | ||
Capital gain distributions from affiliated issuers | 188,490,690 | |||
Net realized gain (loss) | $96,169,737 | |||
Change in unrealized appreciation or depreciation | ||||
Affiliated issuers | $(71,593,371 | ) | ||
Net realized and unrealized gain (loss) | $24,576,366 | |||
Change in net assets from operations | $325,529,690 |
See Notes to Financial Statements
13
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $300,953,324 | $295,982,331 | ||||||
Net realized gain (loss) | 96,169,737 | 249,029,308 | ||||||
Net unrealized gain (loss) | (71,593,371 | ) | (721,445,505 | ) | ||||
Change in net assets from operations | $325,529,690 | $(176,433,866 | ) | |||||
Total distributions to shareholders | $(530,914,635 | ) | $(385,690,225 | ) | ||||
Change in net assets from fund share transactions | $5,144,131,183 | $5,132,815,691 | ||||||
Total change in net assets | $4,938,746,238 | $4,570,691,600 | ||||||
Net assets | ||||||||
At beginning of period | 16,707,009,190 | 12,136,317,590 | ||||||
At end of period | $21,645,755,428 | $16,707,009,190 |
See Notes to Financial Statements
14
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.71 | $19.68 | $18.07 | $15.59 | $16.91 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.25 | $0.37 | $0.21 | $0.24 | (c) | $0.17 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.32 | (0.85 | ) | 1.68 | 2.54 | (1.24 | ) | |||||||||||||
Total from investment operations | $0.57 | $(0.48 | ) | $1.89 | $2.78 | $(1.07 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.37 | ) | $(0.28 | ) | $(0.30 | ) | $(0.25 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.48 | ) | $(0.49 | ) | $(0.28 | ) | $(0.30 | ) | $(0.25 | ) | ||||||||||
Net asset value, end of period (x) | $18.80 | $18.71 | $19.68 | $18.07 | $15.59 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.80 | (2.15 | ) | 10.46 | 18.18 | (c) | (6.36 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.37 | 0.36 | 0.38 | 0.37 | (c) | 0.38 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.35 | 0.34 | 0.35 | 0.35 | (c) | 0.35 | ||||||||||||||
Net investment income (loss) (l) | 1.31 | 1.96 | 1.09 | 1.51 | (c) | 1.11 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,778,815 | $2,458,587 | $2,263,605 | $1,804,722 | $2,388,830 |
See Notes to Financial Statements
15
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.50 | $19.43 | $17.84 | $15.38 | $16.75 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.10 | $0.22 | $0.07 | $0.09 | (c) | $0.06 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.31 | (0.82 | ) | 1.66 | 2.54 | (1.25 | ) | |||||||||||||
Total from investment operations | $0.41 | $(0.60 | ) | $1.73 | $2.63 | $(1.19 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.08 | ) | $(0.21 | ) | $(0.14 | ) | $(0.17 | ) | $(0.18 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.30 | ) | $(0.33 | ) | $(0.14 | ) | $(0.17 | ) | $(0.18 | ) | ||||||||||
Net asset value, end of period (x) | $18.61 | $18.50 | $19.43 | $17.84 | $15.38 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.08 | (2.93 | ) | 9.71 | 17.27 | (c) | (7.09 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.12 | 1.11 | 1.12 | 1.12 | (c) | 1.13 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.09 | 1.10 | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.53 | 1.20 | 0.36 | 0.56 | (c) | 0.37 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $20,424 | $27,434 | $34,421 | $34,040 | $35,760 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.28 | $19.20 | $17.65 | $15.23 | $16.60 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.10 | $0.22 | $0.07 | $0.09 | (c) | $0.06 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.30 | (0.81 | ) | 1.64 | 2.51 | (1.23 | ) | |||||||||||||
Total from investment operations | $0.40 | $(0.59 | ) | $1.71 | $2.60 | $(1.17 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.10 | ) | $(0.21 | ) | $(0.16 | ) | $(0.18 | ) | $(0.20 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.32 | ) | $(0.33 | ) | $(0.16 | ) | $(0.18 | ) | $(0.20 | ) | ||||||||||
Net asset value, end of period (x) | $18.36 | $18.28 | $19.20 | $17.65 | $15.23 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.04 | (2.87 | ) | 9.67 | 17.28 | (c) | (7.07 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.12 | 1.11 | 1.12 | 1.12 | (c) | 1.13 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.09 | 1.10 | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.53 | 1.21 | 0.37 | 0.57 | (c) | 0.36 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $419,045 | $472,251 | $517,523 | $470,214 | $460,869 |
See Notes to Financial Statements
16
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.91 | $19.89 | $18.25 | $15.75 | $17.05 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.30 | $0.42 | $0.30 | $0.23 | (c) | $0.22 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.32 | (0.86 | ) | 1.66 | 2.61 | (1.26 | ) | |||||||||||||
Total from investment operations | $0.62 | $(0.44 | ) | $1.96 | $2.84 | $(1.04 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.30 | ) | $(0.42 | ) | $(0.32 | ) | $(0.34 | ) | $(0.26 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.52 | ) | $(0.54 | ) | $(0.32 | ) | $(0.34 | ) | $(0.26 | ) | ||||||||||
Net asset value, end of period (x) | $19.01 | $18.91 | $19.89 | $18.25 | $15.75 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.04 | (1.91 | ) | 10.78 | 18.42 | (c) | (6.09 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.12 | 0.11 | 0.13 | 0.12 | (c) | 0.13 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.10 | 0.09 | 0.10 | 0.10 | (c) | 0.10 | ||||||||||||||
Net investment income (loss) (l) | 1.56 | 2.21 | 1.56 | 1.39 | (c) | 1.38 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $9,936,595 | $7,848,998 | $5,199,628 | $4,166,366 | $1,036,517 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $17.99 | $18.93 | $17.39 | $15.01 | $16.36 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.12 | $0.22 | $0.06 | $0.09 | (c) | $0.05 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.28 | (0.81 | ) | 1.63 | 2.47 | (1.21 | ) | |||||||||||||
Total from investment operations | $0.40 | $(0.59 | ) | $1.69 | $2.56 | $(1.16 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.13 | ) | $(0.23 | ) | $(0.15 | ) | $(0.18 | ) | $(0.19 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.35 | ) | $(0.35 | ) | $(0.15 | ) | $(0.18 | ) | $(0.19 | ) | ||||||||||
Net asset value, end of period (x) | $18.04 | $17.99 | $18.93 | $17.39 | $15.01 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.04 | (2.91 | ) | 9.70 | 17.29 | (c) | (7.08 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.12 | 1.11 | 1.12 | 1.12 | (c) | 1.13 | ||||||||||||||
Expenses after expense reductions (f)(h) | 1.10 | 1.09 | 1.10 | 1.10 | (c) | 1.10 | ||||||||||||||
Net investment income (loss) (l) | 0.67 | 1.23 | 0.33 | 0.58 | (c) | 0.36 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $7,756 | $8,625 | $8,912 | $8,716 | $7,736 |
See Notes to Financial Statements
17
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.39 | $19.34 | $17.76 | $15.34 | $16.66 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.19 | $0.33 | $0.16 | $0.17 | (c) | $0.13 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.33 | (0.84 | ) | 1.65 | 2.52 | (1.22 | ) | |||||||||||||
Total from investment operations | $0.52 | $(0.51 | ) | $1.81 | $2.69 | $(1.09 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.32 | ) | $(0.23 | ) | $(0.27 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.42 | ) | $(0.44 | ) | $(0.23 | ) | $(0.27 | ) | $(0.23 | ) | ||||||||||
Net asset value, end of period (x) | $18.49 | $18.39 | $19.34 | $17.76 | $15.34 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.60 | (2.41 | ) | 10.20 | 17.82 | (c) | (6.55 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.62 | 0.61 | 0.62 | 0.62 | (c) | 0.63 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.60 | 0.59 | 0.60 | 0.60 | (c) | 0.60 | ||||||||||||||
Net investment income (loss) (l) | 1.02 | 1.75 | 0.84 | 1.07 | (c) | 0.86 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $53,110 | $61,929 | $73,998 | $72,991 | $59,795 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.57 | $19.54 | $17.95 | $15.49 | $16.80 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.24 | $0.35 | $0.21 | $0.21 | (c) | $0.17 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.33 | (0.82 | ) | 1.66 | 2.55 | (1.24 | ) | |||||||||||||
Total from investment operations | $0.57 | $(0.47 | ) | $1.87 | $2.76 | $(1.07 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.38 | ) | $(0.28 | ) | $(0.30 | ) | $(0.24 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.48 | ) | $(0.50 | ) | $(0.28 | ) | $(0.30 | ) | $(0.24 | ) | ||||||||||
Net asset value, end of period (x) | $18.66 | $18.57 | $19.54 | $17.95 | $15.49 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 2.83 | (2.15 | ) | 10.44 | 18.19 | (c) | (6.34 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.38 | 0.36 | 0.38 | 0.37 | (c) | 0.38 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.35 | 0.34 | 0.35 | 0.35 | (c) | 0.35 | ||||||||||||||
Net investment income (loss) (l) | 1.25 | 1.86 | 1.09 | 1.32 | (c) | 1.11 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $724,023 | $523,367 | $391,082 | $289,853 | $230,042 |
See Notes to Financial Statements
18
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $18.85 | $19.82 | $18.19 | $15.70 | $17.00 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d)(l) | $0.32 | $0.42 | $0.26 | $0.26 | (c) | $0.20 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.30 | (0.85 | ) | 1.69 | 2.57 | (1.24 | ) | |||||||||||||
Total from investment operations | $0.62 | $(0.43 | ) | $1.95 | $2.83 | $(1.04 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.30 | ) | $(0.42 | ) | $(0.32 | ) | $(0.34 | ) | $(0.26 | ) | ||||||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.52 | ) | $(0.54 | ) | $(0.32 | ) | $(0.34 | ) | $(0.26 | ) | ||||||||||
Net asset value, end of period (x) | $18.95 | $18.85 | $19.82 | $18.19 | $15.70 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.04 | (1.89 | ) | 10.75 | 18.42 | (c) | (6.11 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.12 | 0.11 | 0.13 | 0.12 | (c) | 0.13 | ||||||||||||||
Expenses after expense reductions (f)(h) | 0.10 | 0.09 | 0.10 | 0.10 | (c) | 0.10 | ||||||||||||||
Net investment income (loss) (l) | 1.62 | 2.22 | 1.32 | 1.57 | (c) | 1.30 | ||||||||||||||
Portfolio turnover | 6 | 1 | 1 | 3 | 3 | |||||||||||||||
Net assets at end of period (000 omitted) | $721,937 | $779,264 | $948,409 | $829,724 | $506,597 |
Class R6 | Year ended | |||||||||||
5/31/20 | 5/31/19 | 5/31/18 (i) | ||||||||||
Net asset value, beginning of period | $18.92 | $19.90 | $19.09 | |||||||||
Income (loss) from investment operations |
| |||||||||||
Net investment income (loss) (d)(l) | $0.32 | $0.43 | $0.02 | |||||||||
Net realized and unrealized gain (loss) | 0.33 | (0.85 | ) | 1.12 | ||||||||
Total from investment operations | $0.65 | $(0.42 | ) | $1.14 | ||||||||
Less distributions declared to shareholders |
| |||||||||||
From net investment income | $(0.32 | ) | $(0.44 | ) | $(0.33 | ) | ||||||
From net realized gain | (0.22 | ) | (0.12 | ) | — | |||||||
Total distributions declared to shareholders | $(0.54 | ) | $(0.56 | ) | $(0.33 | ) | ||||||
Net asset value, end of period (x) | $19.03 | $18.92 | $19.90 | |||||||||
Total return (%) (r)(s)(t)(x) | 3.17 | (1.82 | ) | 5.98 | (n) | |||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||
Expenses before expense reductions (f)(h) | 0.02 | 0.02 | 0.03 | (a) | ||||||||
Expenses after expense reductions (f)(h) | 0.00 | 0.00 | 0.00 | (a) | ||||||||
Net investment income (loss) (l) | 1.65 | 2.25 | 0.13 | (a) | ||||||||
Portfolio turnover | 6 | 1 | 1 | (n) | ||||||||
Net assets at end of period (000 omitted) | $6,984,049 | $4,526,554 | $2,698,739 |
See Notes to Financial Statements
19
Table of Contents
Financial Highlights – continued
(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(i) | For Class R6, the period is from the class inception, October 2, 2017, through the stated period end. |
(l) | The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(n) | Not annualized. |
(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
20
Table of Contents
(1) Business and Organization
MFS International Diversification Fund (the fund) is a diversified series of MFS Series Trust X (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 is a “fund of funds”, which invests the majority of its assets in other MFS mutual funds (underlying funds), which may have different fiscal year ends than the fund. The underlying funds, in turn, may engage in a number of investment techniques and practices, which involve certain risks. Certain underlying funds can invest 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, 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, and accounting systems, and greater political, social, and economic instability than developed markets.
The accounting policies of the underlying funds in which the fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov. The underlying funds’ shareholder reports are not covered by this report.
The investment objective of each of the international stock funds held by the fund at May 31, 2020 was to seek capital appreciation.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications
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due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
Investment Valuations – Open-end investment companies (underlying funds) are generally valued at their net asset value per share. The investments of underlying funds managed by the adviser are valued as described below. For purposes of this policy disclosure, “fund” also refers to the underlying funds in which the fund-of-funds invests.
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 which there were no sales reported for 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. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Debt instruments sold short are generally valued at an evaluated or composite mean 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. Exchange-traded options are generally valued at the last sale or official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. For put options, the position may be valued at the last daily ask quotation if there are no trades reported during the day. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. 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. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Swap agreements are generally valued using valuations provided by a third-party pricing service, which for cleared swaps includes an evaluation of any trading activity at the clearinghouses. Open-end investment companies are generally valued at net asset value per share. 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,
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coupon rate, maturity, type of issue, trading characteristics, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
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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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $21,632,370,679 | $— | $— | $21,632,370,679 |
For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the underlying funds’ shareholder reports for further information regarding the levels used in valuing the underlying funds’ assets or liabilities.
Derivatives – The fund does not invest in derivatives directly. The fund does invest in underlying funds that may use 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 underlying funds use 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.
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 – Investment transactions are recorded on the trade date. 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. Distributions of income and capital gains from the underlying funds are recorded on the ex-dividend date. Recognition of net investment income by the fund is affected by the timing of the declaration of distributions by the underlying funds in which the fund invests. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund and/or the underlying funds 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.
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
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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.
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 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $300,909,086 | $298,850,815 | ||||||
Long-term capital gains | 230,005,549 | 86,839,410 | ||||||
Total distributions | $530,914,635 | $385,690,225 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $20,638,625,170 | |||
Gross appreciation | 1,360,125,130 | |||
Gross depreciation | (366,379,621 | ) | ||
Net unrealized appreciation (depreciation) | $993,745,509 | |||
Undistributed long-term capital gain | 124,897,573 | |||
Late year ordinary loss deferral | (8,962,474 | ) |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares
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approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $67,819,520 | $59,207,345 | ||||||
Class B | 387,736 | 519,613 | ||||||
Class C | 7,858,901 | 8,605,640 | ||||||
Class I | 253,102,831 | 178,684,250 | ||||||
Class R1 | 182,773 | 161,514 | ||||||
Class R2 | 1,278,642 | 1,537,266 | ||||||
Class R3 | 15,677,872 | 11,107,617 | ||||||
Class R4 | 22,450,225 | 23,836,493 | ||||||
Class R6 | 162,156,135 | 102,030,487 | ||||||
Total | $530,914,635 | $385,690,225 |
(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. MFS receives no compensation under this agreement; however MFS receives management fees from the underlying MFS funds.
The investment adviser has agreed in writing to pay a portion of the fund’s operating expenses, excluding distribution and service fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses including fees and expenses associated with investments in investment companies and other similar investment vehicles, such that fund operating expenses do not exceed 0.10% annually of the class’s average daily net assets for each of Class A, Class B, Class C, Class I, Class R1, Class R2, Class R3, and Class R4 shares and 0.00% annually of the class’s average daily net assets for Class R6 shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $4,602,211, which is included in the reduction of total expenses in the Statement of Operations.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $951,169 for the year ended May 31, 2020, 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
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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.
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% | $6,796,323 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 250,127 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 4,647,928 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 90,700 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 300,432 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 1,563,081 | |||||||||||||||
Total Distribution and Service Fees |
| $13,648,591 |
(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 May 31, 2020 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 May 31, 2020, this rebate amounted to $9,582, $45, $300, and $72 for Class A, Class B, Class C, and Class R3, 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $68,118 | |||
Class B | 23,002 | |||
Class C | 59,121 |
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 May 31, 2020, the fee was $343,803, which equated to 0.0017% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $14,371,217.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative
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services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund pays an annual fixed amount of $17,500. The administrative services fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0001% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $8,340 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
On December 14, 2018, MFS redeemed 2,661 shares of Class R6 for an aggregate amount of $47,602.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of shares of underlying funds, excluding the MFS Institutional Money Market Portfolio, aggregated $5,778,802,529 and $1,239,894,391, respectively.
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(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 41,250,536 | $798,861,213 | 37,275,199 | $698,858,943 | ||||||||||||
Class B | 7,171 | 137,727 | 147,932 | 2,762,980 | ||||||||||||
Class C | 4,774,099 | 91,525,185 | 6,603,147 | 120,816,691 | ||||||||||||
Class I | 266,430,478 | 5,141,105,282 | 244,579,663 | 4,604,731,408 | ||||||||||||
Class R1 | 128,033 | 2,376,947 | 101,380 | 1,823,421 | ||||||||||||
Class R2 | 1,180,186 | 22,541,074 | 1,210,082 | 22,289,152 | ||||||||||||
Class R3 | 19,364,507 | 370,821,785 | 12,690,756 | 233,325,380 | ||||||||||||
Class R4 | 11,276,261 | 221,195,859 | 13,900,416 | 260,587,719 | ||||||||||||
Class R6 | 175,315,187 | 3,423,958,035 | 126,258,985 | 2,388,942,482 | ||||||||||||
519,726,458 | $10,072,523,107 | 442,767,560 | $8,334,138,176 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 3,040,475 | $63,363,512 | 3,316,888 | $55,723,723 | ||||||||||||
Class B | 18,040 | 373,253 | 30,091 | 501,316 | ||||||||||||
Class C | 341,310 | 6,969,545 | 472,709 | 7,780,783 | ||||||||||||
Class I | 10,366,283 | 218,210,265 | 9,169,367 | 155,512,461 | ||||||||||||
Class R1 | 9,111 | 182,773 | 9,970 | 161,514 | ||||||||||||
Class R2 | 53,169 | 1,090,507 | 62,334 | 1,030,381 | ||||||||||||
Class R3 | 758,076 | 15,677,014 | 666,324 | 11,107,617 | ||||||||||||
Class R4 | 995,391 | 20,883,293 | 1,324,233 | 22,379,530 | ||||||||||||
Class R6 | 7,405,196 | 155,953,430 | 5,894,049 | 99,963,068 | ||||||||||||
22,987,051 | $482,703,592 | 20,945,965 | $354,160,393 | |||||||||||||
Shares reacquired |
| |||||||||||||||
Class A | (27,918,023 | ) | $(524,778,931 | ) | (24,193,272 | ) | $(452,003,567 | ) | ||||||||
Class B | �� | (410,250 | ) | (7,733,270 | ) | (467,270 | ) | (8,681,058 | ) | |||||||
Class C | (8,128,098 | ) | (150,652,720 | ) | (8,189,236 | ) | (149,261,516 | ) | ||||||||
Class I | (169,321,688 | ) | (3,154,741,089 | ) | (100,049,126 | ) | (1,867,595,903 | ) | ||||||||
Class R1 | (186,673 | ) | (3,404,779 | ) | (102,751 | ) | (1,870,354 | ) | ||||||||
Class R2 | (1,727,193 | ) | (33,092,520 | ) | (1,730,887 | ) | (31,842,175 | ) | ||||||||
Class R3 | (9,499,079 | ) | (183,036,430 | ) | (5,184,900 | ) | (96,855,612 | ) | ||||||||
Class R4 | (15,526,585 | ) | (308,304,175 | ) | (21,718,945 | ) | (409,452,535 | ) | ||||||||
Class R6 | (54,979,151 | ) | (1,045,351,602 | ) | (28,476,598 | ) | (537,920,158 | ) | ||||||||
(287,696,740 | ) | $(5,411,095,516 | ) | (190,112,985 | ) | $(3,555,482,878 | ) |
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Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change |
| |||||||||||||||
Class A | 16,372,988 | $337,445,794 | 16,398,815 | $302,579,099 | ||||||||||||
Class B | (385,039 | ) | (7,222,290 | ) | (289,247 | ) | (5,416,762 | ) | ||||||||
Class C | (3,012,689 | ) | (52,157,990 | ) | (1,113,380 | ) | (20,664,042 | ) | ||||||||
Class I | 107,475,073 | 2,204,574,458 | 153,699,904 | 2,892,647,966 | ||||||||||||
Class R1 | (49,529 | ) | (845,059 | ) | 8,599 | 114,581 | ||||||||||
Class R2 | (493,838 | ) | (9,460,939 | ) | (458,471 | ) | (8,522,642 | ) | ||||||||
Class R3 | 10,623,504 | 203,462,369 | 8,172,180 | 147,577,385 | ||||||||||||
Class R4 | (3,254,933 | ) | (66,225,023 | ) | (6,494,296 | ) | (126,485,286 | ) | ||||||||
Class R6 | 127,741,232 | 2,534,559,863 | 103,676,436 | 1,950,985,392 | ||||||||||||
255,016,769 | $5,144,131,183 | 273,600,540 | $5,132,815,691 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $100,938 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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(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 Emerging Markets Equity Fund | $1,697,864,882 | $2,079,120,361 | $168,831,960 | $(14,354,553 | ) | $(390,413,451 | ) | $3,203,385,279 | ||||||||||||||||
MFS Institutional Money Market Portfolio | 12,614,829 | 624,237,898 | 578,004,642 | (14,571 | ) | (805 | ) | 58,832,709 | ||||||||||||||||
MFS International Growth Fund | 4,159,528,038 | 1,058,414,771 | 464,562,207 | (18,003,634 | ) | 102,579,983 | 4,837,956,951 | |||||||||||||||||
MFS International Intrinsic Value Fund | 4,161,412,989 | 1,040,836,917 | 519,276,355 | (52,082,484 | ) | 239,234,227 | 4,870,125,294 | |||||||||||||||||
MFS International New Discovery Fund | 1,670,998,554 | 626,841,661 | 14,510,868 | (1,279,481 | ) | (92,759,203 | ) | 2,189,290,663 | ||||||||||||||||
MFS Research International Fund | 4,991,711,456 | 1,490,601,680 | 72,713,001 | (6,586,230 | ) | 69,765,878 | 6,472,779,783 | |||||||||||||||||
$16,694,130,748 | $6,920,053,288 | $1,817,899,033 | $(92,320,953 | ) | $(71,593,371 | ) | $21,632,370,679 | |||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Emerging Markets Equity Fund |
| $61,612,150 | $— | |||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| 226,621 | — | |||||||||||||||||||||
MFS International Growth Fund |
| 54,216,941 | 18,433,708 | |||||||||||||||||||||
MFS International Intrinsic Value Fund |
| 57,864,675 | 139,450,190 | |||||||||||||||||||||
MFS International New Discovery Fund |
| 27,823,984 | 30,606,792 | |||||||||||||||||||||
MFS Research International Fund |
| 127,004,422 | — | |||||||||||||||||||||
$328,748,793 | $188,490,690 |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
(9) Subsequent Event
The Board of Trustees of the fund has approved modifications to the underlying funds and underlying fund target weightings of the fund. The transition to the revised underlying fund allocations will commence on or about June 30, 2020, and will be completed by December 31, 2020, although these dates could change based on market conditions and other factors. Please see the fund’s prospectus for details.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust X and the Shareholders of MFS International Diversification Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS International Diversification Fund (the “Fund”), including the portfolio of investments, as of May 31, 2020, 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 May 31, 2020, 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. Our procedures included confirmation of securities owned as of May 31, 2020, by
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Report of Independent Registered Public Accounting Firm – continued
correspondence with the underlying funds’ transfer agent. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 17, 2020
We have served as the auditor of one or more of the MFS investment companies since 1924.
