MFS SERIES TRUST XVI NCSR
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 811-02032
MFS SERIES TRUST XVI
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Boston, Massachusetts 02199 (Address of principal executive offices) (Zip code)
Christopher R. Bohane
Massachusetts Financial Services Company
111Huntington 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: June 30
Date of reporting period: June 30, 2023
ITEM 1. REPORTS TO STOCKHOLDERS.
Item 1(a):
Annual Report
June 30, 2023
MFS® Prudent Investor Fund
MFS® Prudent Investor Fund
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The report is prepared for the
general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED
• MAY LOSE VALUE • NO BANK GUARANTEE
Portfolio structure
|
| Active Security
Selection (a)
| Derivative
Overlay
Positions (b)
| Net Market
Exposure (c)
|
Equities
|
| 53.9%
| —%
| 53.9%
|
Gold Related Investments (f)
|
| 1.6%
| —%
| 1.6%
|
Hedges
| MSCI EAFE Index Future - Sep 2023
| —%
| (0.9)%
| (0.9)%
|
| Russell 2000 Index Option Puts
| —%
| (1.2)%
| (1.2)%
|
| S&P 500 Index Option Puts
| —%
| (1.5)%
| (1.5)%
|
| S&P 500 E-Mini Index Future - Sep 2023
| —%
| (2.4)%
| (2.4)%
|
Net Equity Exposure
|
| 55.5%
| (6.0)%
| 49.5%
|
Debt Instruments, excluding Short-Term Government Securities
|
| 17.0%
| —%
| 17.0%
|
Cash, Cash Equivalents, and Short-Term Government Securities (d)
|
|
|
| 26.4%
|
Other (e)
|
|
|
| 7.1%
|
Total Net Exposure Summary
|
|
|
| 100.0%
|
Portfolio Composition - continued
Top ten holdings (c)
U.S. Treasury Notes, 1.375%, 9/30/2023
| 3.7%
|
U.S. Treasury Notes, 2.25%, 3/31/24
| 3.7%
|
U.S. Treasury Notes, 2.625%, 12/31/2023
| 3.7%
|
U.S. Treasury Notes, 3.0%, 6/30/2024
| 3.6%
|
LEG Immobilien SE
| 3.3%
|
U.S. Treasury Notes, TIPS, 0.5%, 4/15/2024
| 3.3%
|
Alphabet, Inc., “A”
| 2.8%
|
U.S. Treasury Notes, TIPS, 0.125%, 4/15/2027
| 2.3%
|
Samsung Electronics Co. Ltd.
| 2.1%
|
S&P 500 E-Mini Index Future - Sep 2023
| (2.4)%
|
(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 (including U.S. Treasury securities with a maturity of less than 3 years for
the purpose of this presentation), 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.
|
(f)
| The fund invests a portion of its assets in Exchange-Traded Funds (ETFs) or Options on ETFs to gain gold related exposure. Percentages include the direct exposure from investing in
ETFs and not the indirect exposure to the underlying holdings.
|
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 June 30, 2023.
The portfolio is actively managed
and current holdings may be different.
Management Review
Summary of Results
For the twelve months ended June 30,
2023, Class A shares of the MFS Prudent Investor Fund (fund) provided a total return of 7.04%, at net asset value. This compares with a return of 18.51% for the fund’s benchmark, the MSCI World Index (net div).
The fund's other benchmark, the ICE BofA 0-3 Month U.S. Treasury Bill Index, generated a return of 3.73%.
Market Environment
During the reporting period, central
banks around the world had to combat the strongest inflationary pressures in four decades, fueled by the global fiscal response to the pandemic, disrupted supply chains and the dislocations to energy markets stemming
from the war in Ukraine. Interest rates rose substantially, but the effects of a tighter monetary policy may not have been fully experienced yet, given that monetary policy works with long and variable lags. Strains
resulting from the abrupt tightening of monetary policy began to affect some parts of the economy, most acutely among small and regional US banks, which suffered from deposit flight as depositors sought higher yields
on their savings. Those shifts exposed an asset-liability mismatch that forced the closure of several institutions by regulators. Given the importance of small and mid-sized lenders to the provision of credit in the
US, concerns were raised in the aftermath of the crisis that credit availability could become constrained, leading to slower economic growth. China’s abandonment of its Zero-COVID policy ushered in an uptick in
economic activity in the world’s second-largest economy in early 2023. In developed markets, consumer demand, particularly for services, remained solid.
Policymakers find themselves in the
difficult position of trying to restrain inflation without tipping economies into recession. Despite the challenging macroeconomic and geopolitical environment, central banks remained focused on controlling price
pressures while also confronting increasing financial stability concerns. Central banks had to juggle achieving their inflation mandates while using macroprudential tools to keep banking systems liquid, a potentially
difficult balancing act. That juxtaposition suggests that we may be nearing peak monetary policy rates.
Against an environment of
still-tight labor markets, tighter global financial conditions and volatile materials prices, investor anxiety appeared to have increased over the potential that corporate profit margins may be past peak for this
cycle. That said, signs that supply chains have generally normalized, the lifting of COVID restrictions in China, low levels of unemployment across developed markets and hopes that inflation levels have peaked were
supportive factors for the macroeconomic backdrop.