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
34
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
Camille Humphries Lee |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $274,265,000 as capital gain dividends paid during the fiscal year.
Income derived from foreign sources was $305,561,152. The fund intends to pass through foreign tax credits of $37,893,381 for the fiscal year.
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® International Growth Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
FGF-ANN
Table of Contents
MFS® International Growth Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings |
| |||
Nestle S.A. | 5.6% | |||
Roche Holding AG | 5.5% | |||
SAP AG | 3.6% | |||
Novartis AG | 3.5% | |||
LVMH Moet Hennessy Louis Vuitton SE | 3.3% | |||
AIA Group Ltd. | 3.0% | |||
L’Oréal | 2.9% | |||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 2.8% | |||
Tencent Holdings Ltd. | 2.5% | |||
Schneider Electric SE | 2.5% |
GICS equity sectors (g) |
| |||
Consumer Staples | 20.2% | |||
Health Care | 15.9% | |||
Information Technology | 14.4% | |||
Industrials | 13.7% | |||
Materials | 10.7% | |||
Consumer Discretionary | 10.0% | |||
Financials | 8.0% | |||
Communication Services | 4.3% | |||
Energy | 0.6% | |||
Utilities | 0.3% | |||
Issuer country weightings (x) |
| |||
France | 18.9% | |||
Switzerland | 15.6% | |||
United Kingdom | 9.1% | |||
Germany | 8.9% | |||
Japan | 8.5% | |||
United States | 7.5% | |||
Canada | 7.1% | |||
India | 3.4% | |||
Taiwan | 3.4% | |||
Other Countries | 17.6% | |||
Currency exposure weightings (y) |
| |||
Euro | 33.0% | |||
Swiss Franc | 15.6% | |||
British Pound Sterling | 10.1% | |||
Japanese Yen | 8.5% | |||
United States Dollar | 8.1% | |||
Hong Kong Dollar | 5.8% | |||
Canadian Dollar | 4.7% | |||
Indian Rupee | 3.4% | |||
Taiwan Dollar | 3.4% | |||
Other Currencies | 7.4% |
2
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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. |
(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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS International Growth Fund (fund) provided a total return of 4.24%, at net asset value. This compares with a return of 7.37% for the fund’s benchmark, the MSCI All Country World (ex-US) Growth Index (net div).
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Detractors from Performance
Stock selection in the information technology, health care and financials sectors weakened performance relative to the MSCI All Country World (ex-US) Growth Index. Within the information technology sector, not holding shares of lithography systems manufacturer ASML (Netherlands) and cloud-based e-commerce platform operator
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Management Review – continued
Shopify (Canada) held back relative returns as both stocks outperformed the benchmark. Although security selection in the health care sector also weighed on relative results, there were no individual securities within this sector that were among the fund’s top relative detractors. Within the financials sector, holding shares of Indian banking firm HDFC Bank (b), and the fund’s overweight positions in shares of insurance company AIA Group (Hong Kong) and banking services provider Grupo Financiero Banorte (Mexico), also detracted from relative performance. Stocks in the financial services industry generally came under pressure at the onset of the pandemic, as central banks across the globe reduced interest rates and provided other forms of stimulus in response to a rapid deterioration of economic conditions.
Elsewhere, the fund’s overweight positions in diversified industrial manufacturer Rolls-Royce (United Kingdom), food processing company Danone (France) and oil and gas exploration company Oil Search (Australia) dampened relative results. Shares of Rolls-Royce Holdings, already under pressure from a slow-down in the wide-body aircraft market prior to the pandemic, declined further as the COVID-19 outbreak severely halted air travel across the globe. The timing of the fund’s position in shares of internet-based, multiple services company Tencent Holdings (China), as well as an underweight position in shares of online and mobile commerce company Alibaba Group (h) (China), also hindered relative performance. The underweight position in shares of Alibaba hurt relative returns as the stock outperformed the benchmark, in part, due to robust e-commerce demand experienced during the pandemic.
Contributors to Performance
Not holding any securities within the poor-performing real estate sector supported relative results. There were no individual stocks within this sector that were among the fund’s top relative contributors over the reporting period.
Stock selection in the industrials sector also benefited relative returns. Not holding shares of poor-performing aerospace company Airbus (France), an overweight position in electrical distribution equipment manufacturer Schneider Electric (France) and holding shares of industrial auctioneer Ritchie Bros. Auctioneers (b) (Canada) lifted relative performance within this sector. The stock price of Schneider Electric performed well prior to the pandemic, as strength in its energy management division helped drive solid business results. Late in the period, the stock recovered from pandemic-induced lows as management highlighted the company’s diverse business divisions, such as its software and services division, and its cost management plans that they believe will help the firm weather the global recession. An overweight position in the materials sector further contributed to relative results. However, there were no individual stocks within this sector that were among the fund’s top relative contributors over the reporting period.
Stocks in other sectors that aided relative performance included overweight positions in pharmaceutical and diagnostic company Roche Holding (Switzerland), internet search engine and online computer games provider NAVER (South Korea), semiconductor manufacturer Taiwan Semiconductor Manufacturing (Taiwan) and medical products and equipment manufacturer Terumo (Japan). The stock price of NAVER rose steadily throughout the period on the back of solid earnings that were driven primarily by strength in search and display advertising revenue. Additionally, holding shares of
5
Table of Contents
Management Review – continued
online betting and gaming operator Flutter Entertainment (b) (United Kingdom), and not holding shares of both beverage manufacturer Anheuser-Busch InBev (Belgium) and Brazilian banking firm Banco Bradesco, helped relative returns.
During the reporting period, the fund’s relative currency exposure, resulting primarily from exposure differences between the fund and the benchmark to holdings of securities denominated in foreign currencies, was a contributor to relative performance. All of MFS’ investment decisions are driven by the fundamentals of each individual opportunity and as such, it is common for our portfolios to have different currency exposure than the benchmark.
Respectfully,
Portfolio Manager(s)
David Antonelli, Matthew Barrett, and Kevin Dwan
Note to Shareholders: Effective April 15, 2021, David Antonelli will be removed as a Portfolio Manager of the Fund.
(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.
6
Table of Contents
PERFORMANCE SUMMARY THROUGH 5/31/20
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
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 10/24/95 | 4.24% | 5.52% | 7.45% | ||||||||
B | 10/24/95 | 3.44% | 4.73% | 6.65% | ||||||||
C | 7/01/96 | 3.46% | 4.73% | 6.65% | ||||||||
I | 1/02/97 | 4.51% | 5.78% | 7.72% | ||||||||
R1 | 10/01/08 | 3.45% | 4.73% | 6.64% | ||||||||
R2 | 10/01/08 | 3.95% | 5.25% | 7.18% | ||||||||
R3 | 10/01/08 | 4.22% | 5.51% | 7.45% | ||||||||
R4 | 10/01/08 | 4.48% | 5.77% | 7.71% | ||||||||
R6 | 5/01/06 | 4.60% | 5.89% | 7.79% | ||||||||
Comparative benchmark(s) | ||||||||||||
MSCI All Country World (ex-US) Growth Index (net div) (f) | 7.37% | 4.02% | 6.43% | |||||||||
Average annual with sales charge | ||||||||||||
A With Initial Sales Charge (5.75%) | (1.76)% | 4.28% | 6.82% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (0.56)% | 4.40% | 6.65% | |||||||||
C With CDSC (1% for 12 months) (v) | 2.46% | 4.73% | 6.65% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
On May 30, 2012, Class W shares were redesignated Class R5 shares. Total returns for Class R5 shares prior to May 30, 2012 reflect the performance history of Class W shares which had different fees and expenses than Class R5 shares. Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
MSCI All Country World (ex-US) Growth Index (net div) – a market capitalization-weighted index that is designed to measure equity market performance for growth securities in the global developed and emerging markets, excluding the U.S. 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.
It is not possible to invest directly in an index.
8
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Performance Summary – continued
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
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During | ||||||||||||||
A | Actual | 1.08% | $1,000.00 | $939.93 | $5.24 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.60 | $5.45 | ||||||||||||||
B | Actual | 1.83% | $1,000.00 | $936.43 | $8.86 | |||||||||||||
Hypothetical (h) | 1.83% | $1,000.00 | $1,015.85 | $9.22 | ||||||||||||||
C | Actual | 1.83% | $1,000.00 | $936.43 | $8.86 | |||||||||||||
Hypothetical (h) | 1.83% | $1,000.00 | $1,015.85 | $9.22 | ||||||||||||||
I | Actual | 0.83% | $1,000.00 | $941.22 | $4.03 | |||||||||||||
Hypothetical (h) | 0.83% | $1,000.00 | $1,020.85 | $4.19 | ||||||||||||||
R1 | Actual | 1.83% | $1,000.00 | $936.45 | $8.86 | |||||||||||||
Hypothetical (h) | 1.83% | $1,000.00 | $1,015.85 | $9.22 | ||||||||||||||
R2 | Actual | 1.33% | $1,000.00 | $938.82 | $6.45 | |||||||||||||
Hypothetical (h) | 1.33% | $1,000.00 | $1,018.35 | $6.71 | ||||||||||||||
R3 | Actual | 1.08% | $1,000.00 | $939.85 | $5.24 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.60 | $5.45 | ||||||||||||||
R4 | Actual | 0.83% | $1,000.00 | $941.04 | $4.03 | |||||||||||||
Hypothetical (h) | 0.83% | $1,000.00 | $1,020.85 | $4.19 | ||||||||||||||
R6 | Actual | 0.73% | $1,000.00 | $941.55 | $3.54 | |||||||||||||
Hypothetical (h) | 0.73% | $1,000.00 | $1,021.35 | $3.69 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
11
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 98.1% | ||||||||
Aerospace - 0.6% | ||||||||
Rolls-Royce Holdings PLC | 19,790,740 | $ | 66,776,177 | |||||
Airlines - 0.3% | ||||||||
Japan Airport Terminal Co. Ltd. (l) | 763,200 | $ | 33,544,142 | |||||
Alcoholic Beverages - 4.1% | ||||||||
Diageo PLC | 7,305,682 | $ | 252,639,570 | |||||
Pernod Ricard S.A. | 1,263,088 | 197,246,229 | ||||||
|
| |||||||
$ | 449,885,799 | |||||||
Apparel Manufacturers - 4.9% | ||||||||
Burberry Group PLC | 3,183,178 | $ | 59,120,493 | |||||
Kering S.A. | 214,800 | 112,603,396 | ||||||
LVMH Moet Hennessy Louis Vuitton SE | 875,313 | 366,546,306 | ||||||
|
| |||||||
$ | 538,270,195 | |||||||
Automotive - 0.7% | ||||||||
Koito Manufacturing Co. Ltd. | 1,809,800 | $ | 76,607,511 | |||||
Business Services - 5.7% | ||||||||
Accenture PLC, “A” | 1,003,819 | $ | 202,389,987 | |||||
Brenntag AG | 1,654,702 | 87,082,812 | ||||||
Compass Group PLC | 4,603,158 | 67,664,780 | ||||||
Experian PLC | 5,419,097 | 189,202,123 | ||||||
Infosys Technologies Ltd., ADR | 8,500,813 | 77,357,398 | ||||||
|
| |||||||
$ | 623,697,100 | |||||||
Computer Software - 4.9% | ||||||||
Dassault Systemes S.A. | 352,414 | $ | 59,825,307 | |||||
OBIC Co. Ltd. | 463,200 | 80,231,591 | ||||||
SAP SE | 3,203,253 | 398,837,278 | ||||||
|
| |||||||
$ | 538,894,176 | |||||||
Computer Software - Systems - 3.6% | ||||||||
Amadeus IT Group S.A. | 1,473,536 | $ | 77,158,706 | |||||
Hitachi Ltd. | 7,020,700 | 224,920,196 | ||||||
NICE Systems Ltd., ADR (a) | 513,540 | 95,590,336 | ||||||
|
| |||||||
$ | 397,669,238 |
12
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Consumer Products - 6.3% | ||||||||
Kao Corp. | 1,381,800 | $ | 110,792,569 | |||||
L’Oréal | 1,100,626 | 321,371,188 | ||||||
Reckitt Benckiser Group PLC | 2,881,616 | 257,764,446 | ||||||
|
| |||||||
$ | 689,928,203 | |||||||
Consumer Services - 0.4% | ||||||||
51job, Inc., ADR (a) | 718,774 | $ | 46,353,735 | |||||
Containers - 0.3% | ||||||||
Brambles Ltd. | 4,770,062 | $ | 37,009,192 | |||||
Electrical Equipment - 3.9% | ||||||||
Legrand S.A. | 829,876 | $ | 56,694,453 | |||||
Prysmian S.p.A. | 4,479,153 | 95,705,940 | ||||||
Schneider Electric SE | 2,742,880 | 273,635,333 | ||||||
|
| |||||||
$ | 426,035,726 | |||||||
Electronics - 3.4% | ||||||||
Delta Electronics, Inc. | 12,939,000 | $ | 59,469,842 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 6,145,097 | 309,282,732 | ||||||
|
| |||||||
$ | 368,752,574 | |||||||
Energy - Independent - 0.6% | ||||||||
Oil Search Ltd. | 29,044,551 | $ | 67,371,546 | |||||
Food & Beverages - 8.0% | ||||||||
Danone S.A. | 3,818,555 | $ | 261,753,430 | |||||
Nestle S.A. | 5,706,027 | 617,787,847 | ||||||
|
| |||||||
$ | 879,541,277 | |||||||
Gaming & Lodging - 1.0% | ||||||||
Flutter Entertainment PLC (l) | 838,765 | $ | 106,487,874 | |||||
General Merchandise - 0.3% | ||||||||
Walmart de Mexico S.A.B. de C.V. | 11,576,635 | $ | 28,896,559 | |||||
Insurance - 3.0% | ||||||||
AIA Group Ltd. | 41,077,200 | $ | 333,058,378 | |||||
Internet - 4.3% | ||||||||
NAVER Corp. | 953,670 | $ | 174,031,588 | |||||
Tencent Holdings Ltd. | 5,239,000 | 277,376,714 | ||||||
Yandex N.V., “A” (a) | 431,928 | 17,376,463 | ||||||
|
| |||||||
$ | 468,784,765 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Leisure & Toys - 0.8% | ||||||||
BANDAI NAMCO Holdings, Inc. | 1,473,700 | $ | 81,935,233 | |||||
Machinery & Tools - 2.9% | ||||||||
GEA Group AG | 2,688,317 | $ | 79,945,843 | |||||
Ingersoll Rand, Inc. (a) | 2,400,407 | 67,691,478 | ||||||
Ritchie Bros. Auctioneers, Inc. | 4,038,960 | 174,805,989 | ||||||
|
| |||||||
$ | 322,443,310 | |||||||
Medical & Health Technology & Services - 0.3% | ||||||||
Alcon, Inc. (a) | 567,810 | $ | 36,706,539 | |||||
Medical Equipment - 5.4% | ||||||||
EssilorLuxottica (a) | 1,758,121 | $ | 227,029,334 | |||||
Mettler-Toledo International, Inc. (a) | 103,190 | 82,036,050 | ||||||
QIAGEN N.V. (a) | 2,422,010 | 105,687,025 | ||||||
Terumo Corp. | 4,570,300 | 179,260,689 | ||||||
|
| |||||||
$ | 594,013,098 | |||||||
Natural Gas - Distribution - 0.3% | ||||||||
China Resources Gas Group Ltd. | 5,858,000 | $ | 31,929,369 | |||||
Other Banks & Diversified Financials - 5.0% | ||||||||
AEON Financial Service Co. Ltd. | 4,561,300 | $ | 51,303,787 | |||||
Credicorp Ltd. | 331,169 | 45,641,711 | ||||||
DBS Group Holdings Ltd. | 8,600,900 | 118,530,240 | ||||||
Element Fleet Management Corp. | 10,372,510 | 73,753,040 | ||||||
Grupo Financiero Banorte S.A. de C.V. | 18,224,022 | 55,269,137 | ||||||
HDFC Bank Ltd. | 14,588,309 | 183,597,630 | ||||||
Komercni Banka A.S. (a) | 808,195 | 17,302,605 | ||||||
|
| |||||||
$ | 545,398,150 | |||||||
Pharmaceuticals - 12.2% | ||||||||
Bayer AG | 2,685,614 | $ | 179,391,288 | |||||
Novartis AG | 4,441,433 | 385,026,072 | ||||||
Novo Nordisk A.S., “B” | 2,576,700 | 167,992,857 | ||||||
Roche Holding AG | 1,740,464 | 604,156,684 | ||||||
|
| |||||||
$ | 1,336,566,901 | |||||||
Precious Metals & Minerals - 2.4% | ||||||||
Agnico-Eagle Mines Ltd. | 2,371,113 | $ | 151,702,324 | |||||
Franco-Nevada Corp. | 826,595 | 116,024,076 | ||||||
|
| |||||||
$ | 267,726,400 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Railroad & Shipping - 2.7% | ||||||||
Adani Ports and Special Economic Zone Ltd. | 8,140,331 | $ | 34,858,105 | |||||
Canadian National Railway Co. | 3,057,272 | 263,047,683 | ||||||
|
| |||||||
$ | 297,905,788 | |||||||
Specialty Chemicals - 8.2% | ||||||||
Akzo Nobel N.V. | 1,639,113 | $ | 134,540,037 | |||||
Croda International PLC | 1,614,112 | 103,819,227 | ||||||
L’Air Liquide S.A. | 1,480,624 | 201,488,902 | ||||||
Linde PLC | 1,304,358 | 261,708,488 | ||||||
Sika AG | 436,646 | 75,030,368 | ||||||
Symrise AG | 1,163,139 | 127,048,462 | ||||||
|
| |||||||
$ | 903,635,484 | |||||||
Tobacco - 1.6% | ||||||||
ITC Ltd. (a) | 29,732,048 | $ | 77,597,337 | |||||
Japan Tobacco, Inc. | 4,692,900 | 93,013,805 | ||||||
|
| |||||||
$ | 170,611,142 | |||||||
Total Common Stocks (Identified Cost, $9,094,612,494) |
| $ | 10,766,435,581 | |||||
Investment Companies (h) - 1.2% | ||||||||
Money Market Funds - 1.2% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $136,257,638) | 136,248,243 | $ | 136,261,868 | |||||
Collateral for Securities Loaned - 0.0% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13% (j) (Identified Cost, $208,168) | 208,168 | $ | 208,168 | |||||
Other Assets, Less Liabilities - 0.7% | 76,818,203 | |||||||
Net Assets - 100.0% | $ | 10,979,723,820 |
(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 $136,261,868 and $10,766,643,749, 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. |
(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 |
See Notes to Financial Statements
15
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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 $19,491,239 of securities on loan (identified cost, $9,094,820,662) | $10,766,643,749 | |||
Investments in affiliated issuers, at value (identified cost, $136,257,638) | 136,261,868 | |||
Cash | 89,443,000 | |||
Foreign currency, at value (identified cost, $793,174) | 793,225 | |||
Receivables for | ||||
Fund shares sold | 37,350,114 | |||
Dividends | 34,475,543 | |||
Other assets | 17,713 | |||
Total assets | $11,064,985,212 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $72,507,301 | |||
Fund shares reacquired | 8,844,045 | |||
Collateral for securities loaned, at value (c) | 208,168 | |||
Payable to affiliates | ||||
Investment adviser | 823,500 | |||
Administrative services fee | 6,580 | |||
Shareholder servicing costs | 1,540,751 | |||
Distribution and service fees | 25,086 | |||
Payable for independent Trustees’ compensation | 10 | |||
Accrued expenses and other liabilities | 1,305,951 | |||
Total liabilities | $85,261,392 | |||
Net assets | $10,979,723,820 | |||
Net assets consist of | ||||
Paid-in capital | $9,377,856,937 | |||
Total distributable earnings (loss) | 1,601,866,883 | |||
Net assets | $10,979,723,820 | |||
Shares of beneficial interest outstanding | 317,637,662 |
(c) | Non-cash collateral is not included. |
16
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $546,391,153 | 16,234,571 | $33.66 | |||||||||
Class B | 2,922,280 | 93,133 | 31.38 | |||||||||
Class C | 39,530,061 | 1,300,526 | 30.40 | |||||||||
Class I | 2,457,330,238 | 65,100,128 | 37.75 | |||||||||
Class R1 | 4,890,078 | 164,534 | 29.72 | |||||||||
Class R2 | 34,148,931 | 1,114,957 | 30.63 | |||||||||
Class R3 | 124,732,197 | 3,736,620 | 33.38 | |||||||||
Class R4 | 262,924,641 | 7,780,447 | 33.79 | |||||||||
Class R6 | 7,506,854,241 | 222,112,746 | 33.80 |
(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 $35.71 [100 / 94.25 x $33.66]. 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
17
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $191,533,936 | |||
Dividends from affiliated issuers | 2,045,472 | |||
Other | 42,638 | |||
Income on securities loaned | 35,689 | |||
Foreign taxes withheld | (20,540,553 | ) | ||
Total investment income | $173,117,182 | |||
Expenses | ||||
Management fee | $70,573,282 | |||
Distribution and service fees | 2,144,654 | |||
Shareholder servicing costs | 3,139,661 | |||
Administrative services fee | 571,699 | |||
Independent Trustees’ compensation | 102,156 | |||
Custodian fee | 1,567,093 | |||
Shareholder communications | 246,456 | |||
Audit and tax fees | 81,890 | |||
Legal fees | 91,003 | |||
Miscellaneous | 747,038 | |||
Total expenses | $79,264,932 | |||
Reduction of expenses by investment adviser and distributor | (1,025,519 | ) | ||
Net expenses | $78,239,413 | |||
Net investment income (loss) | $94,877,769 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers (net of $11,544 country tax) | $(120,002,152 | ) | ||
Affiliated issuers | 16,889 | |||
Foreign currency | 239,849 | |||
Net realized gain (loss) | $(119,745,414 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers (net of $3,258,183 decrease in deferred country tax) | $370,010,896 | |||
Affiliated issuers | (10,290 | ) | ||
Translation of assets and liabilities in foreign currencies | 420,199 | |||
Net unrealized gain (loss) | $370,420,805 | |||
Net realized and unrealized gain (loss) | $250,675,391 | |||
Change in net assets from operations | $345,553,160 |
See Notes to Financial Statements
18
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $94,877,769 | $118,902,626 | ||||||
Net realized gain (loss) | (119,745,414 | ) | 199,499,335 | |||||
Net unrealized gain (loss) | 370,420,805 | (289,254,634 | ) | |||||
Change in net assets from operations | $345,553,160 | $29,147,327 | ||||||
Total distributions to shareholders | $(158,637,952 | ) | $(256,363,860 | ) | ||||
Change in net assets from fund share transactions | $2,060,458,436 | $2,605,537,537 | ||||||
Total change in net assets | $2,247,373,644 | $2,378,321,004 | ||||||
Net assets | ||||||||
At beginning of period | 8,732,350,176 | 6,354,029,172 | ||||||
At end of period | $10,979,723,820 | $8,732,350,176 |
See Notes to Financial Statements
19
Table of Contents
Financial Statements
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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $32.76 | $34.20 | $31.09 | $26.46 | $28.28 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.23 | $0.42 | $0.37 | $0.14 | (c) | $0.27 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.20 | (0.73 | ) | 3.50 | 4.75 | (1.81 | ) | |||||||||||||
Total from investment operations | $1.43 | $(0.31 | ) | $3.87 | $4.89 | $(1.54 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.35 | ) | $(0.29 | ) | $(0.23 | ) | $(0.26 | ) | $(0.26 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.53 | ) | $(1.13 | ) | $(0.76 | ) | $(0.26 | ) | $(0.28 | ) | ||||||||||
Net asset value, end of period (x) | $33.66 | $32.76 | $34.20 | $31.09 | $26.46 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 4.24 | (0.64 | ) | 12.53 | 18.69 | (c) | (5.44 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | 1.10 | 1.15 | 1.18 | (c) | 1.21 | ||||||||||||||
Expenses after expense reductions (f) | 1.07 | 1.09 | 1.14 | 1.17 | (c) | 1.20 | ||||||||||||||
Net investment income (loss) | 0.66 | 1.28 | 1.12 | 0.51 | (c) | 1.04 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $546,391 | $402,964 | $360,401 | $319,266 | $585,089 |
See Notes to Financial Statements
20
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $30.67 | $32.01 | $29.15 | $24.82 | $26.64 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.06 | ) | $0.11 | $0.07 | $(0.01 | )(c) | $0.05 | |||||||||||||
Net realized and unrealized gain (loss) | 1.15 | (0.61 | ) | 3.32 | 4.41 | (1.68 | ) | |||||||||||||
Total from investment operations | $1.09 | $(0.50 | ) | $3.39 | $4.40 | $(1.63 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.20 | ) | $— | $(0.00 | )(w) | $(0.07 | ) | $(0.17 | ) | |||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.38 | ) | $(0.84 | ) | $(0.53 | ) | $(0.07 | ) | $(0.19 | ) | ||||||||||
Net asset value, end of period (x) | $31.38 | $30.67 | $32.01 | $29.15 | $24.82 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.44 | (1.36 | ) | 11.68 | 17.79 | (c) | (6.12 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.83 | 1.85 | 1.90 | 1.93 | (c) | 1.96 | ||||||||||||||
Expenses after expense reductions (f) | 1.82 | 1.84 | 1.89 | 1.92 | (c) | 1.95 | ||||||||||||||
Net investment income (loss) | (0.18 | ) | 0.35 | 0.23 | (0.02 | )(c) | 0.21 | |||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,922 | $4,599 | $6,537 | $7,799 | $8,792 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $29.76 | $31.15 | $28.43 | $24.22 | $26.03 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.04 | ) | $0.14 | $0.09 | $0.00 | (c)(w) | $0.06 | |||||||||||||
Net realized and unrealized gain (loss) | 1.10 | (0.64 | ) | 3.21 | 4.30 | (1.67 | ) | |||||||||||||
Total from investment operations | $1.06 | $(0.50 | ) | $3.30 | $4.30 | $(1.61 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.24 | ) | $(0.05 | ) | $(0.05 | ) | $(0.09 | ) | $(0.18 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.42 | ) | $(0.89 | ) | $(0.58 | ) | $(0.09 | ) | $(0.20 | ) | ||||||||||
Net asset value, end of period (x) | $30.40 | $29.76 | $31.15 | $28.43 | $24.22 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.46 | (1.37 | ) | 11.67 | 17.81 | (c) | (6.17 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.83 | 1.85 | 1.90 | 1.93 | (c) | 1.96 | ||||||||||||||
Expenses after expense reductions (f) | 1.82 | 1.84 | 1.89 | 1.92 | (c) | 1.95 | ||||||||||||||
Net investment income (loss) | (0.14 | ) | 0.48 | 0.30 | 0.01 | (c) | 0.25 | |||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $39,530 | $42,015 | $42,981 | $38,985 | $40,163 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $36.61 | $38.08 | $34.52 | $29.36 | $31.29 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.34 | $0.60 | $0.50 | $0.34 | (c) | $0.37 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.35 | (0.86 | ) | 3.90 | 5.16 | (2.00 | ) | |||||||||||||
Total from investment operations | $1.69 | $(0.26 | ) | $4.40 | $5.50 | $(1.63 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.37 | ) | $(0.37 | ) | $(0.31 | ) | $(0.34 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to shareholders | $(0.55 | ) | $(1.21 | ) | $(0.84 | ) | $(0.34 | ) | $(0.30 | ) | ||||||||||
Net asset value, end of period (x) | $37.75 | $36.61 | $38.08 | $34.52 | $29.36 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 4.51 | (0.41 | ) | 12.84 | 18.97 | (c) | (5.19 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | 0.85 | 0.90 | 0.93 | (c) | 0.96 | ||||||||||||||
Expenses after expense reductions (f) | 0.82 | 0.84 | 0.89 | 0.92 | (c) | 0.95 | ||||||||||||||
Net investment income (loss) | 0.89 | 1.63 | 1.35 | 1.12 | (c) | 1.27 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,457,330 | $1,974,109 | $1,371,442 | $1,497,306 | $1,174,202 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $29.12 | $30.57 | $27.93 | $23.87 | $25.65 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $0.18 | $0.14 | $0.02 | (c) | $0.10 | |||||||||||||
Net realized and unrealized gain (loss) | 1.07 | (0.68 | ) | 3.11 | 4.19 | (1.67 | ) | |||||||||||||
Total from investment operations | $1.04 | $(0.50 | ) | $3.25 | $4.21 | $(1.57 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.11 | ) | $(0.08 | ) | $(0.15 | ) | $(0.19 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.44 | ) | $(0.95 | ) | $(0.61 | ) | $(0.15 | ) | $(0.21 | ) | ||||||||||
Net asset value, end of period (x) | $29.72 | $29.12 | $30.57 | $27.93 | $23.87 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.45 | (1.39 | ) | 11.69 | 17.77 | (c) | (6.12 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.83 | 1.85 | 1.90 | 1.93 | (c) | 1.96 | ||||||||||||||
Expenses after expense reductions (f) | 1.82 | 1.84 | 1.89 | 1.92 | (c) | 1.95 | ||||||||||||||
Net investment income (loss) | (0.11 | ) | 0.61 | 0.47 | 0.08 | (c) | 0.41 | |||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $4,890 | $4,266 | $3,663 | $2,496 | $1,587 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $29.92 | $31.31 | $28.54 | $24.32 | $26.05 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.15 | $0.28 | $0.25 | $0.14 | (c) | $0.17 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.07 | (0.64 | ) | 3.23 | 4.29 | (1.66 | ) | |||||||||||||
Total from investment operations | $1.22 | $(0.36 | ) | $3.48 | $4.43 | $(1.49 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.33 | ) | $(0.19 | ) | $(0.18 | ) | $(0.21 | ) | $(0.22 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.51 | ) | $(1.03 | ) | $(0.71 | ) | $(0.21 | ) | $(0.24 | ) | ||||||||||
Net asset value, end of period (x) | $30.63 | $29.92 | $31.31 | $28.54 | $24.32 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.95 | (0.89 | ) | 12.27 | 18.39 | (c) | (5.69 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.33 | 1.35 | 1.40 | 1.43 | (c) | 1.46 | ||||||||||||||
Expenses after expense reductions (f) | 1.32 | 1.34 | 1.39 | 1.42 | (c) | 1.45 | ||||||||||||||
Net investment income (loss) | 0.48 | 0.92 | 0.83 | 0.56 | (c) | 0.70 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $34,149 | $18,890 | $23,650 | $22,245 | $21,051 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $32.51 | $33.96 | $30.89 | $26.29 | $28.07 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.23 | $0.48 | $0.36 | $0.20 | (c) | $0.18 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.18 | (0.79 | ) | 3.48 | 4.66 | (1.71 | ) | |||||||||||||
Total from investment operations | $1.41 | $(0.31 | ) | $3.84 | $4.86 | $(1.53 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.36 | ) | $(0.30 | ) | $(0.24 | ) | $(0.26 | ) | $(0.23 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to | $(0.54 | ) | $(1.14 | ) | $(0.77 | ) | $(0.26 | ) | $(0.25 | ) | ||||||||||
Net asset value, end of period (x) | $33.38 | $32.51 | $33.96 | $30.89 | $26.29 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 4.22 | (0.63 | ) | 12.52 | 18.67 | (c) | (5.43 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | 1.10 | 1.15 | 1.18 | (c) | 1.21 | ||||||||||||||
Expenses after expense reductions (f) | 1.07 | 1.09 | 1.14 | 1.17 | (c) | 1.20 | ||||||||||||||
Net investment income (loss) | 0.69 | 1.47 | 1.09 | 0.72 | (c) | 0.69 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $124,732 | $59,575 | $30,465 | $26,234 | $27,198 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $32.83 | $34.28 | $31.17 | $26.52 | $28.30 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.31 | $0.53 | $0.45 | $0.26 | (c) | $0.32 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.20 | (0.76 | ) | 3.52 | 4.71 | (1.80 | ) | |||||||||||||
Total from investment operations | $1.51 | $(0.23 | ) | $3.97 | $4.97 | $(1.48 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.37 | ) | $(0.38 | ) | $(0.33 | ) | $(0.32 | ) | $(0.28 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to shareholders | $(0.55 | ) | $(1.22 | ) | $(0.86 | ) | $(0.32 | ) | $(0.30 | ) | ||||||||||
Net asset value, end of period (x) | $33.79 | $32.83 | $34.28 | $31.17 | $26.52 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 4.48 | (0.40 | ) | 12.81 | 18.97 | (c) | (5.20 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | 0.85 | 0.90 | 0.93 | (c) | 0.96 | ||||||||||||||
Expenses after expense reductions (f) | 0.82 | 0.84 | 0.89 | 0.92 | (c) | 0.95 | ||||||||||||||
Net investment income (loss) | 0.91 | 1.60 | 1.36 | 0.97 | (c) | 1.22 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $262,925 | $209,454 | $167,066 | $124,580 | $231,275 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $32.81 | $34.27 | $31.15 | �� | $26.54 | $28.29 | ||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.34 | $0.56 | $0.51 | $0.34 | (c) | $0.37 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.21 | (0.78 | ) | 3.49 | 4.65 | (1.81 | ) | |||||||||||||
Total from investment operations | $1.55 | $(0.22 | ) | $4.00 | $4.99 | $(1.44 | ) | |||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.38 | ) | $(0.40 | ) | $(0.35 | ) | $(0.38 | ) | $(0.29 | ) | ||||||||||
From net realized gain | (0.18 | ) | (0.84 | ) | (0.53 | ) | — | (0.02 | ) | |||||||||||
Total distributions declared to shareholders | $(0.56 | ) | $(1.24 | ) | $(0.88 | ) | $(0.38 | ) | $(0.31 | ) | ||||||||||
Net asset value, end of period (x) | $33.80 | $32.81 | $34.27 | $31.15 | $26.54 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 4.60 | (0.34 | ) | 12.95 | 19.08 | (c) | (5.05 | ) | ||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | 0.77 | 0.80 | 0.82 | (c) | 0.83 | ||||||||||||||
Expenses after expense reductions (f) | 0.73 | 0.76 | 0.79 | 0.81 | (c) | 0.82 | ||||||||||||||
Net investment income (loss) | 1.00 | 1.69 | 1.53 | 1.22 | (c) | 1.41 | ||||||||||||||
Portfolio turnover | 17 | 17 | 12 | 21 | 20 | |||||||||||||||
Net assets at end of period (000 omitted) | $7,506,854 | $6,016,478 | $4,347,824 | $2,717,276 | $1,973,418 |
See Notes to Financial Statements
24
Table of Contents
Financial Highlights – continued
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(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
25
Table of Contents
(1) Business and Organization
MFS International Growth Fund (the fund) is a diversified series of MFS Series Trust X (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 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, 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, and accounting systems, and greater political, social, and economic instability than developed markets.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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
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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 – 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. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
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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 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
France | $— | $2,078,193,878 | $— | $2,078,193,878 | ||||||||||||
Switzerland | — | 1,718,707,510 | — | 1,718,707,510 | ||||||||||||
United Kingdom | — | 996,986,816 | — | 996,986,816 | ||||||||||||
Germany | 399,764,142 | 578,228,566 | — | 977,992,708 | ||||||||||||
Japan | 931,609,523 | — | — | 931,609,523 | ||||||||||||
Canada | 779,333,112 | — | — | 779,333,112 | ||||||||||||
United States | 613,826,003 | — | — | 613,826,003 | ||||||||||||
India | 373,410,470 | — | — | 373,410,470 | ||||||||||||
Taiwan | 368,752,574 | — | — | 368,752,574 | ||||||||||||
Other Countries | 1,452,225,447 | 475,397,540 | — | 1,927,622,987 | ||||||||||||
Mutual Funds | 136,470,036 | — | — | 136,470,036 | ||||||||||||
Total | $5,055,391,307 | $5,847,514,310 | $— | $10,902,905,617 |
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.
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Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, 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. 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 $19,491,239. The fair value of the fund’s investment securities on loan and a related liability of $208,168 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 $20,526,474 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 – Investment transactions are recorded on the trade date. 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
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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.
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 wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $118,011,521 | $111,362,405 | ||||||
Long-term capital gains | 40,626,431 | 145,001,455 | ||||||
Total distributions | $158,637,952 | $256,363,860 |
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The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $9,292,735,323 | |||
Gross appreciation | 2,142,273,706 | |||
Gross depreciation | (532,103,412 | ) | ||
Net unrealized appreciation (depreciation) | $1,610,170,294 | |||
Undistributed ordinary income | 94,741,366 | |||
Capital loss carryforwards | (102,262,566 | ) | ||
Other temporary differences | (782,211 | ) |
As of May 31, 2020, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
Short-Term | $(17,736,937 | ) | ||
Long-Term | (84,525,629 | ) | ||
Total | $(102,262,566 | ) |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $8,054,194 | $12,211,974 | ||||||
Class B | 44,332 | 143,810 | ||||||
Class C | 575,884 | 1,215,622 | ||||||
Class I | 32,629,581 | 52,900,003 | ||||||
Class R1 | 68,031 | 125,448 | ||||||
Class R2 | 472,801 | 633,180 | ||||||
Class R3 | 1,703,950 | 1,216,796 | ||||||
Class R4 | 3,769,910 | 6,437,586 | ||||||
Class R6 | 111,319,269 | 181,479,441 | ||||||
Total | $158,637,952 | $256,363,860 |
(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
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facilities to the fund. For the period from June 1, 2019 through July 31, 2019, the management fee was computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:
Up to $1 billion | 0.90 | % | ||
In excess of $1 billion and up to $2 billion | 0.80 | % | ||
In excess of $2 billion and up to $5 billion | 0.70 | % | ||
In excess of $5 billion | 0.65 | % |
Effective August 1, 2019, 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 $1 billion | 0.90 | % | ||
In excess of $1 billion and up to $2 billion | 0.80 | % | ||
In excess of $2 billion and up to $5 billion | 0.70 | % | ||
In excess of $5 billion and up to $10 billion | 0.65 | % | ||
In excess of $10 billion and up to $20 billion | 0.62 | % | ||
In excess of $20 billion | 0.60 | % |
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. For the year ended May 31, 2020, this management fee reduction amounted to $1,020,976, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.69% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $110,525 for the year ended May 31, 2020, 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.
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% | $1,233,761 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 38,581 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 431,826 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 47,969 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 138,846 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 253,671 | |||||||||||||||
Total Distribution and Service Fees |
| $2,144,654 |
(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 |
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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 May 31, 2020 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 May 31, 2020, this rebate amounted to $3,893, $14, $129, and $507 for Class A, Class B, Class C, and Class R3, 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $4,198 | |||
Class B | 4,156 | |||
Class C | 5,281 |
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 May 31, 2020, the fee was $114,626, which equated to 0.0011% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $3,025,035.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0057% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an
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Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO
Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $4,373 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $14,352,515 and $5,104,260, respectively. The sales transactions resulted in net realized gains (losses) of $(235,741).
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $3,662,251,874 and $1,705,005,418, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 7,110,440 | $245,948,585 | 3,811,189 | $124,288,708 | ||||||||||||
Class B | 1,713 | 53,631 | 10,263 | 317,167 | ||||||||||||
Class C | 288,084 | 9,041,809 | 394,651 | 11,619,008 | ||||||||||||
Class I | 29,332,088 | 1,099,001,832 | 26,140,472 | 947,472,325 | ||||||||||||
Class R1 | 65,481 | 1,992,292 | 85,066 | 2,526,994 | ||||||||||||
Class R2 | 902,153 | 28,948,022 | 148,136 | 4,418,593 | ||||||||||||
Class R3 | 2,900,890 | 100,640,646 | 1,521,262 | 49,777,985 | ||||||||||||
Class R4 | 3,984,941 | 137,814,467 | 2,622,234 | 85,022,441 | ||||||||||||
Class R6 | 61,771,463 | 2,134,382,871 | 58,542,671 | 1,905,536,796 | ||||||||||||
106,357,253 | $3,757,824,155 | 93,275,944 | $3,130,980,017 |
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Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 181,396 | $6,577,430 | 369,629 | $11,199,745 | ||||||||||||
Class B | 1,287 | 43,672 | 4,983 | 141,879 | ||||||||||||
Class C | 15,591 | 512,308 | 40,123 | 1,108,204 | ||||||||||||
Class I | 710,345 | 28,854,199 | 1,355,581 | 45,859,310 | ||||||||||||
Class R1 | 2,117 | 68,031 | 4,641 | 125,448 | ||||||||||||
Class R2 | 13,730 | 453,624 | 20,850 | 577,746 | ||||||||||||
Class R3 | 47,371 | 1,703,950 | 40,465 | 1,216,796 | ||||||||||||
Class R4 | 77,959 | 2,835,359 | 157,327 | 4,773,308 | ||||||||||||
Class R6 | 2,915,703 | 105,985,806 | 5,869,167 | 177,894,461 | ||||||||||||
3,965,499 | $147,034,379 | 7,862,766 | $242,896,897 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (3,358,128 | ) | $(113,176,248 | ) | (2,417,847 | ) | $(78,641,496 | ) | ||||||||
Class B | (59,824 | ) | (1,882,068 | ) | (69,496 | ) | (2,138,066 | ) | ||||||||
Class C | (415,000 | ) | (12,698,807 | ) | (402,624 | ) | (11,997,231 | ) | ||||||||
Class I | (18,859,303 | ) | (695,195,694 | ) | (9,596,712 | ) | (343,497,745 | ) | ||||||||
Class R1 | (49,551 | ) | (1,515,499 | ) | (63,038 | ) | (1,865,197 | ) | ||||||||
Class R2 | (432,373 | ) | (13,371,338 | ) | (292,976 | ) | (8,893,812 | ) | ||||||||
Class R3 | (1,044,223 | ) | (34,943,677 | ) | (626,119 | ) | (19,896,671 | ) | ||||||||
Class R4 | (2,662,266 | ) | (91,208,654 | ) | (1,273,363 | ) | (41,839,130 | ) | ||||||||
Class R6 | (25,930,767 | ) | (880,408,113 | ) | (7,942,275 | ) | (259,570,029 | ) | ||||||||
(52,811,435 | ) | $(1,844,400,098 | ) | (22,684,450 | ) | $(768,339,377 | ) | |||||||||
Net change | ||||||||||||||||
Class A | 3,933,708 | $139,349,767 | 1,762,971 | $56,846,957 | ||||||||||||
Class B | (56,824 | ) | (1,784,765 | ) | (54,250 | ) | (1,679,020 | ) | ||||||||
Class C | (111,325 | ) | (3,144,690 | ) | 32,150 | 729,981 | ||||||||||
Class I | 11,183,130 | 432,660,337 | 17,899,341 | 649,833,890 | ||||||||||||
Class R1 | 18,047 | 544,824 | 26,669 | 787,245 | ||||||||||||
Class R2 | 483,510 | 16,030,308 | (123,990 | ) | (3,897,473 | ) | ||||||||||
Class R3 | 1,904,038 | 67,400,919 | 935,608 | 31,098,110 | ||||||||||||
Class R4 | 1,400,634 | 49,441,172 | 1,506,198 | 47,956,619 | ||||||||||||
Class R6 | 38,756,399 | 1,359,960,564 | 56,469,563 | 1,823,861,228 | ||||||||||||
57,511,317 | $2,060,458,436 | 78,454,260 | $2,605,537,537 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
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
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Notes to Financial Statements – continued
Fund, the MFS Growth Allocation Fund, the MFS Moderate Allocation Fund, and the MFS Aggressive Growth Allocation Fund were the owners of record of approximately 44%, 2%, 2%, and 1%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Conservative Allocation Fund, the MFS Lifetime 2020 Fund, 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, 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.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $50,347 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 | $119,890,323 | $2,213,123,294 | $2,196,758,348 | $16,889 | $(10,290 | ) | $136,261,868 | |||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $2,045,472 | $— |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of MFS International Growth Fund and the Board of Trustees of MFS Series Trust X
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS International Growth Fund (the “Fund”) (one of the funds constituting MFS Series Trust X (the “Trust”)), including the portfolio of investments, as of May 31, 2020, 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 X) at May 31, 2020, 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.