Factors Affecting Performance
During the reporting period, the
fund's exposure to both the Russell 2000® Index and Standard & Poor’s 500 Index, via index options, detracted from absolute performance. Conversely, the fund’s
allocation to the equity securities asset class, most notably to large capitalization stocks, contributed to absolute returns.
Respectfully,
Portfolio Manager(s)
David Cole, Shanti Das-Wermes, Edward Dearing, and Barnaby Weiner
Management Review - continued
Note to Shareholders: Effective
April 30, 2024, Barnaby Wiener will no longer be a Portfolio Manager of the fund.
Effective February 7, 2023, the
fund’s investment objective changed to seek capital appreciation in order to better align the fund’s stated objective with the fund’s long-term return orientation and investment approach. Prior to
February 7, 2023, the fund’s investment objective was to seek total return. Please see the fund’s prospectus for details.
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.
Performance Summary THROUGH 6/30/23
The following chart illustrates a
representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in
net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged
and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past
performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or
higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000
Investment (t)
Performance Summary - continued
Total Returns through 6/30/23
Average annual without sales
charge
Share Class
| Class Inception Date
| 1-yr
| 5-yr
| Life (t)
|
A
| 1/18/18
| 7.04%
| 3.08%
| 2.95%
|
B
| 1/18/18
| 6.36%
| 2.32%
| 2.19%
|
C
| 1/18/18
| 6.25%
| 2.32%
| 2.18%
|
I
| 1/18/18
| 7.38%
| 3.33%
| 3.20%
|
R1
| 1/18/18
| 6.41%
| 2.33%
| 2.19%
|
R2
| 1/18/18
| 6.86%
| 2.82%
| 2.70%
|
R3
| 1/18/18
| 7.13%
| 3.08%
| 2.95%
|
R4
| 1/18/18
| 7.39%
| 3.35%
| 3.21%
|
R6
| 1/18/18
| 7.48%
| 3.39%
| 3.25%
|
Comparative benchmark(s)
|
|
|
|
MSCI World Index (net div) (f)
| 18.51%
| 9.07%
| 7.48%
|
ICE BofA 0-3 Month U.S. Treasury Bill Index (f)
| 3.73%
| 1.54%
| 1.55%
|
Average annual with sales
charge
|
|
|
|
A
With Initial Sales Charge (5.75%)
| 0.89%
| 1.87%
| 1.84%
|
B
With CDSC (Declining over six years from 4% to 0%) (v)
| 2.36%
| 1.96%
| 2.02%
|
C
With CDSC (1% for 12 months) (v)
| 5.25%
| 2.32%
| 2.18%
|
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)
ICE BofA 0-3 Month U.S. Treasury
Bill Index(d) – 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.
MSCI World Index(e) (net div) – a market capitalization-weighted index that is designed to measure equity market performance in the global developed markets.
It is not possible to invest
directly in an index.
(d)
| 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
|
Performance Summary - continued
completeness of the indices or
the index data or any component thereof, and the indices and the index data and all 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.
(e)
| Morgan Stanley Capital International (“MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI
data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
|
Notes to Performance Summary
Average annual total return
represents the average annual change in value for each share class for the periods presented. 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.
Expense Table
Fund expenses borne by the
shareholders during the period,
January 1, 2023 through June 30, 2023
As a shareholder of the fund, you
incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and
other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an
investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2023 through June 30, 2023.
Actual Expenses
The first line for each share class
in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled
“Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for
Comparison Purposes
The second line for each share class
in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information
to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown
in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Table - continued
Share
Class
|
| Annualized
Expense
Ratio
| Beginning
Account Value
1/01/23
| Ending
Account Value
6/30/23
| Expenses
Paid During
Period (p)
1/01/23 - 6/30/23
|
A
| Actual
| 1.24%
| $1,000.00
| $1,082.10
| $6.40
|
Hypothetical (h)
| 1.24%
| $1,000.00
| $1,018.65
| $6.21
|
B
| Actual
| 1.99%
| $1,000.00
| $1,078.53
| $10.26
|
Hypothetical (h)
| 1.99%
| $1,000.00
| $1,014.93
| $9.94
|
C
| Actual
| 1.99%
| $1,000.00
| $1,076.92
| $10.25
|
Hypothetical (h)
| 1.99%
| $1,000.00
| $1,014.93
| $9.94
|
I
| Actual
| 0.99%
| $1,000.00
| $1,083.00
| $5.11
|
Hypothetical (h)
| 0.99%
| $1,000.00
| $1,019.89
| $4.96
|
R1
| Actual
| 1.99%
| $1,000.00
| $1,078.53
| $10.26
|
Hypothetical (h)
| 1.99%
| $1,000.00
| $1,014.93
| $9.94
|
R2
| Actual
| 1.49%
| $1,000.00
| $1,081.03
| $7.69
|
Hypothetical (h)
| 1.49%
| $1,000.00
| $1,017.41
| $7.45
|
R3
| Actual
| 1.24%
| $1,000.00
| $1,082.02
| $6.40
|
Hypothetical (h)
| 1.24%
| $1,000.00
| $1,018.65
| $6.21
|
R4
| Actual
| 0.99%
| $1,000.00
| $1,083.99
| $5.12
|
Hypothetical (h)
| 0.99%
| $1,000.00
| $1,019.89
| $4.96
|
R6
| Actual
| 0.92%
| $1,000.00
| $1,083.99
| $4.75
|
Hypothetical (h)
| 0.92%
| $1,000.00
| $1,020.23
| $4.61
|
(h)
| 5% class return per year before expenses.