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 May 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included
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Report of Independent Registered Public Accounting Firm – continued
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
July 17, 2020
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
David Antonelli Matthew Barrett Kevin Dwan |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $44,690,000 as capital gain dividends paid during the fiscal year.
Income derived from foreign sources was $191,179,498. The fund intends to pass through foreign tax credits of $20,076,307 for the fiscal year.
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® International Intrinsic Value Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
FGI-ANN
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MFS® International Intrinsic Value Fund
Contact information | 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
Table of Contents
LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings | ||||
Nestle S.A. | 5.2% | |||
Cadence Design Systems, Inc. | 4.5% | |||
Givaudan S.A. | 3.7% | |||
Reckitt Benckiser Group PLC | 2.5% | |||
Schneider Electric SE | 2.4% | |||
ANSYS, Inc. | 2.3% | |||
Pernod Ricard S.A. | 2.3% | |||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 2.3% | |||
Kao Corp. | 2.2% | |||
Colgate-Palmolive Co. | 2.2% |
GICS equity sectors (g) | ||||
Consumer Staples | 30.7% | |||
Information Technology | 25.1% | |||
Industrials | 16.6% | |||
Materials | 9.1% | |||
Health Care | 3.2% | |||
Financials | 3.1% | |||
Real Estate | 3.0% | |||
Consumer Discretionary | 2.4% | |||
Communication Services | 0.8% | |||
Energy | 0.2% | |||
Issuer country weightings (x) |
| |||
Japan | 21.6% | |||
United States | 19.5% | |||
Switzerland | 13.2% | |||
France | 12.6% | |||
United Kingdom | 11.8% | |||
Germany | 8.0% | |||
Canada | 2.5% | |||
Taiwan | 2.3% | |||
Spain | 1.5% | |||
Other Countries | 7.0% | |||
Currency exposure weightings (y) |
| |||
Euro | 25.0% | |||
United States Dollar | 24.7% | |||
Japanese Yen | 17.2% | |||
Swiss Franc | 13.2% | |||
British Pound Sterling | 11.8% | |||
Canadian Dollar | 2.5% | |||
Taiwan Dollar | 2.3% | |||
Danish Krone | 1.4% | |||
South Korean Won | 1.1% | |||
Other Currencies | 0.8% |
2
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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. |
(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 and Other. |
(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.
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 May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended May 31, 2020, Class A shares of the MFS International Intrinsic Value Fund (fund) provided a total return of 9.84%, at net asset value. This compares with a return of –13.03% for the fund’s benchmark, the MSCI EAFE Value Index (net div).
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Contributors to Performance
Stock selection in the information technology sector positively impacted performance relative to the MSCI EAFE Value Index during the reporting period. Notably, the fund’s holdings of integrated circuits and electronic devices developer Cadence Design Systems (b), simulation software developer ANSYS (b), semiconductor manufacturer Taiwan Semiconductor Manufacturing (b) (Taiwan) and business system services
4
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Management Review – continued
company Nomura Research Institute (b) (Japan) benefited relative returns. Cadence Design System’s stock price rose as digital delivery of the firm’s design software proved resilient, even as the pandemic hit, and the company reported strong sales and earnings throughout the reporting period.
An overweight position in the consumer staples sector further aided relative results. Within this sector, holding shares of global food company Nestle (b) (Switzerland) and household products manufacturer Reckitt Benckiser (b) (United Kingdom) contributed to relative performance. The stock price of both companies benefited from increased demand from consumers sheltered at home in response to government-issued lockdowns across the globe.
Elsewhere, holding shares of flavors and fragrances company Givaudan (b) (Switzerland), and not holding shares of both global energy and petrochemicals company Royal Dutch Shell (United Kingdom) and banking and financial services company HSBC (United Kingdom), lifted relative returns.
The fund’s cash and/or cash equivalents position during the period was also a contributor to 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 declined, as measured by the fund’s benchmark, holding cash benefited performance versus the benchmark, which has no cash position.
Detractors from Performance
Not holding any positions in the strong-performing utilities sector weakened relative performance over the reporting period. Notably, not holding shares of electricity and gas distributor Enel (Italy) and electric utility company Iberdrola (Spain) hurt relative returns; both stocks were benchmark constituents and performed well over the reporting period as utilities were largely unscathed by the adverse effects of the COVID-19 pandemic.
Both an underweight position and stock selection in the consumer discretionary sector further weighed on relative results, led by the fund not holding shares of auto manufacturer Toyota Motor (Japan). Prior to the pandemic, Toyota’s stock price traded upwards on the back of solid business and earnings results. At the onset of the pandemic, the share price traded lower but recovered off its lows, reflecting what appeared to have been investor optimism in the resiliency of the business, and the Toyota brand, in the midst of a global vehicle sales decline.
An underweight position in the health care sector also hindered relative performance. Within this sector, not holding pharmaceutical firms Sanofi (France), GlaxoSmithKline (United Kingdom) and Takeda Pharmaceutical (Japan), as well as the fund’s underweight position in life sciences company Bayer (h) (Germany), hurt relative returns. All four stocks outperformed the benchmark over the reporting period as investors, and the world, looked to pharmaceutical companies for help in the fight against COVID-19.
Stocks in other sectors that also had a negative impact on relative results included holding shares of tourism and travel IT solutions provider Amadeus IT Holding (b) (Spain), and not holding tobacco distributor British American Tobacco (United Kingdom) and technology investment firm SoftBank (Japan).
5
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Management Review – continued
Respectfully,
Portfolio Manager(s)
Philip Evans, Pablo de la Mata, and Benjamin Stone
Note to Shareholders: Effective February 1, 2020, Philip Evans was added as a Portfolio Manager of the Fund. Effective April 15, 2022, Pablo de la Mata will be removed as a Portfolio Manager of the Fund.
(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.
6
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PERFORMANCE SUMMARY THROUGH 5/31/20
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
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | ||||||||
A | 10/24/95 | 9.84% | 7.51% | 10.65% | ||||||||
B | 10/24/95 | 8.99% | 6.70% | 9.82% | ||||||||
C | 7/01/96 | 9.00% | 6.71% | 9.82% | ||||||||
I | 1/02/97 | 10.10% | 7.78% | 10.93% | ||||||||
R1 | 10/01/08 | 9.01% | 6.71% | 9.83% | ||||||||
R2 | 10/01/08 | 9.56% | 7.24% | 10.37% | ||||||||
R3 | 10/01/08 | 9.81% | 7.51% | 10.65% | ||||||||
R4 | 10/01/08 | 10.09% | 7.78% | 10.93% | ||||||||
R6 | 5/01/06 | 10.21% | 7.89% | 10.99% | ||||||||
Comparative benchmark(s) | ||||||||||||
MSCI EAFE Value Index (net div) (f) | (13.03)% | (2.89)% | 2.96% | |||||||||
Average annual with sales charge | ||||||||||||
A With Initial Sales Charge (5.75%) | 3.52% | 6.24% | 9.99% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 4.99% | 6.39% | 9.82% | |||||||||
C With CDSC (1% for 12 months) (v) | 8.00% | 6.71% | 9.82% |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
On May 30, 2012, Class W shares were redesignated Class R5 shares. Total returns for Class R5 shares prior to May 30, 2012 reflect the performance history of Class W shares which had different fees and expenses than Class R5 shares. Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.
(f) | Source: FactSet Research Systems Inc. |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
MSCI EAFE (Europe, Australasia, Far East) Value Index (net div) – a market capitalization-weighted index that is designed to measure equity market performance for value securities in the developed markets, excluding the U.S. and Canada. 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.
It is not possible to invest directly in an index.
8
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Performance Summary – continued
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
Table of Contents
Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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 December 1, 2019 through May 31, 2020.
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
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During | ||||||||||||||
A | Actual | 0.98% | $1,000.00 | $1,006.53 | $4.92 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,020.10 | $4.95 | ||||||||||||||
B | Actual | 1.73% | $1,000.00 | $1,002.62 | $8.66 | |||||||||||||
Hypothetical (h) | 1.73% | $1,000.00 | $1,016.35 | $8.72 | ||||||||||||||
C | Actual | 1.73% | $1,000.00 | $1,002.76 | $8.66 | |||||||||||||
Hypothetical (h) | 1.73% | $1,000.00 | $1,016.35 | $8.72 | ||||||||||||||
I | Actual | 0.73% | $1,000.00 | $1,007.78 | $3.66 | |||||||||||||
Hypothetical (h) | 0.73% | $1,000.00 | $1,021.35 | $3.69 | ||||||||||||||
R1 | Actual | 1.73% | $1,000.00 | $1,002.82 | $8.66 | |||||||||||||
Hypothetical (h) | 1.73% | $1,000.00 | $1,016.35 | $8.72 | ||||||||||||||
R2 | Actual | 1.23% | $1,000.00 | $1,005.18 | $6.17 | |||||||||||||
Hypothetical (h) | 1.23% | $1,000.00 | $1,018.85 | $6.21 | ||||||||||||||
R3 | Actual | 0.98% | $1,000.00 | $1,006.56 | $4.92 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,020.10 | $4.95 | ||||||||||||||
R4 | Actual | 0.73% | $1,000.00 | $1,007.76 | $3.66 | |||||||||||||
Hypothetical (h) | 0.73% | $1,000.00 | $1,021.35 | $3.69 | ||||||||||||||
R6 | Actual | 0.63% | $1,000.00 | $1,008.31 | $3.16 | |||||||||||||
Hypothetical (h) | 0.63% | $1,000.00 | $1,021.85 | $3.18 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
11
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - 92.1% | ||||||||
Airlines - 0.6% | ||||||||
Ryanair Holdings PLC, ADR (a) | 2,216,223 | $ | 159,058,325 | |||||
Alcoholic Beverages - 5.6% | �� | |||||||
Diageo PLC | 16,118,199 | $ | 557,387,369 | |||||
Heineken N.V. | 3,943,506 | 362,470,384 | ||||||
Pernod Ricard S.A. | 4,026,876 | 628,844,629 | ||||||
|
| |||||||
$ | 1,548,702,382 | |||||||
Apparel Manufacturers - 0.9% | ||||||||
Compagnie Financiere Richemont S.A. | 2,339,624 | $ | 136,769,844 | |||||
LVMH Moet Hennessy Louis Vuitton SE | 244,189 | 102,256,651 | ||||||
|
| |||||||
$ | 239,026,495 | |||||||
Automotive - 0.3% | ||||||||
Compagnie Generale des Etablissements Michelin | 813,303 | $ | 82,413,789 | |||||
Knorr-Bremse AG | 111,274 | 11,756,609 | ||||||
|
| |||||||
$ | 94,170,398 | |||||||
Biotechnology - 1.2% | ||||||||
Novozymes A.S. | 5,841,579 | $ | 320,059,525 | |||||
Brokerage & Asset Managers - 0.4% | ||||||||
Euronext N.V. | 1,368,460 | $ | 125,930,038 | |||||
Business Services - 7.6% | ||||||||
Compass Group PLC | 14,071,626 | $ | 206,847,882 | |||||
Experian PLC | 9,279,198 | 323,973,525 | ||||||
Intertek Group PLC | 3,997,427 | 273,060,811 | ||||||
Nomura Research Institute Ltd. | 12,363,554 | 326,500,086 | ||||||
Rentokil Initial PLC | 3,881,513 | 23,918,386 | ||||||
Secom Co. Ltd. | 4,469,100 | 386,801,237 | ||||||
SGS S.A. | 161,777 | 381,061,117 | ||||||
Sohgo Security Services Co. Ltd. | 2,410,900 | 118,482,730 | ||||||
Thomson Reuters Corp. | 836,404 | 56,021,481 | ||||||
|
| |||||||
$ | 2,096,667,255 | |||||||
Chemicals - 3.7% | ||||||||
Givaudan S.A. | 285,940 | $ | 1,028,879,949 |
12
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Computer Software - 10.0% | ||||||||
ANSYS, Inc. (a) | 2,296,238 | $ | 649,835,354 | |||||
Cadence Design Systems, Inc. (a) | 13,673,974 | 1,248,297,086 | ||||||
Dassault Systemes S.A. | 1,505,364 | 255,548,483 | ||||||
OBIC Co. Ltd. | 2,123,200 | 367,762,771 | ||||||
SAP SE | 1,669,335 | 207,849,029 | ||||||
Wisetech Global Ltd. | 2,325,823 | 31,610,145 | ||||||
|
| |||||||
$ | 2,760,902,868 | |||||||
Computer Software - Systems - 2.5% | ||||||||
Amadeus IT Group S.A. | 8,072,193 | $ | 422,683,918 | |||||
Descartes Systems Group, Inc. (a) | 1,445,368 | 68,906,530 | ||||||
Wix.com Ltd. (a) | 890,642 | 198,016,436 | ||||||
|
| |||||||
$ | 689,606,884 | |||||||
Construction - 0.5% | ||||||||
Geberit AG | 288,571 | $ | 140,729,569 | |||||
Consumer Products - 11.4% | ||||||||
Colgate-Palmolive Co. | 8,466,665 | $ | 612,393,879 | |||||
Kao Corp. | 7,664,400 | 614,530,732 | ||||||
Kobayashi Pharmaceutical Co. Ltd. (h) | 4,299,200 | 382,700,357 | ||||||
KOSE Corp. | 393,300 | 49,196,690 | ||||||
L’Oréal | 2,040,058 | 595,675,427 | ||||||
Reckitt Benckiser Group PLC | 7,721,677 | 690,714,444 | ||||||
ROHTO Pharmaceutical Co. Ltd. (h) | 7,120,600 | 218,546,859 | ||||||
|
| |||||||
$ | 3,163,758,388 | |||||||
Electrical Equipment - 5.9% | ||||||||
Legrand S.A. | 6,508,469 | $ | 444,637,620 | |||||
OMRON Corp. | 4,176,000 | 276,476,796 | ||||||
Schneider Electric SE | 6,682,549 | 666,664,792 | ||||||
Spectris PLC | 5,021,826 | 159,761,621 | ||||||
Yokogawa Electric Corp. | 5,707,100 | 82,131,014 | ||||||
|
| |||||||
$ | 1,629,671,843 | |||||||
Electronics - 8.8% | ||||||||
Analog Devices, Inc. | 4,638,691 | $ | 523,940,148 | |||||
DISCO Corp. | 347,100 | 77,437,304 | ||||||
Halma PLC | 8,949,359 | 258,669,673 | ||||||
Hirose Electric Co. Ltd. (h) | 2,851,900 | 340,339,867 | ||||||
Infineon Technologies AG | 2,589,761 | 54,206,573 | ||||||
Samsung Electronics Co. Ltd. | 7,754,842 | 317,469,813 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 12,373,042 | 622,735,204 | ||||||
Texas Instruments, Inc. | 1,920,700 | 228,063,918 | ||||||
|
| |||||||
$ | 2,422,862,500 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Engineering - Construction - 0.8% | ||||||||
IMI PLC (h) | 18,158,403 | $ | 202,609,414 | |||||
Wartsila Oyj Abp | 4,278,841 | 33,519,166 | ||||||
|
| |||||||
$ | 236,128,580 | |||||||
Food & Beverages - 11.6% | ||||||||
Chocoladefabriken Lindt & Sprungli AG | 3,364 | $ | 28,103,731 | |||||
Danone S.A. | 6,562,588 | 449,850,772 | ||||||
Ezaki Glico Co. Ltd. | 3,287,900 | 158,838,695 | ||||||
ITO EN Ltd. (h) | 7,140,300 | 409,171,070 | ||||||
Kerry Group PLC | 1,882,569 | 233,878,951 | ||||||
Nestle S.A. | 13,244,260 | 1,433,947,451 | ||||||
Nissan Foods Holdings Co. Ltd. | 1,109,000 | 92,549,492 | ||||||
Toyo Suisan Kaisha Ltd. (h) | 7,633,300 | 398,493,013 | ||||||
|
| |||||||
$ | 3,204,833,175 | |||||||
Insurance - 0.6% | ||||||||
Fairfax Financial Holdings Ltd. | 279,704 | $ | 77,697,926 | |||||
Hiscox Ltd. | 8,286,429 | 76,058,273 | ||||||
|
| |||||||
$ | 153,756,199 | |||||||
Internet - 0.8% | ||||||||
Alphabet, Inc., “A” (a) | 149,172 | $ | 213,841,045 | |||||
Machinery & Tools - 4.9% | ||||||||
Epiroc AB, “A” | 7,194,623 | $ | 80,195,240 | |||||
GEA Group AG | 5,984,933 | 177,981,434 | ||||||
Nordson Corp. | 1,426,902 | 268,756,992 | ||||||
Schindler Holding AG | 562,746 | 131,053,818 | ||||||
SMC Corp. | 594,700 | 299,817,692 | ||||||
Spirax-Sarco Engineering PLC | 3,378,538 | 413,514,301 | ||||||
|
| |||||||
$ | 1,371,319,477 | |||||||
Major Banks - 0.9% | ||||||||
Svenska Handelsbanken AB, “A” (a) | 12,945,644 | $ | 122,974,658 | |||||
UBS Group AG | 12,970,916 | 139,768,592 | ||||||
|
| |||||||
$ | 262,743,250 | |||||||
Medical Equipment - 3.2% | ||||||||
EssilorLuxottica (a) | 1,136,959 | $ | 146,817,565 | |||||
Nihon Kohden Corp. (h) | 7,846,900 | 261,575,460 | ||||||
Shimadzu Corp. | 8,071,200 | 218,160,768 | ||||||
Terumo Corp. | 6,892,000 | 270,324,633 | ||||||
|
| |||||||
$ | 896,878,426 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Oil Services - 0.2% | ||||||||
Core Laboratories N.V. (h)(l) | 2,369,009 | $ | 47,901,362 | |||||
Other Banks & Diversified Financials - 1.1% | ||||||||
Chiba Bank Ltd. | 11,283,200 | $ | 53,567,605 | |||||
Hachijuni Bank Ltd. | 11,069,100 | 40,850,311 | ||||||
Julius Baer Group Ltd. | 1,619,077 | 69,267,977 | ||||||
Jyske Bank A.S. (a) | 1,405,266 | 38,960,270 | ||||||
Mebuki Financial Group, Inc. | 18,640,670 | 42,174,635 | ||||||
North Pacific Bank Ltd. | 16,592,400 | 31,232,391 | ||||||
Sydbank A.S. (a) | 1,863,351 | 32,627,877 | ||||||
|
| |||||||
$ | 308,681,066 | |||||||
Pharmaceuticals - 1.3% | ||||||||
Santen Pharmaceutical Co. Ltd. | 19,369,500 | $ | 357,413,927 | |||||
Precious Metals & Minerals - 1.8% | ||||||||
Agnico-Eagle Mines Ltd. | 2,102,072 | $ | 134,489,249 | |||||
Franco-Nevada Corp. | 2,573,190 | 361,182,917 | ||||||
|
| |||||||
$ | 495,672,166 | |||||||
Real Estate - 3.0% | ||||||||
Deutsche Wohnen SE | 8,159,634 | $ | 364,296,871 | |||||
LEG Immobilien AG (a) | 944,568 | 117,517,907 | ||||||
TAG Immobilien AG | 4,806,681 | 111,710,460 | ||||||
Vonovia SE | 3,990,442 | 230,221,625 | ||||||
|
| |||||||
$ | 823,746,863 | |||||||
Specialty Chemicals - 2.5% | ||||||||
Croda International PLC | 1,270,584 | $ | 81,723,603 | |||||
Kansai Paint Co. Ltd. | 5,305,200 | 109,798,381 | ||||||
Sika AG | 856,795 | 147,226,001 | ||||||
Symrise AG | 3,128,185 | 341,688,391 | ||||||
|
| |||||||
$ | 680,436,376 | |||||||
Total Common Stocks (Identified Cost, $16,302,767,967) |
| $ | 25,473,378,331 | |||||
Preferred Stocks - 2.1% | ||||||||
Consumer Products - 2.1% | ||||||||
Henkel AG & Co. KGaA (Identified Cost, $659,365,742) | 6,690,710 | $ | 594,198,267 | |||||
Investment Companies (h) - 5.5% | ||||||||
Money Market Funds - 5.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) (Identified Cost, $1,532,062,878) | 1,532,101,713 | $ | 1,532,254,924 |
15
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Collateral for Securities Loaned - 0.0% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13% (j) (Identified Cost, $11,043,534) | 11,043,535 | $ | 11,043,534 | |||||
Other Assets, Less Liabilities - 0.3% | 61,042,970 | |||||||
Net Assets - 100.0% | $ | 27,671,918,026 |
(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 $3,793,592,326 and $23,817,282,730, 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. |
(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 |
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:
JPY | Japanese Yen |
Derivative Contracts at 5/31/20
Forward Foreign Currency Exchange Contracts
Currency Purchased | Currency | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||
Liability Derivatives | ||||||||||||||||||
USD | 1,155,430,338 | JPY | 127,367,445,000 | HSBC Bank | 8/21/2020 | $(27,021,282 | ) | |||||||||||
USD | 55,126,156 | JPY | 5,991,965,000 | Morgan Stanley Capital Services, Inc. | 8/21/2020 | (501,941 | ) | |||||||||||
|
| |||||||||||||||||
$(27,523,223 | ) | |||||||||||||||||
|
|
At May 31, 2020, the fund had cash collateral of $650,000 to cover any collateral or margin obligations for certain derivative contracts. Restricted cash and/or deposits with brokers in the Statement of Assets and Liabilities are comprised of cash collateral.
See Notes to Financial Statements
16
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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 $10,892,696 of securities on loan (identified cost, $15,355,167,396) | $23,817,282,730 | |||
Investments in affiliated issuers, at value (identified cost, $3,150,072,725) | 3,793,592,326 | |||
Foreign currency, at value (identified cost, $10,401,084) | 10,481,278 | |||
Restricted cash for | ||||
Forward foreign currency exchange contracts | 650,000 | |||
Receivables for | ||||
Fund shares sold | 17,647,908 | |||
Interest and dividends | 116,846,570 | |||
Other assets | 45,789 | |||
Total assets | $27,756,546,601 | |||
Liabilities | ||||
Payables for | ||||
Forward foreign currency exchange contracts | $27,523,223 | |||
Fund shares reacquired | 33,721,766 | |||
Collateral for securities loaned, at value | 11,043,534 | |||
Payable to affiliates | ||||
Investment adviser | 1,865,233 | |||
Administrative services fee | 6,580 | |||
Shareholder servicing costs | 8,466,269 | |||
Distribution and service fees | 165,871 | |||
Payable for independent Trustees’ compensation | 27 | |||
Accrued expenses and other liabilities | 1,836,072 | |||
Total liabilities | $84,628,575 | |||
Net assets | $27,671,918,026 | |||
Net assets consist of | ||||
Paid-in capital | $17,718,938,174 | |||
Total distributable earnings (loss) | 9,952,979,852 | |||
Net assets | $27,671,918,026 | |||
Shares of beneficial interest outstanding | 611,063,030 |
17
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $2,651,119,572 | 59,621,928 | $44.47 | |||||||||
Class B | 25,230,916 | 598,125 | 42.18 | |||||||||
Class C | 395,411,427 | 9,875,002 | 40.04 | |||||||||
Class I | 10,468,862,444 | 223,560,456 | 46.83 | |||||||||
Class R1 | 9,835,911 | 242,635 | 40.54 | |||||||||
Class R2 | 219,474,228 | 5,306,363 | 41.36 | |||||||||
Class R3 | 1,320,256,602 | 29,929,027 | 44.11 | |||||||||
Class R4 | 1,019,909,090 | 22,879,113 | 44.58 | |||||||||
Class R6 | 11,561,817,836 | 259,050,381 | 44.63 |
(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 $47.18 [100 / 94.25 x $44.47]. 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
18
Table of Contents
Financial Statements
Year ended 5/31/20
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 | $407,759,508 | |||
Dividends from affiliated issuers | 46,546,802 | |||
Income on securities loaned | 480,454 | |||
Other | 128,212 | |||
Interest | 417 | |||
Foreign taxes withheld | (42,894,326 | ) | ||
Total investment income | $412,021,067 | |||
Expenses | ||||
Management fee | $171,594,241 | |||
Distribution and service fees | 16,698,500 | |||
Shareholder servicing costs | 17,834,719 | |||
Administrative services fee | 571,699 | |||
Independent Trustees’ compensation | 185,589 | |||
Custodian fee | 2,528,210 | |||
Shareholder communications | 951,229 | |||
Audit and tax fees | 78,575 | |||
Legal fees | 244,662 | |||
Miscellaneous | 781,605 | |||
Total expenses | $211,469,029 | |||
Reduction of expenses by investment adviser and distributor | (2,851,154 | ) | ||
Net expenses | $208,617,875 | |||
Net investment income (loss) | $203,403,192 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $1,267,803,382 | |||
Affiliated issuers | 19,795,853 | |||
Forward foreign currency exchange contracts | 38,103,739 | |||
Foreign currency | (1,797,713 | ) | ||
Net realized gain (loss) | $1,323,905,261 | |||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $416,911,840 | |||
Affiliated issuers | 620,720,640 | |||
Forward foreign currency exchange contracts | (12,057,675 | ) | ||
Translation of assets and liabilities in foreign currencies | 1,475,967 | |||
Net unrealized gain (loss) | $1,027,050,772 | |||
Net realized and unrealized gain (loss) | $2,350,956,033 | |||
Change in net assets from operations | $2,554,359,225 |
See Notes to Financial Statements
19
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $203,403,192 | $334,315,188 | ||||||
Net realized gain (loss) | 1,323,905,261 | 855,097,081 | ||||||
Net unrealized gain (loss) | 1,027,050,772 | (521,091,836 | ) | |||||
Change in net assets from operations | $2,554,359,225 | $668,320,433 | ||||||
Total distributions to shareholders | $(1,170,503,173 | ) | $(1,145,005,100 | ) | ||||
Change in net assets from fund share transactions | $(1,492,350,372 | ) | $(1,296,355,983 | ) | ||||
Total change in net assets | $(108,494,320 | ) | $(1,773,040,650 | ) | ||||
Net assets | ||||||||
At beginning of period | 27,780,412,346 | 29,553,452,996 | ||||||
At end of period | $27,671,918,026 | $27,780,412,346 |
See Notes to Financial Statements
20
Table of Contents
Financial Statements
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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $42.09 | $42.91 | $40.88 | $35.53 | $36.07 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.21 | $0.39 | $0.43 | $0.30 | (c) | $0.50 | ||||||||||||||
Net realized and unrealized gain (loss) | 3.93 | 0.45 | 2.67 | 5.62 | 0.02 | |||||||||||||||
Total from investment operations | $4.14 | $0.84 | $3.10 | $5.92 | $0.52 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.37 | ) | $(0.51 | ) | $(0.61 | ) | $(0.53 | ) | $(0.45 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.76 | ) | $(1.66 | ) | $(1.07 | ) | $(0.57 | ) | $(1.06 | ) | ||||||||||
Net asset value, end of period (x) | $44.47 | $42.09 | $42.91 | $40.88 | $35.53 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 9.84 | 2.29 | 7.60 | 16.94 | (c) | 1.60 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | 0.99 | 0.98 | 1.04 | (c) | 1.10 | ||||||||||||||
Expenses after expense reductions (f) | 0.98 | 0.98 | 0.97 | 1.00 | (c) | 1.01 | ||||||||||||||
Net investment income (loss) | 0.48 | 0.93 | 1.02 | 0.82 | (c) | 1.45 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,651,120 | $2,959,958 | $3,594,359 | $3,927,507 | $6,853,902 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $39.99 | $40.80 | $38.94 | $33.86 | $34.42 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.12 | ) | $0.06 | $0.11 | $0.09 | (c) | $0.22 | |||||||||||||
Net realized and unrealized gain (loss) | 3.72 | 0.46 | 2.53 | 5.29 | 0.03 | |||||||||||||||
Total from investment operations | $3.60 | $0.52 | $2.64 | $5.38 | $0.25 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.02 | ) | $(0.18 | ) | $(0.32 | ) | $(0.26 | ) | $(0.20 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.41 | ) | $(1.33 | ) | $(0.78 | ) | $(0.30 | ) | $(0.81 | ) | ||||||||||
Net asset value, end of period (x) | $42.18 | $39.99 | $40.80 | $38.94 | $33.86 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 8.99 | 1.53 | 6.79 | 16.05 | (c) | 0.85 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.74 | 1.73 | 1.79 | (c) | 1.85 | ||||||||||||||
Expenses after expense reductions (f) | 1.73 | 1.73 | 1.72 | 1.75 | (c) | 1.76 | ||||||||||||||
Net investment income (loss) | (0.29 | ) | 0.16 | 0.27 | 0.27 | (c) | 0.67 | |||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $25,231 | $35,571 | $46,522 | $52,439 | $56,474 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $38.05 | $38.91 | $37.19 | $32.36 | $32.97 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.11 | ) | $0.07 | $0.11 | $0.09 | (c) | $0.21 | |||||||||||||
Net realized and unrealized gain (loss) | 3.54 | 0.42 | 2.40 | 5.06 | 0.03 | |||||||||||||||
Total from investment operations | $3.43 | $0.49 | $2.51 | $5.15 | $0.24 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.05 | ) | $(0.20 | ) | $(0.33 | ) | $(0.28 | ) | $(0.24 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.44 | ) | $(1.35 | ) | $(0.79 | ) | $(0.32 | ) | $(0.85 | ) | ||||||||||
Net asset value, end of period (x) | $40.04 | $38.05 | $38.91 | $37.19 | $32.36 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 9.00 | 1.53 | 6.77 | 16.07 | (c) | 0.84 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.74 | 1.73 | 1.79 | (c) | 1.85 | ||||||||||||||
Expenses after expense reductions (f) | 1.73 | 1.73 | 1.72 | 1.75 | (c) | 1.76 | ||||||||||||||
Net investment income (loss) | (0.27 | ) | 0.17 | 0.28 | 0.26 | (c) | 0.68 | |||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $395,411 | $496,745 | $627,662 | $719,227 | $811,433 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $44.24 | $45.02 | $42.85 | $37.22 | $37.73 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.34 | $0.53 | $0.58 | $0.53 | (c) | $0.62 | ||||||||||||||
Net realized and unrealized gain (loss) | 4.13 | 0.47 | 2.77 | 5.77 | 0.01 | |||||||||||||||
Total from investment operations | $4.47 | $1.00 | $3.35 | $6.30 | $0.63 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.49 | ) | $(0.63 | ) | $(0.72 | ) | $(0.63 | ) | $(0.53 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.88 | ) | $(1.78 | ) | $(1.18 | ) | $(0.67 | ) | $(1.14 | ) | ||||||||||
Net asset value, end of period (x) | $46.83 | $44.24 | $45.02 | $42.85 | $37.22 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 10.10 | 2.56 | 7.85 | 17.25 | (c) | 1.84 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | 0.74 | 0.73 | 0.79 | (c) | 0.85 | ||||||||||||||
Expenses after expense reductions (f) | 0.73 | 0.73 | 0.72 | 0.75 | (c) | 0.76 | ||||||||||||||
Net investment income (loss) | 0.74 | 1.22 | 1.30 | 1.39 | (c) | 1.71 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $10,468,862 | $10,871,918 | $11,680,254 | $14,934,283 | $12,003,645 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $38.51 | $39.39 | $37.64 | $32.77 | $33.35 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.10 | ) | $0.08 | $0.12 | $0.10 | (c) | $0.22 | |||||||||||||
Net realized and unrealized gain (loss) | 3.58 | 0.41 | 2.43 | 5.11 | 0.02 | |||||||||||||||
Total from investment operations | $3.48 | $0.49 | $2.55 | $5.21 | $0.24 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.22 | ) | $(0.34 | ) | $(0.30 | ) | $(0.21 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.45 | ) | $(1.37 | ) | $(0.80 | ) | $(0.34 | ) | $(0.82 | ) | ||||||||||
Net asset value, end of period (x) | $40.54 | $38.51 | $39.39 | $37.64 | $32.77 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 9.01 | 1.52 | 6.79 | 16.08 | (c) | 0.84 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.73 | 1.73 | 1.79 | (c) | 1.84 | ||||||||||||||
Expenses after expense reductions (f) | 1.73 | 1.73 | 1.72 | 1.75 | (c) | 1.76 | ||||||||||||||
Net investment income (loss) | (0.25 | ) | 0.20 | 0.31 | 0.29 | (c) | 0.68 | |||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $9,836 | $11,321 | $12,943 | $12,813 | $12,422 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $39.25 | $40.13 | $38.32 | $33.36 | $33.89 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.09 | $0.27 | $0.29 | $0.29 | (c) | $0.36 | ||||||||||||||
Net realized and unrealized gain (loss) | 3.67 | 0.41 | 2.51 | 5.17 | 0.05 | |||||||||||||||
Total from investment operations | $3.76 | $0.68 | $2.80 | $5.46 | $0.41 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.41 | ) | $(0.53 | ) | $(0.46 | ) | $(0.33 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.65 | ) | $(1.56 | ) | $(0.99 | ) | $(0.50 | ) | $(0.94 | ) | ||||||||||
Net asset value, end of period (x) | $41.36 | $39.25 | $40.13 | $38.32 | $33.36 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 9.56 | 2.02 | 7.34 | 16.62 | (c) | 1.37 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 1.24 | 1.24 | 1.23 | 1.29 | (c) | 1.34 | ||||||||||||||
Expenses after expense reductions (f) | 1.23 | 1.23 | 1.22 | 1.25 | (c) | 1.26 | ||||||||||||||
Net investment income (loss) | 0.23 | 0.69 | 0.74 | 0.83 | (c) | 1.10 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $219,474 | $295,690 | $358,138 | $429,776 | $397,056 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $41.78 | $42.62 | $40.63 | $35.34 | $35.88 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.21 | $0.40 | $0.45 | $0.39 | (c) | $0.51 | ||||||||||||||
Net realized and unrealized gain (loss) | 3.89 | 0.43 | 2.63 | 5.49 | 0.01 | |||||||||||||||
Total from investment operations | $4.10 | $0.83 | $3.08 | $5.88 | $0.52 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.38 | ) | $(0.52 | ) | $(0.63 | ) | $(0.55 | ) | $(0.45 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.77 | ) | $(1.67 | ) | $(1.09 | ) | $(0.59 | ) | $(1.06 | ) | ||||||||||
Net asset value, end of period (x) | $44.11 | $41.78 | $42.62 | $40.63 | $35.34 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 9.81 | 2.28 | 7.61 | 16.93 | (c) | 1.62 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | 0.99 | 0.98 | 1.04 | (c) | 1.10 | ||||||||||||||
Expenses after expense reductions (f) | 0.98 | 0.98 | 0.97 | 1.00 | (c) | 1.01 | ||||||||||||||
Net investment income (loss) | 0.49 | 0.97 | 1.06 | 1.08 | (c) | 1.47 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,320,257 | $1,353,427 | $1,450,342 | $1,406,181 | $1,165,637 |
See Notes to Financial Statements
24
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $42.20 | $43.03 | $41.01 | $35.66 | $36.19 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.33 | $0.51 | $0.55 | $0.49 | (c) | $0.60 | ||||||||||||||
Net realized and unrealized gain (loss) | 3.93 | 0.44 | 2.66 | 5.53 | 0.02 | |||||||||||||||
Total from investment operations | $4.26 | $0.95 | $3.21 | $6.02 | $0.62 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.49 | ) | $(0.63 | ) | $(0.73 | ) | $(0.63 | ) | $(0.54 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.88 | ) | $(1.78 | ) | $(1.19 | ) | $(0.67 | ) | $(1.15 | ) | ||||||||||
Net asset value, end of period (x) | $44.58 | $42.20 | $43.03 | $41.01 | $35.66 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 10.09 | 2.56 | 7.85 | 17.23 | (c) | 1.87 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | 0.74 | 0.73 | 0.79 | (c) | 0.85 | ||||||||||||||
Expenses after expense reductions (f) | 0.73 | 0.73 | 0.72 | 0.75 | (c) | 0.76 | ||||||||||||||
Net investment income (loss) | 0.75 | 1.22 | 1.30 | 1.32 | (c) | 1.74 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,019,909 | $1,048,956 | $1,157,723 | $1,134,929 | $1,077,352 | |||||||||||||||
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $42.24 | $43.09 | $41.06 | $35.70 | $36.23 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.37 | $0.56 | $0.62 | $0.55 | (c) | $0.64 | ||||||||||||||
Net realized and unrealized gain (loss) | 3.94 | 0.42 | 2.64 | 5.52 | 0.01 | |||||||||||||||
Total from investment operations | $4.31 | $0.98 | $3.26 | $6.07 | $0.65 | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.53 | ) | $(0.68 | ) | $(0.77 | ) | $(0.67 | ) | $(0.57 | ) | ||||||||||
From net realized gain | (1.39 | ) | (1.15 | ) | (0.46 | ) | (0.04 | ) | (0.61 | ) | ||||||||||
Total distributions declared to shareholders | $(1.92 | ) | $(1.83 | ) | $(1.23 | ) | $(0.71 | ) | $(1.18 | ) | ||||||||||
Net asset value, end of period (x) | $44.63 | $42.24 | $43.09 | $41.06 | $35.70 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 10.21 | 2.64 | 7.97 | 17.37 | (c) | 1.97 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f) | 0.63 | 0.63 | 0.63 | 0.69 | (c) | 0.74 | ||||||||||||||
Expenses after expense reductions (f) | 0.62 | 0.62 | 0.62 | 0.65 | (c) | 0.66 | ||||||||||||||
Net investment income (loss) | 0.85 | 1.34 | 1.46 | 1.49 | (c) | 1.85 | ||||||||||||||
Portfolio turnover | 7 | 6 | 14 | 7 | 14 | |||||||||||||||
Net assets at end of period (000 omitted) | $11,561,818 | $10,706,826 | $10,625,510 | $4,751,104 | $3,485,253 |
See Notes to Financial Statements
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Financial Highlights – continued
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(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
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(1) Business and Organization
MFS International Intrinsic Value Fund (the fund) is a diversified series of MFS Series Trust X (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 invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industrial, political, regulatory, geopolitical, and other conditions.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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.
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Notes to Financial Statements – continued
Investment Valuations – 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. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
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Notes to Financial Statements – continued
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 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 forward foreign currency exchange contracts. The following is a summary of the levels used as of May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
Japan | $5,984,874,516 | $— | $— | $5,984,874,516 | ||||||||||||
United States | 3,793,029,784 | — | — | 3,793,029,784 | ||||||||||||
Switzerland | — | 3,636,808,049 | — | 3,636,808,049 | ||||||||||||
France | 125,930,038 | 3,372,709,728 | — | 3,498,639,766 | ||||||||||||
United Kingdom | — | 3,268,239,302 | — | 3,268,239,302 | ||||||||||||
Germany | 1,067,447,785 | 1,143,979,381 | — | 2,211,427,166 | ||||||||||||
Canada | 698,298,103 | — | — | 698,298,103 | ||||||||||||
Taiwan | 622,735,204 | — | — | 622,735,204 | ||||||||||||
Spain | — | 422,683,918 | — | 422,683,918 | ||||||||||||
Other Countries | 706,154,719 | 1,224,686,071 | — | 1,930,840,790 | ||||||||||||
Mutual Funds | 1,543,298,458 | — | — | 1,543,298,458 | ||||||||||||
Total | $14,541,768,607 | $13,069,106,449 | $— | $27,610,875,056 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts – Liabilities | $— | $(27,523,223 | ) | $— | $(27,523,223 | ) |
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
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Notes to Financial Statements – continued
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 forward foreign currency exchange contracts. Depending on the type of derivative, the 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’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 May 31, 2020 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||
Risk | Derivative Contracts | Liability Derivatives | ||||
Foreign Exchange | Forward Foreign Currency Exchange Contracts | $ | (27,523,223 | ) |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended May 31, 2020 as reported in the Statement of Operations:
Risk | Forward Foreign Currency Exchange Contracts | |||
Foreign Exchange | $38,103,739 |
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 May 31, 2020 as reported in the Statement of Operations:
Risk | Forward Foreign Currency Exchange Contracts | |||
Foreign Exchange | $(12,057,675 | ) |
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
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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 collateral 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.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on forward foreign currency exchange contracts.
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Notes to Financial Statements – continued
Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, a multicurrency cash settlement system for the centralized settlement of foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, 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. 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 $10,892,696. The fair value of the fund’s investment securities on loan and a related liability of $11,043,534 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. 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,
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Notes to Financial Statements – continued
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 – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. 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 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.
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, derivative transactions, treating a portion of the proceeds from redemptions as a distribution for tax purposes, and foreign taxes.
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Notes to Financial Statements – continued
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $318,778,739 | $400,002,723 | ||||||
Long-term capital gains | 851,724,434 | 745,002,377 | ||||||
Total distributions | $1,170,503,173 | $1,145,005,100 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $18,511,288,799 | |||
Gross appreciation | 9,871,995,275 | |||
Gross depreciation | (799,932,241 | ) | ||
Net unrealized appreciation (depreciation) | $9,072,063,034 | |||
Undistributed ordinary income | 142,832,068 | |||
Undistributed long-term capital gain | 740,757,209 | |||
Other temporary differences | (2,672,459 | ) |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $113,265,526 | $126,907,599 | ||||||
Class B | 1,068,147 | 1,328,470 | ||||||
Class C | 16,217,262 | 19,187,689 | ||||||
Class I | 434,142,654 | 446,208,634 | ||||||
Class R1 | 360,163 | 414,071 | ||||||
Class R2 | 10,019,225 | 12,331,518 | ||||||
Class R3 | 56,109,021 | 54,297,176 | ||||||
Class R4 | 43,680,889 | 44,122,013 | ||||||
Class R6 | 495,640,286 | 440,207,930 | ||||||
Total | $1,170,503,173 | $1,145,005,100 |
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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 $1 billion | 0.90 | % | ||
In excess of $1 billion and up to $2 billion | 0.80 | % | ||
In excess of $2 billion and up to $10 billion | 0.70 | % | ||
In excess of $10 billion and up to $15 billion | 0.65 | % | ||
In excess of $15 billion and up to $20 billion | 0.55 | % | ||
In excess of $20 billion and up to $25 billion | 0.50 | % | ||
In excess of $25 billion and up to $30 billion | 0.45 | % | ||
In excess of $30 billion and up to $35 billion | 0.43 | % | ||
In excess of $35 billion | 0.41 | % |
MFS has also 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. For the year ended May 31, 2020, this management fee reduction amounted to $2,843,226, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.60% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $41,509 for the year ended May 31, 2020, 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.
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% | $7,076,936 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 314,841 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 4,523,795 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 100,732 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 1,264,341 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 3,417,855 | |||||||||||||||
Total Distribution and Service Fees |
| $16,698,500 |
(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. |
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(e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended May 31, 2020 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 May 31, 2020, this rebate amounted to $7,678, $12, $224, and $14 for Class A, Class B, Class C, and Class R3, 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 May 31, 2020, were as follows:
Amount | ||||
Class A | $5,369 | |||
Class B | 21,359 | |||
Class C | 5,002 |
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 May 31, 2020, the fee was $323,521, which equated to 0.0012% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $17,511,198.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0020% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and
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was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $12,950 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended May 31, 2020, the fund engaged in sale transactions pursuant to this policy, which amounted to $10,224,984. The sales transactions resulted in net realized gains (losses) of $4,340,692.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $1,872,547,122 and $4,572,484,181, respectively.
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 9,489,966 | $406,662,902 | 13,166,328 | $540,261,338 | ||||||||||||
Class B | 1,899 | 79,845 | 16,719 | 661,100 | ||||||||||||
Class C | 219,520 | 8,683,562 | 312,436 | 11,615,504 | ||||||||||||
Class I | 28,106,233 | 1,257,995,288 | 36,433,894 | 1,581,116,677 | ||||||||||||
Class R1 | 43,392 | 1,696,952 | 47,621 | 1,815,762 | ||||||||||||
Class R2 | 772,296 | 31,195,475 | 1,087,770 | 42,221,562 | ||||||||||||
Class R3 | 5,835,690 | 250,654,235 | 5,824,254 | 241,034,368 | ||||||||||||
Class R4 | 5,709,984 | 250,380,836 | 4,825,043 | 199,950,996 | ||||||||||||
Class R6 | 44,611,383 | 1,961,893,209 | 55,642,556 | 2,309,476,613 | ||||||||||||
94,790,363 | $4,169,242,304 | 117,356,621 | $4,928,153,920 |
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Notes to Financial Statements – continued
Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 2,278,606 | $101,648,593 | 2,954,730 | $114,407,149 | ||||||||||||
Class B | 23,423 | 994,760 | 33,939 | 1,252,680 | ||||||||||||
Class C | 359,759 | 14,501,899 | 491,991 | 17,278,735 | ||||||||||||
Class I | 8,181,128 | 383,858,540 | 9,691,642 | 393,868,340 | ||||||||||||
Class R1 | 8,825 | 360,163 | 11,651 | 414,071 | ||||||||||||
Class R2 | 233,618 | 9,704,485 | 321,327 | 11,615,980 | ||||||||||||
Class R3 | 1,268,000 | 56,109,021 | 1,412,885 | 54,297,176 | ||||||||||||
Class R4 | 876,284 | 39,143,625 | 1,028,965 | 39,892,980 | ||||||||||||
Class R6 | 10,561,776 | 472,111,394 | 10,783,392 | 418,287,784 | ||||||||||||
23,791,419 | $1,078,432,480 | 26,730,522 | $1,051,314,895 | |||||||||||||
Shares reacquired |
| |||||||||||||||
Class A | (22,469,987 | ) | $(956,526,809 | ) | (29,557,941 | ) | $(1,208,710,690 | ) | ||||||||
Class B | (316,761 | ) | (12,848,751 | ) | (301,388 | ) | (11,880,957 | ) | ||||||||
Class C | (3,759,248 | ) | (146,118,818 | ) | (3,879,266 | ) | (145,637,275 | ) | ||||||||
Class I | (58,492,147 | ) | (2,603,033,876 | ) | (59,793,490 | ) | (2,600,814,318 | ) | ||||||||
Class R1 | (103,564 | ) | (4,130,127 | ) | (93,880 | ) | (3,574,394 | ) | ||||||||
Class R2 | (3,232,204 | ) | (129,090,822 | ) | (2,801,384 | ) | (109,151,068 | ) | ||||||||
Class R3 | (9,570,168 | ) | (408,046,750 | ) | (8,875,155 | ) | (366,332,163 | ) | ||||||||
Class R4 | (8,566,756 | ) | (372,768,236 | ) | (7,897,510 | ) | (330,272,555 | ) | ||||||||
Class R6 | (49,587,172 | ) | (2,107,460,967 | ) | (59,556,093 | ) | (2,499,451,378 | ) | ||||||||
(156,098,007 | ) | $(6,740,025,156 | ) | (172,756,107 | ) | $(7,275,824,798 | ) | |||||||||
Net change | ||||||||||||||||
Class A | (10,701,415 | ) | $(448,215,314 | ) | (13,436,883 | ) | $(554,042,203 | ) | ||||||||
Class B | (291,439 | ) | (11,774,146 | ) | (250,730 | ) | (9,967,177 | ) | ||||||||
Class C | (3,179,969 | ) | (122,933,357 | ) | (3,074,839 | ) | (116,743,036 | ) | ||||||||
Class I | (22,204,786 | ) | (961,180,048 | ) | (13,667,954 | ) | (625,829,301 | ) | ||||||||
Class R1 | (51,347 | ) | (2,073,012 | ) | (34,608 | ) | (1,344,561 | ) | ||||||||
Class R2 | (2,226,290 | ) | (88,190,862 | ) | (1,392,287 | ) | (55,313,526 | ) | ||||||||
Class R3 | (2,466,478 | ) | (101,283,494 | ) | (1,638,016 | ) | (71,000,619 | ) | ||||||||
Class R4 | (1,980,488 | ) | (83,243,775 | ) | (2,043,502 | ) | (90,428,579 | ) | ||||||||
Class R6 | 5,585,987 | 326,543,636 | 6,869,855 | 228,313,019 | ||||||||||||
(37,516,225 | ) | $(1,492,350,372 | ) | (28,668,964 | ) | $(1,296,355,983 | ) |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
Effective at the close of business on May 29, 2015, the fund is closed to new investors subject to certain exceptions. Please see the fund’s prospectus for details.
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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 was the owner of record of approximately 18% of the value of outstanding voting shares of the fund. In addition, the MFS Aggressive Growth Allocation Fund, the MFS Conservative Allocation Fund, the MFS Growth Allocation Fund, the MFS Lifetime 2020 Fund, 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 Income Fund, and the MFS Moderate Allocation Fund were each the owners of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $148,269 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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(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 | ||||||||||||||||||
Cadence Design Systems, Inc.* | $913,507,956 | $— | $45,739,369 | $21,264,441 | $359,264,058 | $— | ||||||||||||||||||
Core Laboratories N.V. | 101,471,294 | 14,397,152 | 280,270 | (2,710,068 | ) | (64,976,746 | ) | 47,901,362 | ||||||||||||||||
Hirose Electric Co. Ltd. | 271,077,571 | 42,778,895 | 2,816,251 | (987,744 | ) | 30,287,396 | 340,339,867 | |||||||||||||||||
IMI PLC | 221,959,593 | — | 16,303,630 | (4,696,673 | ) | 1,650,124 | 202,609,414 | |||||||||||||||||
ITO EN Ltd. | 340,509,654 | — | 3,956,836 | 726,721 | 71,891,531 | 409,171,070 | ||||||||||||||||||
Kobayashi Pharmaceutical Co. Ltd. | 320,981,984 | — | 4,289,882 | 2,864,190 | 63,144,065 | 382,700,357 | ||||||||||||||||||
MFS Institutional Money Market Portfolio | 1,214,534,644 | 3,164,390,410 | 2,846,867,418 | 137,258 | 60,030 | 1,532,254,924 | ||||||||||||||||||
Nihon Kohden Corp. | 226,537,529 | — | 2,826,721 | 695,455 | 37,169,197 | 261,575,460 | ||||||||||||||||||
ROHTO Pharmaceutical Co. Ltd. | 154,017,877 | 44,527,222 | 2,206,866 | (77,595 | ) | 22,286,221 | 218,546,859 | |||||||||||||||||
Toyo Suisan Kaisha Ltd. | 312,022,369 | — | 16,053,988 | 2,579,868 | 99,944,764 | 398,493,013 | ||||||||||||||||||
$4,076,620,471 | $3,266,093,679 | $2,941,341,231 | $19,795,853 | $620,720,640 | $3,793,592,326 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||
Cadence Design Systems, Inc.* | $— | $— | ||||||
Core Laboratories N.V. | 2,767,450 | — | ||||||
Hirose Electric Co. Ltd. | 5,063,112 | — | ||||||
IMI PLC | 3,317,711 | — | ||||||
ITO EN Ltd. | 2,320,100 | — | ||||||
Kobayashi Pharmaceutical Co. Ltd. | 2,541,853 | — | ||||||
MFS Institutional Money Market Portfolio | 21,733,666 | — | ||||||
Nihon Kohden Corp. | 2,243,427 | — | ||||||
ROHTO Pharmaceutical Co. Ltd. | 1,407,203 | — | ||||||
Toyo Suisan Kaisha Ltd. | 5,152,280 | — | ||||||
$46,546,802 | $— |
* | Held at period end. No longer considered an affiliated issuer. |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of MFS International Intrinsic Value Fund and the Board of Trustees of MFS Series Trust X
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS International Intrinsic Value Fund (the “Fund”) (one of the funds constituting MFS Series Trust X (the “Trust”)), including the portfolio of investments, as of May 31, 2020, 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 X) at May 31, 2020, 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.
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 May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting
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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
July 17, 2020
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
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) | ||
Philip Evans Pablo de la Mata Benjamin Stone |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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 $1,028,438,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 11.58% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
Income derived from foreign sources was $394,908,296. The fund intends to pass through foreign tax credits of $42,533,181 for the fiscal year.
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rev. 3/16
| 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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Save paper with eDelivery.
MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Table of Contents
Annual Report
May 31, 2020
MFS® Managed Wealth Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the complete reports will be made available on the fund’s Web site (funds.mfs.com), and you will be notified by mail each time a report is posted and provided with a Web site link to access the report.
If you are already signed up to receive shareholder reports by email, you will not be affected by this change and you need not take any action. You may sign up to receive shareholder reports and other communications from the fund by email by contacting your financial intermediary (such as a broker-dealer or bank) or, if you hold your shares directly with the fund, by calling 1-800-225-2606 or by logging on to MFS Access at mfs.com.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. Contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you can call 1-800-225-2606 or send an email request to orderliterature@mfs.com to let the fund know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the MFS fund complex if you invest directly.
MGW-ANN
Table of Contents
MFS® Managed Wealth Fund
Contact information | 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
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LETTER FROM THE EXECUTIVE CHAIR
Dear Shareholders:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the
development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year.
Global central banks have taken aggressive, coordinated steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal stimulus. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery;
however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely as households, businesses, and governments adjust to a new reality, and these alterations could change the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our powerful global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
July 17, 2020
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Active Security Selection (a) | Derivative Overlay Positions (b) | Net Market Exposure (c) | ||||||||||||
Strategic Allocation | MFS Value Fund | 30.7% | ||||||||||||
MFS Institutional International Equity Fund | 30.6% | |||||||||||||
MFS Growth Fund | 30.1% | |||||||||||||
Market Exposure Overlay | Mini Russell 1000 Growth Index Future JUN 19 20 | (26.6)% | ||||||||||||
Mini MSCI EAFE Index Future JUN 19 20 | (27.1)% | |||||||||||||
Mini Russell 1000 Value Index Future JUN 19 20 | (27.2)% | |||||||||||||
Net Equity Exposure | 10.5% | |||||||||||||
Standard & Poors 500 Index Option 2000.00 PUT SEP 18 20 | (0.1)% | |||||||||||||
Standard & Poors 500 Index Option 2625.00 PUT DEC 18 20 | (0.1)% | |||||||||||||
Standard & Poors 500 Index Option 2975.00 PUT JUN 19 20 | (0.5)% | |||||||||||||
Standard & Poors Index Option PUT(s) | (0.7)% | |||||||||||||
Downside Hedge(s) | (0.7)% | |||||||||||||
Net Equivalent Equity Exposure | 91.4% | (81.6)% | 9.8% | |||||||||||
Limited Maturity U.S. Treasury Notes | 1.1% | |||||||||||||
Cash | Cash & Cash Equivalent (d) | 7.4% | ||||||||||||
Other (e) | 81.7% | |||||||||||||
Total Net Exposure Summary | 100.0% |
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Portfolio Composition – continued
Top ten holdings (c)(i) | ||||
Microsoft Corp. | 2.8% | |||
Amazon.com, Inc. | 2.2% | |||
Nestle S.A. | 1.9% | |||
Roche Holding AG | 1.4% | |||
Adobe Systems, Inc. | 1.4% | |||
Johnson & Johnson | 1.3% | |||
Alphabet, Inc., “A” | 1.3% | |||
Mini Russell 1000 Growth Index Future - JUN 2020 | (26.6)% | |||
Mini MSCI EAFE Index Future - JUN 2020 | (27.1)% | |||
Mini Russell 1000 Value Index Future - JUN 2020 | (27.2)% |
(a) | Represents the actively managed portion of the portfolio and for purposes of this presentation, components include the value of securities, less any securities sold short. The bond component will include any accrued interest amounts. This also reflects the equivalent exposure of certain derivative positions. These amounts may be negative from time to time. |
(b) | Represents the tactical overlay portion of the portfolio which is how the fund manages its exposure to markets and currencies through the use of derivative positions. Percentages reflect the equivalent exposure of those derivative positions. |
(c) | For purposes of this presentation, the components include the value of securities, less any securities sold short, and reflect the impact of the equivalent exposure of all derivative positions. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. |
(d) | 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. |
(e) | Other includes currency derivatives and/or the offsetting of the leverage produced by the fund’s derivative positions, including payables and/or receivables of the finance leg of interest rate swaps and the unrealized gain or loss in connection with forward currency exchange contracts. |
(i) | For purposes of this presentation, the components include a look-through to the individual holdings within the underlying affiliated funds. |
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 value of derivatives may be different.
Where the fund holds convertible bonds, they are treated as part of the equity portion of the portfolio.
Percentages are based on net assets as of May 31, 2020.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
The MFS Managed Wealth Fund’s (fund) investment objective is to seek total return. MFS seeks to achieve the fund’s objective by generating returns from (1) a strategic allocation to three MFS equity funds, referred to as underlying funds, and (2) a tactical asset allocation overlay primarily using derivative instruments to seek to decrease the volatility of the fund’s returns by reducing the fund’s exposure to the equity and/or currency markets as represented by the underlying funds and also to potentially expose the fund to asset classes and/or markets in which the underlying funds have little or no exposure. In addition, MFS may seek to limit the fund’s exposure to certain extreme market events. It is expected that the fund will generally have lower volatility than the overall equity market and will generally underperform the equity markets during periods of rising equity markets.
A committee of portfolio managers (committee) is responsible for selecting the underlying funds, determining the target strategic allocations to the underlying funds, and determining the fund’s tactical allocation overlay.
For the twelve months ended May 31, 2020, Class A shares of the fund provided a total return of 6.30%, at net asset value. This compares with a return of 1.66% for the fund’s benchmark, the ICE BofA 0-3 Month U.S. Treasury Bill Index (formerly BofA Merrill Lynch 0-3 Month U.S. Treasury Bill Index). The fund’s other benchmark, the Standard & Poor’s 500 Stock Index, generated a return of 12.84%.
Market Environment
Markets experienced an extraordinarily sharp selloff and in many cases an unusually rapid partial recovery late in the period. Central banks and fiscal authorities undertook astonishing levels of stimulus to offset the economic effects of government-imposed social-distancing measures implemented to slow the spread of COVID-19. Despite policymakers’ best efforts, a global recession has undoubtedly begun.
Compounding market uncertainty earlier in the coronavirus pandemic was a crash in the price of crude oil due to a sharp drop in global demand and a disagreement between Saudi Arabia and Russia over production cuts, which resulted in a price war. The subsequent decline in prices undercut oil exporters, many of which are in emerging markets, as well as a large segment of the high-yield credit market. OPEC+ later agreed on output cuts, which – along with the gradual reopening of some major economies and resultant boost in demand – helped stabilize the price of crude.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. They proved largely successful in helping to restore market function, easing volatility and stimulating a market rebound at the end of the period. Monetary easing measures were complemented by large fiscal stimulus plans in developed countries. Even emerging market countries were able to implement countercyclical policies – a departure from the usual market-dictated response to risk-off crises – due to relatively manageable external liabilities and balances of payments in many countries, along with persistently low inflation.
As is often the case in a crisis, market vulnerabilities were revealed. For example, companies that added significant leverage to their balance sheets in recent years by
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Management Review – continued
borrowing to fund dividend payments and stock buybacks may find it difficult to follow that path in the future, and investors may not reward them if they do. Recapitalizations by some of these highly leveraged firms could dilute existing shareholders. Very long supply chains designed to squeeze out every bit of savings may be shifted closer to home markets if companies seek to put resiliency before cost after a series of supply disruptions. The aftereffects of the pandemic could affect consumer, business and government behavior in ways difficult to forecast. Also, while markets have regained lost ground more swiftly than expected, any economic recovery is likely to be protracted.
Factors Affecting Performance
During the reporting period, the fund’s short exposure to futures contracts on the Russell 1000® Growth Index was a detractor from absolute performance.
The committee reduced the fund’s net equity exposure from 20% to 10%, compared to the fund’s neutral equity market exposure of 50%, given the committee’s view of the poor risk/return tradeoff in equity markets. The setting of the fund’s equity exposure at approximately 10% reflects the committee’s ongoing long-term views of the equity markets and is consistent with its objectives, such as reducing volatility.
Conversely, the fund’s allocation to large cap growth equities, represented by the MFS Growth Fund, and the fund’s short positions in futures contracts on the Russell 1000® Value Index and MSCI EAFE Index, were the most notable contributors to absolute performance.
Respectfully,
Portfolio Manager(s)
William Adams, Robert Almeida, Mike Roberge, and Barnaby Wiener
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.
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PERFORMANCE SUMMARY THROUGH 5/31/20
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 (t)
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Performance Summary – continued
Total Returns through 5/31/20
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | Life (t) | ||||||||
A | 6/27/14 | 6.30% | 3.67% | 3.51% | ||||||||
B | 6/27/14 | 5.35% | 2.77% | 2.58% | ||||||||
C | 6/27/14 | 5.27% | 2.76% | 2.59% | ||||||||
I | 6/27/14 | 6.33% | 3.79% | 3.61% | ||||||||
R1 | 6/27/14 | 5.35% | 2.75% | 2.58% | ||||||||
R2 | 6/27/14 | 5.79% | 3.27% | 3.10% | ||||||||
R3 | 6/27/14 | 6.00% | 3.52% | 3.35% | ||||||||
R4 | 6/27/14 | 6.43% | 3.79% | 3.61% | ||||||||
R6 | 10/02/17 | 6.44% | N/A | 5.59% | ||||||||
Comparative benchmark(s) | ||||||||||||
ICE BofA 0-3 Month U.S. Treasury Bill Index (f) | 1.66% | 1.12% | 0.94% | |||||||||
Standard & Poor’s 500 Stock Index (f) | 12.84% | 9.86% | 9.95% | |||||||||
Average annual with sales charge | ||||||||||||
A With Initial Sales Charge (5.75%) | 0.19% | 2.45% | 2.48% | |||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 1.35% | 2.41% | 2.43% | |||||||||
C With CDSC (1% for 12 months) (v) | 4.27% | 2.76% | 2.59% |
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. |
(t) | For the period from the class inception date through the stated period end. The comparative benchmark performance information provided for the “life” period is from the inception date of the Class A shares. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
ICE BofA 0-3 Month U.S. Treasury Bill Index (formerly BofA Merrill Lynch 0-3 Month U.S. Treasury Bill Index) – tracks the performance of U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months. Source ICE Data Indices, LLC (”ICE Data”), is used with permission. ICE Data, its affiliates and their respective third party suppliers disclaim any and all warranties and representations, express and/or implied, including any warranties of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither ICE Data, its affiliates nor their respective third party suppliers shall be subject to any damages or liability with respect the adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and the index data and all
7
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Performance Summary – continued
components thereof are provided on an “as is” basis and your use is at your own risk. ICE Data, its affiliates and their respective third party suppliers do not sponsor, endorse or recommend MFS, or any of its products or services.
Standard & Poor’s 500 Stock Index – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. “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).
It is not possible to invest directly in an index.
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable.
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.
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Fund expenses borne by the shareholders during the period, December 1, 2019 through May 31, 2020
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.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Because the underlying funds have varied expenses and fee levels and the fund may own different proportions of the underlying funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. If these transactional and indirect costs were included, your costs would have been higher.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2019 through May 31, 2020.
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.
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 12/01/19 | Ending Account Value | Expenses Paid During 12/01/19-5/31/20 | ||||||||||||||
A | Actual | 0.75% | $1,000.00 | $1,038.28 | $3.82 | |||||||||||||
Hypothetical (h) | 0.75% | $1,000.00 | $1,021.25 | $3.79 | ||||||||||||||
B | Actual | 1.67% | $1,000.00 | $1,034.07 | $8.49 | |||||||||||||
Hypothetical (h) | 1.67% | $1,000.00 | $1,016.65 | $8.42 | ||||||||||||||
C | Actual | 1.67% | $1,000.00 | $1,033.27 | $8.49 | |||||||||||||
Hypothetical (h) | 1.67% | $1,000.00 | $1,016.65 | $8.42 | ||||||||||||||
I | Actual | 0.67% | $1,000.00 | $1,038.66 | $3.41 | |||||||||||||
Hypothetical (h) | 0.67% | $1,000.00 | $1,021.65 | $3.39 | ||||||||||||||
R1 | Actual | 1.67% | $1,000.00 | $1,033.12 | $8.49 | |||||||||||||
Hypothetical (h) | 1.67% | $1,000.00 | $1,016.65 | $8.42 | ||||||||||||||
R2 | Actual | 1.17% | $1,000.00 | $1,035.93 | $5.96 | |||||||||||||
Hypothetical (h) | 1.17% | $1,000.00 | $1,019.15 | $5.91 | ||||||||||||||
R3 | Actual | 0.92% | $1,000.00 | $1,037.22 | $4.69 | |||||||||||||
Hypothetical (h) | 0.92% | $1,000.00 | $1,020.40 | $4.65 | ||||||||||||||
R4 | Actual | 0.67% | $1,000.00 | $1,038.63 | $3.41 | |||||||||||||
Hypothetical (h) | 0.67% | $1,000.00 | $1,021.65 | $3.39 | ||||||||||||||
R6 | Actual | 0.62% | $1,000.00 | $1,038.75 | $3.16 | |||||||||||||
Hypothetical (h) | 0.62% | $1,000.00 | $1,021.90 | $3.13 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Notes to Expense Table
Each class with a Rule 12b-1 service fee is subject to a rebate of a portion of such fee. Such rebates are included in the expense ratios above and are outside of the expense limitation arrangement. For Class A shares, this rebate reduced the expense ratio above by 0.17%. See Note 3 in the Notes to Financial Statements for additional information.
Expense ratios include 0.01% of interest expense on uncovered collateral or margin obligations with the broker (See Note 2 of the Notes to Financial Statements) that are outside of the expense limitation arrangement (See Note 3 of the Notes to Financial Statements).
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5/31/20
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
Bonds - 1.1% | ||||||||
U.S. Treasury Obligations - 1.1% | ||||||||
U.S. Treasury Notes, 1.875%, 6/30/2020 (f) | $ | 200,000 | $ | 200,281 | ||||
U.S. Treasury Notes, 2%, 9/30/2020 (f) | 200,000 | 201,188 | ||||||
U.S. Treasury Notes, 2.375%, 12/31/2020 (f) | 200,000 | 202,539 | ||||||
U.S. Treasury Notes, 2.25%, 3/31/2021 (f) | 200,000 | 203,398 | ||||||
U.S. Treasury Notes, 2.625%, 6/15/2021 (f) | 200,000 | 205,024 | ||||||
U.S. Treasury Notes, 1.125%, 9/30/2021 (f) | 200,000 | 202,492 | ||||||
Total Bonds (Identified Cost, $1,202,333) | $ | 1,214,922 | ||||||
Investment Companies (h) - 91.5% | ||||||||
International Stock Funds - 30.6% | ||||||||
MFS Institutional International Equity Fund | 1,350,174 | $ | 33,133,260 | |||||
U.S. Stock Funds - 60.8% | ||||||||
MFS Growth Fund - Class R6 | 240,314 | $ | 32,632,249 | |||||
MFS Value Fund - Class R6 | 857,941 | 33,219,479 | ||||||
|
| |||||||
$ | 65,851,728 | |||||||
Money Market Funds - 0.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.19% (v) | 52,992 | $ | 52,997 | |||||
Total Investment Companies (Identified Cost, $83,390,818) | $ | 99,037,985 |
Underlying/Expiration Date/Exercise Price | Put/Call | Counterparty | Notional Amount | Par Amount/ Number of Contracts | ||||||||||||||||
Purchased Options - 0.1% | ||||||||||||||||||||
Market Index Securities - 0.1% | ||||||||||||||||||||
S&P 500 Index - June 2020 @ $2,975 | Put | Exchange Traded | $ | 1,522,155 | 5 | $ | 20,075 | |||||||||||||
S&P 500 Index - September 2020 @ $2,000 | Put | Exchange Traded | 3,044,310 | 10 | 13,200 | |||||||||||||||
S&P 500 Index - December 2020 @ $2,625 | Put | Exchange Traded | 608,862 | 2 | 24,866 | |||||||||||||||
Total Purchased Options (Premiums Paid, $90,521) |
| $ | 58,141 | |||||||||||||||||
Other Assets, Less Liabilities - 7.3% | 7,928,603 | |||||||||||||||||||
Net Assets - 100.0% | $ | 108,239,651 |
11
Table of Contents
Portfolio of Investments – continued
(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 $99,037,985 and $1,273,063, respectively. |
(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. |
Derivative Contracts at 5/31/20
Futures Contracts
Description | Long/ Short | Currency | Contracts | Notional Amount | Expiration Date | Value/ Unrealized Appreciation (Depreciation) | ||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||
Equity Futures | ||||||||||||||||||||||
Mini MSCI EAFE Index | Short | USD | 340 | $29,335,200 | June - 2020 | $(3,517,977 | ) | |||||||||||||||
Mini Russell 1000 Growth Index | Short | USD | 311 | 28,842,140 | June - 2020 | (5,312,302 | ) | |||||||||||||||
Mini Russell 1000 Value Index | Short | USD | 525 | 29,439,375 | June - 2020 | (3,670,549 | ) | |||||||||||||||
|
| |||||||||||||||||||||
$(12,500,828 | ) | |||||||||||||||||||||
|
|
At May 31, 2020, the fund had cash collateral of $7,252,074 and other liquid securities with an aggregate value of $1,214,924 to cover any collateral or margin obligations for certain derivative contracts. Restricted cash and/or deposits with brokers in the Statement of Assets and Liabilities are comprised of cash collateral.
See Notes to Financial Statements
12
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20
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, $1,292,854) | $1,273,063 | |||
Investments in affiliated issuers, at value (identified cost, $83,390,818) | 99,037,985 | |||
Deposit with brokers for | ||||
Futures contracts | 7,252,074 | |||
Receivables for | ||||
Fund shares sold | 1,269,146 | |||
Interest | 7,818 | |||
Receivable from investment adviser | 16,692 | |||
Receivable from distributor | 2,306 | |||
Other assets | 226 | |||
Total assets | $108,859,310 | |||
Liabilities | ||||
Payables for | ||||
Net daily variation margin on open futures contracts | $210,811 | |||
Investments purchased | 27,673 | |||
Fund shares reacquired | 295,885 | |||
Payable to affiliates | ||||
Administrative services fee | 279 | |||
Shareholder servicing costs | 11,618 | |||
Payable for independent Trustees’ compensation | 13 | |||
Accrued expenses and other liabilities | 73,380 | |||
Total liabilities | $619,659 | |||
Net assets | $108,239,651 | |||
Net assets consist of | ||||
Paid-in capital | $103,171,787 | |||
Total distributable earnings (loss) | 5,067,864 | |||
Net assets | $108,239,651 | |||
Shares of beneficial interest outstanding | 9,365,670 |
13
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $12,825,954 | 1,111,198 | $11.54 | |||||||||
Class B | 75,338 | 6,709 | 11.23 | |||||||||
Class C | 2,462,023 | 220,200 | 11.18 | |||||||||
Class I | 78,291,737 | 6,766,959 | 11.57 | |||||||||
Class R1 | 58,253 | 5,187 | 11.23 | |||||||||
Class R2 | 59,694 | 5,198 | 11.48 | |||||||||
Class R3 | 60,369 | 5,228 | 11.55 | |||||||||
Class R4 | 61,063 | 5,279 | 11.57 | |||||||||
Class R6 | 14,345,220 | 1,239,712 | 11.57 |
(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 $12.24 [100 / 94.25 x $11.54]. 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
14
Table of Contents
Financial Statements
Year ended 5/31/20
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 from affiliated issuers | $697,517 | |||
Interest | 32,517 | |||
Total investment income | $730,034 | |||
Expenses | ||||
Management fee | $183,014 | |||
Distribution and service fees | 39,538 | |||
Shareholder servicing costs | 25,321 | |||
Administrative services fee | 18,473 | |||
Independent Trustees’ compensation | 1,277 | |||
Custodian fee | 11,058 | |||
Shareholder communications | 12,251 | |||
Audit and tax fees | 45,765 | |||
Legal fees | 601 | |||
Registration fees | 144,536 | |||
Miscellaneous | 48,707 | |||
Total expenses | $530,541 | |||
Reduction of expenses by investment adviser and distributor | (160,166 | ) | ||
Net expenses | $370,375 | |||
Net investment income (loss) | $359,659 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $198,165 | |||
Affiliated issuers | (348,334 | ) | ||
Capital gain distributions from affiliated issuers | 512,960 | |||
Written options | 55,814 | |||
Futures contracts | 5,866,370 | |||
Net realized gain (loss) | $6,284,975 | |||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $14,257 | |||
Affiliated issuers | 9,670,743 | |||
Futures contracts | (12,823,779 | ) | ||
Net unrealized gain (loss) | $(3,138,779 | ) | ||
Net realized and unrealized gain (loss) | $3,146,196 | |||
Change in net assets from operations | $3,505,855 |
See Notes to Financial Statements
15
Table of Contents
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 | ||||||||
5/31/20 | 5/31/19 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $359,659 | $201,677 | ||||||
Net realized gain (loss) | 6,284,975 | 927,218 | ||||||
Net unrealized gain (loss) | (3,138,779 | ) | 810,661 | |||||
Change in net assets from operations | $3,505,855 | $1,939,556 | ||||||
Total distributions to shareholders | $(240,022 | ) | $(125,006 | ) | ||||
Change in net assets from fund share transactions | $65,580,651 | $12,691,789 | ||||||
Total change in net assets | $68,846,484 | $14,506,339 | ||||||
Net assets | ||||||||
At beginning of period | 39,393,167 | 24,886,828 | ||||||
At end of period | $108,239,651 | $39,393,167 |
See Notes to Financial Statements
16
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). 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 | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.91 | $10.37 | $10.14 | $10.00 | $10.17 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.09 | $0.07 | $0.04 | $0.05 | $0.02 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.60 | 0.51 | 0.27 | 0.34 | (0.08 | ) | ||||||||||||||
Total from investment operations | $0.69 | $0.58 | $0.31 | $0.39 | $(0.06 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.04 | ) | $(0.08 | ) | $— | $(0.05 | ) | |||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $(0.06 | ) | $(0.04 | ) | $(0.08 | ) | $(0.25 | ) | $(0.11 | ) | ||||||||||
Net asset value, end of period (x) | $11.54 | $10.91 | $10.37 | $10.14 | $10.00 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.30 | 5.59 | 3.08 | 4.09 | (0.59 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.20 | 1.43 | 1.73 | 1.14 | 0.99 | |||||||||||||||
Expenses after expense reductions (f)(h) | 0.74 | 0.71 | 0.75 | 0.83 | 0.83 | |||||||||||||||
Net investment income (loss) | 0.77 | 0.64 | 0.41 | 0.48 | 0.20 | |||||||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $12,826 | $8,205 | $4,698 | $4,842 | $6,319 |
See Notes to Financial Statements
17
Table of Contents
Financial Highlights – continued
Class B | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.66 | $10.19 | $9.98 | $9.92 | $10.13 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.03 | ) | $(0.04 | ) | $(0.04 | ) | $(0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) | 0.58 | 0.50 | 0.25 | 0.35 | (0.08 | ) | ||||||||||||||
Total from investment operations | $0.57 | $0.47 | $0.21 | $0.31 | $(0.15 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $— | |||||||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $— | $— | $(0.25 | ) | $(0.06 | ) | |||||||||||||
Net asset value, end of period (x) | $11.23 | $10.66 | $10.19 | $9.98 | $9.92 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.35 | 4.61 | 2.10 | 3.30 | (1.48 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.96 | 2.18 | 2.49 | 1.90 | 1.74 | |||||||||||||||
Expenses after expense reductions (f)(h) | 1.67 | 1.65 | 1.64 | 1.66 | 1.66 | |||||||||||||||
Net investment income (loss) | (0.05 | ) | (0.31 | ) | (0.42 | ) | (0.42 | ) | (0.71 | ) | ||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $75 | $98 | $89 | $62 | $68 | |||||||||||||||
Class C | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.62 | $10.15 | $9.93 | $9.88 | $10.09 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.03 | ) | $(0.04 | ) | $(0.03 | ) | $(0.06 | ) | ||||||||||
Net realized and unrealized gain (loss) | 0.58 | 0.50 | 0.26 | 0.33 | (0.08 | ) | ||||||||||||||
Total from investment operations | $0.56 | $0.47 | $0.22 | $0.30 | $(0.14 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $(0.01 | ) | ||||||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $— | $— | $(0.25 | ) | $(0.07 | ) | |||||||||||||
Net asset value, end of period (x) | $11.18 | $10.62 | $10.15 | $9.93 | $9.88 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.27 | 4.63 | 2.22 | 3.22 | (1.40 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.94 | 2.19 | 2.47 | 1.87 | 1.74 | |||||||||||||||
Expenses after expense reductions (f)(h) | 1.67 | 1.65 | 1.65 | 1.66 | 1.66 | |||||||||||||||
Net investment income (loss) | (0.19 | ) | (0.27 | ) | (0.40 | ) | (0.28 | ) | (0.60 | ) | ||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,462 | $1,074 | $905 | $1,668 | $3,618 |
See Notes to Financial Statements
18
Table of Contents
Financial Highlights – continued
Class I | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.94 | $10.39 | $10.17 | $10.01 | $10.17 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.08 | $0.07 | $0.08 | $0.06 | $0.05 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.61 | 0.52 | 0.24 | 0.35 | (0.09 | ) | ||||||||||||||
Total from investment operations | $0.69 | $0.59 | $0.32 | $0.41 | $(0.04 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.04 | ) | $(0.10 | ) | $— | $(0.06 | ) | |||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $(0.06 | ) | $(0.04 | ) | $(0.10 | ) | $(0.25 | ) | $(0.12 | ) | ||||||||||
Net asset value, end of period (x) | $11.57 | $10.94 | $10.39 | $10.17 | $10.01 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.33 | 5.74 | 3.12 | 4.28 | (0.41 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.94 | 1.16 | 1.48 | 0.87 | 0.74 | |||||||||||||||
Expenses after expense reductions (f)(h) | 0.67 | 0.65 | 0.65 | 0.66 | 0.66 | |||||||||||||||
Net investment income (loss) | 0.67 | 0.64 | 0.73 | 0.65 | 0.51 | |||||||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $78,292 | $24,169 | $14,632 | $17,167 | $50,757 | |||||||||||||||
Class R1 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.66 | $10.19 | $9.98 | $9.92 | $10.13 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.03 | ) | $(0.04 | ) | $(0.04 | ) | $(0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) | 0.58 | 0.50 | 0.25 | 0.35 | (0.08 | ) | ||||||||||||||
Total from investment operations | $0.57 | $0.47 | $0.21 | $0.31 | $(0.15 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $— | $— | $— | $— | $— | |||||||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $— | $— | $(0.25 | ) | $(0.06 | ) | |||||||||||||
Net asset value, end of period (x) | $11.23 | $10.66 | $10.19 | $9.98 | $9.92 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.35 | 4.61 | 2.10 | 3.30 | (1.48 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.96 | 2.19 | 2.48 | 1.90 | 1.74 | |||||||||||||||
Expenses after expense reductions (f)(h) | 1.67 | 1.65 | 1.65 | 1.66 | 1.66 | |||||||||||||||
Net investment income (loss) | (0.10 | ) | (0.29 | ) | (0.36 | ) | (0.42 | ) | (0.71 | ) | ||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $58 | $55 | $53 | $52 | $50 |
See Notes to Financial Statements
19
Table of Contents
Financial Highlights – continued
Class R2 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.86 | $10.33 | $10.11 | $10.00 | $10.15 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.04 | $0.02 | $0.01 | $0.01 | $(0.02 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 0.59 | 0.51 | 0.26 | 0.35 | (0.07 | ) | ||||||||||||||
Total from investment operations | $0.63 | $0.53 | $0.27 | $0.36 | $(0.09 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.01 | ) | $— | $(0.05 | ) | $— | $— | |||||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $(0.01 | ) | $— | $(0.05 | ) | $(0.25 | ) | $(0.06 | ) | |||||||||||
Net asset value, end of period (x) | $11.48 | $10.86 | $10.33 | $10.11 | $10.00 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.79 | 5.13 | 2.66 | 3.78 | (0.89 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.46 | 1.69 | 1.98 | 1.40 | 1.24 | |||||||||||||||
Expenses after expense reductions (f)(h) | 1.17 | 1.15 | 1.15 | 1.16 | 1.16 | |||||||||||||||
Net investment income (loss) | 0.40 | 0.21 | 0.13 | 0.08 | (0.22 | ) | ||||||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $60 | $56 | $54 | $52 | $50 | |||||||||||||||
Class R3 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.92 | $10.37 | $10.15 | $10.01 | $10.16 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.07 | $0.05 | $0.04 | $0.03 | $0.00 | (w) | ||||||||||||||
Net realized and unrealized gain (loss) | 0.59 | 0.52 | 0.25 | 0.36 | (0.07 | ) | ||||||||||||||
Total from investment operations | $0.66 | $0.57 | $0.29 | $0.39 | $(0.07 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.03 | ) | $(0.02 | ) | $(0.07 | ) | $— | $(0.02 | ) | |||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $(0.03 | ) | $(0.02 | ) | $(0.07 | ) | $(0.25 | ) | $(0.08 | ) | ||||||||||
Net asset value, end of period (x) | $11.55 | $10.92 | $10.37 | $10.15 | $10.01 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.09 | 5.49 | 2.90 | 4.08 | (0.74 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.21 | 1.44 | 1.73 | 1.15 | 0.99 | |||||||||||||||
Expenses after expense reductions (f)(h) | 0.92 | 0.90 | 0.90 | 0.91 | 0.91 | |||||||||||||||
Net investment income (loss) | 0.65 | 0.45 | 0.38 | 0.33 | 0.03 | |||||||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $60 | $57 | $54 | $52 | $50 |
See Notes to Financial Statements
20
Table of Contents
Financial Highlights – continued
Class R4 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 | 5/31/17 | 5/31/16 | ||||||||||||||||
Net asset value, beginning of period | $10.93 | $10.39 | $10.17 | $10.00 | $10.17 | |||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.10 | $0.07 | $0.07 | $0.06 | $0.03 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.60 | 0.51 | 0.25 | 0.36 | (0.08 | ) | ||||||||||||||
Total from investment operations | $0.70 | $0.58 | $0.32 | $0.42 | $(0.05 | ) | ||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.04 | ) | $(0.10 | ) | $— | $(0.06 | ) | |||||||||||
From net realized gain | — | — | — | (0.25 | ) | (0.06 | ) | |||||||||||||
Total distributions declared to shareholders | $(0.06 | ) | $(0.04 | ) | $(0.10 | ) | $(0.25 | ) | $(0.12 | ) | ||||||||||
Net asset value, end of period (x) | $11.57 | $10.93 | $10.39 | $10.17 | $10.00 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.43 | 5.64 | 3.15 | 4.39 | (0.51 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.96 | 1.19 | 1.48 | 0.90 | 0.74 | |||||||||||||||
Expenses after expense reductions (f)(h) | 0.67 | 0.65 | 0.65 | 0.66 | 0.66 | |||||||||||||||
Net investment income (loss) | 0.90 | 0.71 | 0.64 | 0.58 | 0.28 | |||||||||||||||
Portfolio turnover | 28 | 17 | 18 | 5 | 26 | |||||||||||||||
Net assets at end of period (000 omitted) | $61 | $57 | $54 | $53 | $50 |
Class R6 | Year ended | |||||||||||||||||||
5/31/20 | 5/31/19 | 5/31/18 (i) | ||||||||||||||||||
Net asset value, beginning of period | $10.93 | $10.39 | $10.21 | |||||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||
Net investment income (loss) (d) | $0.09 | $0.08 | $(0.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) | 0.61 | 0.51 | 0.29 | |||||||||||||||||
Total from investment operations | $0.70 | $0.59 | $0.28 | |||||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||
From net investment income | $(0.06 | ) | $(0.05 | ) | $(0.10 | ) | ||||||||||||||
Net asset value, end of period (x) | $11.57 | $10.93 | $10.39 | |||||||||||||||||
Total return (%) (r)(s)(t)(x) | 6.44 | 5.67 | 2.80 | (n) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.91 | 1.18 | 1.53 | (a) | ||||||||||||||||
Expenses after expense reductions (f)(h) | 0.62 | 0.64 | 0.64 | (a) | ||||||||||||||||
Net investment income (loss) | 0.84 | 0.74 | (0.17 | )(a)(l) | ||||||||||||||||
Portfolio turnover | 28 | 17 | 18 | |||||||||||||||||
Net assets at end of period (000 omitted) | $14,345 | $5,621 | $4,348 |
See Notes to Financial Statements
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Financial Highlights – continued
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(i) | For Class R6, the period is from the class inception, October 2, 2017, through the stated period end. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(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
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(1) Business and Organization
MFS Managed Wealth Fund (the fund) is a diversified series of MFS Series Trust X (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 invests in derivatives as part of its principal investment strategy. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying indicators on which the derivative is based. Derivatives can involve leverage. The fund is a “fund of funds”, which invests the majority of its assets in other MFS mutual funds (underlying funds), which may have different fiscal year ends than the fund. The underlying funds, in turn, may engage in a number of investment techniques and practices, which involve certain risks. Certain underlying funds can invest 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, 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, and accounting systems, and greater political, social, and economic instability than developed markets.
The accounting policies of the underlying funds in which the fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov. The underlying funds’ shareholder reports are not covered by this report.
The investment objective of each of the underlying funds held by the fund at May 31, 2020 was to seek capital appreciation.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on
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Notes to Financial Statements – continued
Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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 – Open-end investment companies (underlying funds) are generally valued at their net asset value per share. The investments of underlying funds managed by the adviser are valued as described below. For purposes of this policy disclosure, “fund” also refers to the underlying funds in which the fund-of-funds invests.
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 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. Exchange-traded options are generally valued at the last sale or official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. For put options, the position may be valued at the last daily ask quotation if there are no trades reported during the day. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. 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
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Notes to Financial Statements – continued
share. 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, and other market data. 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an 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
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Notes to Financial Statements – continued
significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes 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 May 31, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $58,141 | $— | $— | $58,141 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | — | 1,214,922 | — | 1,214,922 | ||||||||||||
Mutual Funds | 99,037,985 | — | — | 99,037,985 | ||||||||||||
Total | $99,096,126 | $1,214,922 | $— | $100,311,048 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts – Liabilities | $(12,500,828 | ) | $— | $— | $(12,500,828 | ) |
For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the underlying funds’ shareholder reports for further information regarding the levels used in valuing the underlying funds’ assets or liabilities.
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 written options, purchased options, and futures contracts. Depending on the type of derivative, the 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’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 May 31, 2020 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Equity | Equity Futures | $— | $(12,500,828 | ) | ||||||
Equity | Purchased Equity Options | 58,141 | — | |||||||
Total | $58,141 | $(12,500,828 | ) |
(a) | The value of purchased options outstanding is included in investments in unaffiliated issuers, at value, within the fund’s Statement of Assets and Liabilities. Values presented in this table for futures contracts correspond to the values reported in the fund’s Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities. |
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Notes to Financial Statements – continued
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended May 31, 2020 as reported in the Statement of Operations:
Risk | Futures Contracts | Unaffiliated Issuers (Purchased Options) | Written Options | |||||||||
Equity | $5,866,370 | $198,165 | $55,814 |
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 May 31, 2020 as reported in the Statement of Operations:
Risk | Futures Contracts | Unaffiliated Issuers (Purchased Options) | ||||||
Equity | $(12,823,779 | ) | $4,832 |
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 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 collateral 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
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Notes to Financial Statements – continued
uncovered collateral or margin obligations with the broker. Any such payments are included in “Miscellaneous” expense in the Statement of Operations.
The following table presents the fund’s derivative assets and liabilities (by type) on a gross basis as of May 31, 2020:
Gross Amounts of: | Derivative Assets | Derivative Liabilities | ||||||
Future Contracts (a) | $— | $(210,811 | ) | |||||
Purchased Options | 58,141 | — | ||||||
Total Gross Amount of Derivative Assets and Liabilities Presented in the Statement of Assets & Liabilities | $58,141 | $(210,811 | ) | |||||
Less: Derivatives Assets and Liabilities Not Subject to a Master Netting Agreement or Similar Arrangement | 58,141 | (210,811 | ) | |||||
Total Gross Amount of Derivative Assets and Liabilities Subject to a Master Netting Agreement or Similar Arrangement | $— | $— |
(a) | The amount presented here represents the fund’s current day net variation margin for futures contracts. This amount, which is recognized within the fund’s Statement of Assets and Liabilities, differs from the fair value of the futures contracts which is presented in the tables that follow the fund’s Portfolio of Investments. |
Written Options – In exchange for a premium, the fund wrote put options on securities for which it anticipated the price would increase. At the time the option was written, the fund believed the premium received exceeded the potential loss that could result from adverse price changes in the options’ underlying securities. In a written option, the fund as the option writer grants the buyer the right to purchase from, or sell to, the fund a specified number of shares or units of a particular security, currency or index at a specified price within a specified period of time.
The premium received is initially recorded as a liability in the Statement of Assets and Liabilities. The option is subsequently marked-to-market daily with the difference between the premium received and the market value of the written option being recorded as unrealized appreciation or depreciation. When a written option expires, the fund realizes a gain equal to the amount of the premium received. The difference between the premium received and the amount paid on effecting a closing transaction is considered a realized gain or loss. When a written put option is exercised, the premium reduces the cost basis of the security purchased by the fund.
At the initiation of the written option contract, for exchange traded options, the fund is required to deposit securities or cash as collateral with the custodian for the benefit of the broker or directly with the clearing broker, based on the type of option. For uncleared options, the fund may post collateral subject to the terms of an ISDA Master Agreement as generally described above if the market value of the options contract moves against it. The fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option. Losses from writing options can exceed the premium received and can exceed the potential loss from an ordinary buy and sell transaction. Although the fund’s market risk may be significant, the maximum counterparty credit risk to the fund
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Notes to Financial Statements – continued
is equal to the market value of any collateral posted to the broker. For uncleared options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above.
Purchased Options – The fund purchased put options for a premium. Purchased put options entitle the holder to buy and sell a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing put options may hedge against an anticipated decline in the value of portfolio securities or currency or decrease the fund’s exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call and put options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument purchased. Upon the exercise or closing of a purchased put option, the premium paid is offset against the proceeds on the sale of the underlying security or financial instrument in order to determine the realized gain or loss on investments.
Whether or not the option is exercised, the fund’s maximum risk of loss from purchasing an option is the amount of premium paid. All option contracts involve credit risk if the counterparty to the option contract fails to perform. For uncleared options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
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.
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Notes to Financial Statements – continued
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 – Investment transactions are recorded on the trade date. 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. Distributions of income and capital gains from the underlying funds are recorded on the ex-dividend date. Recognition of net investment income by the fund is affected by the timing of the declaration of distributions by the underlying funds in which the fund invests. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund and/or the underlying funds 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.
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.
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 derivative transactions.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended 5/31/20 | Year ended 5/31/19 | |||||||
Ordinary income (including any short-term capital gains) | $240,022 | $125,006 |
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The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 5/31/20 | ||||
Cost of investments | $73,785,974 | |||
Gross appreciation | 14,072,566 | |||
Gross depreciation | (48,320 | ) | ||
Net unrealized appreciation (depreciation) | $14,024,246 | |||
Undistributed ordinary income | 319,996 | |||
Capital loss carryforwards | (9,276,378 | ) |
As of May 31, 2020, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
Short-Term | $(5,613,717 | ) | ||
Long-Term | (3,662,661 | ) | ||
Total | $(9,276,378 | ) |
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 shares will convert to Class A shares approximately eight years after purchase. Class C shares will convert to Class A shares approximately ten 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 5/31/20 | Year ended 5/31/19 | |||||||
Class A | $44,601 | $28,999 | ||||||
Class I | 161,629 | 74,190 | ||||||
Class R2 | 43 | — | ||||||
Class R3 | 179 | 95 | ||||||
Class R4 | 318 | 229 | ||||||
Class R6 | 33,252 | 21,493 | ||||||
Total | $240,022 | $125,006 |
(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 an annual rate of 0.35% of the fund’s average daily net assets.
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
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Notes to Financial Statements – continued
Board of Trustees. For the year ended May 31, 2020, this management fee reduction amounted to $5,411, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.34% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as fees and expenses associated with investments in investment companies and other similar investment vehicles), such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 | ||||||||||||||||||||||||
0.91% | 1.66% | 1.66% | 0.66% | 1.66% | 1.16% | 0.91% | 0.66% | 0.63% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until September 30, 2021. For the year ended May 31, 2020, this reduction amounted to $138,305, which is included in the reduction of total expenses in the Statement of Operations.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $2,666 for the year ended May 31, 2020, 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.
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% | 0.08% | $23,584 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 932 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 14,020 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 566 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 290 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 146 | |||||||||||||||
Total Distribution and Service Fees |
| $39,538 |
(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 |
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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 May 31, 2020 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 May 31, 2020, this rebate amounted to $16,450 for Class A 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 May 31, 2020, were as follows:
Amount | ||||
Class A | �� | $7 | ||
Class B | — | |||
Class C | 56 |
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 May 31, 2020, the fee was $2,139, which equated to 0.0041% annually of the fund’s average daily net assets. MFSC also receives payment 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 May 31, 2020, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $23,182.
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 incurred for the year ended May 31, 2020 was equivalent to an annual effective rate of 0.0353% 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. 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 – This fund and certain other funds managed by MFS (the funds) had entered into a service agreement (the ISO Agreement) which provided for payment of fees
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solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino served as the ISO and was an officer of the funds and the sole member of Tarantino LLC. Effective June 30, 2019, Mr. Tarantino retired from his position as ISO for the funds, and the ISO Agreement was terminated. For the year ended May 31, 2020, the fee paid by the fund under this agreement was $19 and is included in “Miscellaneous” expense in the Statement of Operations. MFS had agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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.
At May 31, 2020, MFS held approximately 77% of the outstanding shares of Class B and 100% of the outstanding shares of Class R1, Class R2, Class R3, and Class R4.
(4) Portfolio Securities
For the year ended May 31, 2020, purchases and sales of investments, other than purchased option transactions and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $667,338 | $600,000 | ||||||
Non-U.S. Government securities | 67,751,584 | 13,516,248 |
(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 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 560,712 | $6,354,034 | 346,988 | $3,629,306 | ||||||||||||
Class B | — | — | 496 | 5,000 | ||||||||||||
Class C | 160,345 | 1,757,588 | 44,621 | 462,623 | ||||||||||||
Class I | 6,246,135 | 70,818,622 | 1,433,835 | 15,139,801 | ||||||||||||
Class R6 | 969,170 | 11,085,853 | 173,486 | 1,855,958 | ||||||||||||
7,936,362 | $90,016,097 | 1,999,426 | $21,092,688 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions |
| |||||||||||||||
Class A | 3,993 | $44,601 | 2,818 | $28,999 | ||||||||||||
Class I | 14,444 | 161,629 | 7,196 | 74,190 | ||||||||||||
Class R2 | 4 | 43 | — | — | ||||||||||||
Class R3 | 16 | 179 | 9 | 95 | ||||||||||||
Class R4 | 28 | 318 | 23 | 229 | ||||||||||||
Class R6 | 27 | 307 | 22 | 227 | ||||||||||||
18,512 | $207,077 | 10,068 | $103,740 |
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Year ended 5/31/20 | Year ended 5/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired |
| |||||||||||||||
Class A | (205,297 | ) | $(2,335,764 | ) | (50,987 | ) | $(529,876 | ) | ||||||||
Class B | (2,498 | ) | (27,502 | ) | — | — | ||||||||||
Class C | (41,354 | ) | (458,453 | ) | (32,613 | ) | (331,498 | ) | ||||||||
Class I | (1,703,504 | ) | (19,073,479 | ) | (639,079 | ) | (6,824,608 | ) | ||||||||
Class R6 | (243,543 | ) | (2,747,325 | ) | (77,916 | ) | (818,657 | ) | ||||||||
(2,196,196 | ) | $(24,642,523 | ) | (800,595 | ) | $(8,504,639 | ) | |||||||||
Net change |
| |||||||||||||||
Class A | 359,408 | $4,062,871 | 298,819 | $3,128,429 | ||||||||||||
Class B | (2,498 | ) | (27,502 | ) | 496 | 5,000 | ||||||||||
Class C | 118,991 | 1,299,135 | 12,008 | 131,125 | ||||||||||||
Class I | 4,557,075 | 51,906,772 | 801,952 | 8,389,383 | ||||||||||||
Class R2 | 4 | 43 | — | — | ||||||||||||
Class R3 | 16 | 179 | 9 | 95 | ||||||||||||
Class R4 | 28 | 318 | 23 | 229 | ||||||||||||
Class R6 | 725,654 | 8,338,835 | 95,592 | 1,037,528 | ||||||||||||
5,758,678 | $65,580,651 | 1,208,899 | $12,691,789 |
Class T shares were not publicly available for sale during the period. Please see the fund’s prospectus for details.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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 one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 May 31, 2020, the fund’s commitment fee and interest expense were $237 and $227, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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(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 Growth Fund | $11,423,750 | $19,925,977 | $4,093,556 | $99,220 | $5,276,858 | $32,632,249 | ||||||||||||||||||
MFS Institutional International Equity Fund | 11,473,514 | 24,045,467 | 4,146,775 | (185,186 | ) | 1,946,240 | 33,133,260 | |||||||||||||||||
MFS Institutional Money Market Portfolio | 3,660,504 | 61,344,765 | 64,954,319 | 2,329 | (282 | ) | 52,997 | |||||||||||||||||
MFS Value Fund | 11,370,391 | 24,941,774 | 5,275,916 | (264,697 | ) | 2,447,927 | 33,219,479 | |||||||||||||||||
$37,928,159 | $130,257,983 | $78,470,566 | $(348,334 | ) | $9,670,743 | $99,037,985 | ||||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Growth Fund |
| $— | $219,818 | |||||||||||||||||||||
MFS Institutional International Equity Fund |
| 314,598 | 118,454 | |||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| 48,842 | — | |||||||||||||||||||||
MFS Value Fund | 334,077 | 174,688 | ||||||||||||||||||||||
$697,517 | $512,960 |
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of MFS Managed Wealth Fund and the Board of Trustees of MFS Series Trust X
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS Managed Wealth Fund (the “Fund”) (one of the funds constituting MFS Series Trust X (the “Trust”)), including the portfolio of investments, as of May 31, 2020, 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 X) at May 31, 2020, 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.
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 May 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included
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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
July 17, 2020
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of July 1, 2020, 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) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
INTERESTED TRUSTEES | ||||||||||
Robert J. Manning (k) (age 56) | Trustee | February 2004 | 134 | Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016) | N/A | |||||
Robin A. Stelmach (k) (age 58) | Trustee | January 2014 | 134 | Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017) | N/A | |||||
INDEPENDENT TRUSTEES | ||||||||||
John P. Kavanaugh (age 65) | Trustee and Chair of Trustees | January 2009 | 134 | Private investor | N/A | |||||
Steven E. Buller (age 68) | Trustee | February 2014 | 134 | Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
John A. Caroselli (age 66) | Trustee | March 2017 | 134 | JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015) | N/A | |||||
Maureen R. Goldfarb (age 65) | Trustee | January 2009 | 134 | Private investor | N/A | |||||
Peter D. Jones (age 64) | Trustee | January 2019 | 134 | Franklin Templeton Distributors, Inc. (investment management), President (until 2015); Franklin Templeton Institutional, LLC (investment management), Chairman (until 2015) | N/A | |||||
James W. Kilman, Jr. (age 59) | Trustee | January 2019 | 134 | Burford Capital Limited (finance and investment management), Chief Financial Officer (since 2019); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016); Morgan Stanley & Co. (financial services), Vice Chairman of Investment Banking, Co-Head of Diversified Financials Coverage – Financial Institutions Investment Banking Group (until 2016) | Alpha-En Corporation, Director (2016-2019) |
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Trustees and Officers – continued
Name, Age | Position(s) with Fund | Trustee/Officer Since (h) | Number of by the | Principal the Past Five Years | Other Directorships | |||||
Clarence Otis, Jr. (age 64) | Trustee | March 2017 | 134 | Darden Restaurants, Inc., Chief Executive Officer (until 2014) | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015) | |||||
Maryanne L. Roepke (age 64) | Trustee | May 2014 | 134 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | |||||
Laurie J. Thomsen (age 62) | Trustee | March 2005 | 134 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015) |
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Number of MFS Funds for which the Person is an Officer | Principal the Past Five Years | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 46) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | ||||
Kino Clark (k) (age 52) | Assistant Treasurer | January 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
John W. Clark, Jr. (k) (age 53) | Assistant Treasurer | April 2017 | 134 | Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017) |
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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 the Past Five Years | ||||
Thomas H. Connors (k) (age 60) | Assistant Secretary and Assistant Clerk | September 2012 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
David L. DiLorenzo (k) (age 51) | President | July 2005 | 134 | Massachusetts Financial Services Company, Senior Vice President | ||||
Heidi W. Hardin (k) (age 52) | Secretary and Clerk | April 2017 | 134 | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015) | ||||
Brian E. Langenfeld (k) (age 47) | Assistant Secretary and Assistant Clerk | June 2006 | 134 | Massachusetts Financial Services Company, Vice President and Senior Counsel | ||||
Amanda S. Mooradian (k) (age 41) | Assistant Secretary and Assistant Clerk | September 2018 | 134 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
Susan A. Pereira (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Kasey L. Phillips (k) (age 49) | Assistant Treasurer | September 2012 | 134 | Massachusetts Financial Services Company, Vice President | ||||
Matthew A. Stowe (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2014 | 134 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | ||||
Martin J. Wolin (k) (age 52) | Chief Compliance Officer | July 2015 | 134 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) |
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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 the Past Five Years | ||||
James O. Yost (k) (age 60) | Treasurer | September 1990 | 134 | 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. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. 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. |
Each Trustee (other than Messrs. Jones and Kilman) 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. 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 Boston, MA 02199-7618 | State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900 | |
Distributor | Independent Registered Public Accounting Firm | |
MFS Fund Distributors, Inc. Boston, MA 02199-7618 | Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 | |
Portfolio Manager(s) | ||
William Adams Robert Almeida Mike Roberge Barnaby Wiener |
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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 website 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 selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/openendfunds by choosing the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), 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 2020 income tax forms in January 2021. 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.
For corporate shareholders, 98.65% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
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rev. 3/16
| 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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1. Go to mfs.com.
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WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
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ITEM 2. | CODE OF ETHICS. |
The Registrant has adopted a Code of Ethics (the “Code”) pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant’s principal executive officer and principal financial and accounting officer. During the period covered by this report, the Registrant has not amended any provision in the Code that relates to an element of the Code’s definition enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.
A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Messrs. Steven E. Buller, James Kilman, and Clarence Otis, Jr. and Ms. Maryanne L. Roepke, members of the Audit Committee, have been determined by the Board of Trustees in their reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in Form N-CSR. In addition, Messrs. Buller, Kilman, and Otis and Ms. Roepke are “independent” members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Items 4(a) through 4(d) and 4(g):
The Board of Trustees has appointed Deloitte & Touche LLP (“Deloitte”) to serve as independent accountants to certain series of the Registrant and Ernst & Young LLP (“E&Y”) to serve in the same capacity to certain other series of the Registrant (each a “Fund” and collectively the “Funds”). The tables below set forth the audit fees billed to each Fund as well as fees for non-audit services provided to each Fund and/or to each Fund’s investment adviser, Massachusetts Financial Services Company (“MFS”), and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Funds (“MFS Related Entities”).
For the fiscal years ended May 31, 2020 and 2019, audit fees billed to each Fund by Deloitte and E&Y were as follows:
Audit Fees | ||||||||
2020 | 2019 | |||||||
Fees billed by Deloitte: | ||||||||
MFS Blended Research Growth Equity Fund | 47,436 | 46,656 | ||||||
MFS Blended Research Mid Cap Equity Fund | 46,521 | 45,757 | ||||||
MFS Blended Research Small Cap Equity Fund | 49,030 | 48,224 | ||||||
MFS Blended Research Value Equity Fund | 47,436 | 46,656 | ||||||
MFS International Diversification Fund | 30,276 | 29,783 | ||||||
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|
|
| |||||
Total | 220,699 | 217,076 |
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Audit Fees | ||||||||
2020 | 2019 | |||||||
Fees billed by E&Y: | ||||||||
MFS Aggressive Growth Allocation Fund | 30,382 | 29,887 | ||||||
MFS Conservative Allocation Fund | 30,382 | 29,887 | ||||||
MFS Emerging Markets Equity Fund | 55,734 | 54,815 | ||||||
MFS Growth Allocation Fund | 30,382 | 29,887 | ||||||
MFS International Growth Fund | 55,853 | 54,933 | ||||||
MFS International Intrinsic Value Fund | 55,853 | 54,933 | ||||||
MFS Managed Wealth Fund | 36,377 | 35,783 | ||||||
MFS Moderate Allocation Fund | 30,382 | 29,887 | ||||||
|
|
|
| |||||
Total | 325,344 | 320,012 |
For the fiscal years ended May 31, 2020 and 2019, fees billed by Deloitte and E&Y for audit-related, tax and other services provided to each Fund and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:
Audit-Related Fees1 | Tax Fees2 | All Other Fees3 | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Fees billed by Deloitte: | ||||||||||||||||||||||||
To MFS Blended Research Growth Equity Fund | 0 | 0 | 7,122 | 7,003 | 0 | 0 | ||||||||||||||||||
To MFS Blended Research Mid Cap Equity Fund | 0 | 0 | 7,017 | 6,900 | 0 | 0 | ||||||||||||||||||
To MFS Blended Research Small Cap Equity Fund | 0 | 0 | 7,122 | 7,003 | 0 | 0 | ||||||||||||||||||
To MFS Blended Research Value Equity Fund | 0 | 0 | 7,122 | 7,003 | 0 | 0 | ||||||||||||||||||
To MFS International Diversification Fund | 0 | 0 | 7,740 | 7,611 | 0 | 0 | ||||||||||||||||||
Total fees billed by Deloitte To above Funds: | 0 | 0 | 36,123 | 35,520 | 0 | 0 |
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Audit-Related Fees1 | Tax Fees2 | All Other Fees3 | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Fees billed by Deloitte: | ||||||||||||||||||||||||
To MFS and MFS Related Entities of MFS Blended Research Growth Equity Fund* | 0 | 0 | 0 | 0 | 5,390 | 5,390 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Blended Research Mid Cap Equity Fund* | 0 | 0 | 0 | 0 | 5,390 | 5,390 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Blended Research Small Cap Equity Fund* | 0 | 0 | 0 | 0 | 5,390 | 5,390 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Blended Research Value Equity Fund* | 0 | 0 | 0 | 0 | 5,390 | 5,390 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS International Diversification Fund* | 0 | 0 | 0 | 0 | 5,390 | 5,390 |
Aggregate fees for non-audit services | ||||||||
2020 | 2019 | |||||||
Fees billed by Deloitte: | ||||||||
To MFS Blended Research Growth Equity Fund, MFS and MFS Related Entities# | 362,512 | 12,393 | ||||||
To MFS Blended Research Mid Cap Equity Fund, MFS and MFS Related Entities# | 362,407 | 12,290 | ||||||
To MFS Blended Research Small Cap Equity Fund, MFS and MFS Related Entities# | 362,512 | 12,393 | ||||||
To MFS Blended Research Value Equity Fund, MFS and MFS Related Entities# | 362,512 | 12,393 | ||||||
To MFS International Diversification Fund, MFS and MFS Related Entities# | 363,130 | 13,001 |
Audit-Related Fees1 | Tax Fees2 | All Other Fees4 | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS Aggressive Growth Allocation Fund | 0 | 0 | 5,498 | 5,407 | 1,485 | 1,483 | ||||||||||||||||||
To MFS Conservative Allocation Fund | 0 | 0 | 5,498 | 5,407 | 1,768 | 1,792 | ||||||||||||||||||
To MFS Emerging Markets Equity Fund | 0 | 0 | 10,641 | 10,482 | 1,623 | 1,411 | ||||||||||||||||||
To MFS Growth Allocation Fund | 0 | 0 | 5,498 | 5,407 | 2,301 | 2,352 | ||||||||||||||||||
To MFS International Growth Fund | 0 | 0 | 10,641 | 10,482 | 3,207 | 2,658 | ||||||||||||||||||
To MFS International Intrinsic Value Fund | 0 | 0 | 10,641 | 10,482 | 8,280 | 8,941 | ||||||||||||||||||
To MFS Managed Wealth Fund | 0 | 0 | 8,361 | 8,231 | 3,615 | 2,990 | ||||||||||||||||||
To MFS Moderate Allocation Fund | 0 | 0 | 5,498 | 5,407 | 2,448 | 2,547 | ||||||||||||||||||
Total fees billed by E&Y To above Funds: | 0 | 0 | 62,276 | 61,305 | 24,727 | 24,174 |
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Audit-Related Fees1 | Tax Fees2 | All Other Fees4 | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS and MFS Related Entities of MFS Aggressive Growth Allocation Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Conservative Allocation Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Emerging Markets Equity Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Growth Allocation Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS International Growth Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS International Intrinsic Value Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Managed Wealth Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Moderate Allocation Fund* | 1,744,294 | 1,619,369 | 0 | 0 | 104,750 | 104,750 |
Aggregate fees for non-audit services | ||||||||
2020 | 2019 | |||||||
Fees billed by E&Y: | ||||||||
To MFS Aggressive Growth Allocation Fund, MFS and MFS Related Entities# | 2,090,027 | 1,943,909 | ||||||
To MFS Conservative Allocation Fund, MFS and MFS Related Entities# | 2,090,310 | 1,944,218 | ||||||
To MFS Emerging Markets Equity Fund, MFS and MFS Related Entities# | 2,095,308 | 1,948,912 | ||||||
To MFS Growth Allocation Fund, MFS and MFS Related Entities# | 2,090,843 | 1,944,778 | ||||||
To MFS International Growth Fund, MFS and MFS Related Entities# | 2,096,892 | 1,950,159 | ||||||
To MFS International Intrinsic Value Fund, MFS and MFS Related Entities# | 2,101,965 | 1,956,442 | ||||||
To MFS Managed Wealth Fund, MFS and MFS Related Entities# | 2,095,020 | 1,948,240 | ||||||
To MFS Moderate Allocation Fund, MFS and MFS Related Entities# | 2,090,990 | 1,944,973 |
* | This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Funds (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex). |
# | This amount reflects the aggregate fees billed by Deloitte or E&Y for non-audit services rendered to the Funds and for non-audit services rendered to MFS and the MFS Related Entities. |
1 | The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under “Audit Fees,” including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews. |
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2 | The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis. |
3 | The fees included under “All Other Fees” are fees for products and services provided by Deloitte other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees”. |
4 | The fees included under “All Other Fees” are fees for products and services provided by E&Y other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to review of internal controls and review of Rule 38a-1 compliance program. |
Item 4(e)(1):
Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services:
To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Fund and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 in each period between regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting.
Item 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).
Item 4(f):
Not applicable.
Item 4(h):
The Registrant’s Audit Committee has considered whether the provision by a Registrant’s independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant’s principal auditors.
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ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
ITEM 6. | INVESTMENTS. |
A schedule of investments of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the Registrant.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 13. | EXHIBITS. |
(a) | (1) | Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Attached hereto as EX-99.COE. |
(2) | A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto as EX-99.302CERT. |
(3) | Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. |
(4) | Change in the registrant’s independent public accountant. Not applicable. |
(b) | If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto as EX-99.906CERT. |
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Notice
A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST X
By (Signature and Title)* | /S/ DAVID L. DILORENZO | |
David L. DiLorenzo, President |
Date: July 17, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /S/ DAVID L. DILORENZO | |
David L. DiLorenzo, President (Principal Executive Officer) |
Date: July 17, 2020
By (Signature and Title)* | /S/ JAMES O. YOST | |
James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: July 17, 2020
* | Print name and title of each signing officer under his or her signature. |