|
(p)
| “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied
by 181/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher.
|
Portfolio of Investments
6/30/23
The Portfolio of Investments is a
complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer
|
|
| Shares/Par
| Value ($)
|
Common Stocks – 54.6%
|
Aerospace & Defense – 2.7%
|
|
Safran S.A.
|
| 3,194
| $500,000
|
Thales S.A.
|
| 3,280
| 491,058
|
|
|
|
| $991,058
|
Alcoholic Beverages – 2.0%
|
|
Heineken Holding N.V.
|
| 8,459
| $735,206
|
Automotive – 1.8%
|
|
Knorr-Bremse AG
|
| 8,459
| $645,948
|
Brokerage & Asset Managers – 1.4%
|
|
B3 Brasil Bolsa Balcao S.A.
|
| 95,900
| $292,615
|
Euronext N.V.
|
| 3,042
| 206,801
|
|
|
|
| $499,416
|
Cable TV – 1.2%
|
|
Charter Communications, Inc., “A” (a)
|
| 1,252
| $459,947
|
Computer Software – 8.3%
|
|
Adobe Systems, Inc. (a)
|
| 695
| $339,848
|
Check Point Software Technologies Ltd. (a)
|
| 5,446
| 684,126
|
Microsoft Corp.
|
| 1,000
| 340,540
|
Oracle Corp.
|
| 4,530
| 539,478
|
Oracle Corp. Japan
|
| 5,900
| 438,432
|
Sage Group PLC
|
| 61,736
| 725,087
|
|
|
|
| $3,067,511
|
Computer Software - Systems – 4.1%
|
|
Amadeus IT Group S.A. (a)
|
| 9,926
| $754,938
|
Samsung Electronics Co. Ltd.
|
| 13,963
| 769,591
|
|
|
|
| $1,524,529
|
Construction – 0.7%
|
|
Barratt Developments PLC
|
| 52,586
| $276,153
|
Consumer Services – 1.7%
|
|
Booking Holdings, Inc. (a)
|
| 229
| $618,376
|
Electrical Equipment – 1.7%
|
|
Legrand S.A.
|
| 6,351
| $629,263
|
Electronics – 1.3%
|
|
Kyocera Corp.
|
| 9,000
| $489,206
|
Portfolio of Investments –
continued
Issuer
|
|
| Shares/Par
| Value ($)
|
Common Stocks – continued
|
Food & Beverages – 1.0%
|
|
Nestle S.A.
|
| 3,033
| $364,617
|
Forest & Paper Products – 1.1%
|
|
Rayonier, Inc., REIT
|
| 12,765
| $400,821
|
Insurance – 0.8%
|
|
Swiss Re Ltd.
|
| 2,940
| $295,757
|
Internet – 4.7%
|
|
Alphabet, Inc., “A” (a)
|
| 8,714
| $1,043,066
|
Scout24 AG
|
| 10,649
| 674,900
|
|
|
|
| $1,717,966
|
Leisure & Toys – 1.8%
|
|
Nintendo Co. Ltd.
|
| 14,800
| $673,219
|
Medical Equipment – 2.2%
|
|
Agilent Technologies, Inc.
|
| 2,308
| $277,537
|
Sonova Holding AG
|
| 2,004
| 533,325
|
|
|
|
| $810,862
|
Other Banks & Diversified Financials – 1.3%
|
|
S&P Global, Inc.
|
| 1,155
| $463,028
|
Printing & Publishing – 1.5%
|
|
Wolters Kluwer N.V.
|
| 4,279
| $543,033
|
Real Estate – 4.8%
|
|
LEG Immobilien SE (a)
|
| 21,072
| $1,210,392
|
Vonovia SE, REIT
|
| 27,792
| 542,695
|
|
|
|
| $1,753,087
|
Specialty Chemicals – 1.4%
|
|
Nitto Denko Corp.
|
| 7,000
| $518,875
|
Telecommunications - Wireless – 3.1%
|
|
Infrastrutture Wireless Italiane S.p.A.
|
| 37,967
| $500,470
|
KDDI Corp.
|
| 20,400
| 630,479
|
|
|
|
| $1,130,949
|
Telephone Services – 0.9%
|
|
Altice USA, Inc., “A” (a)
|
| 16,124
| $48,694
|
Hellenic Telecommunications Organization S.A.
|
| 16,851
| 288,873
|
|
|
|
| $337,567
|
Trucking – 1.3%
|
|
Yamato Holdings Co. Ltd.
|
| 25,800
| $466,596
|
Portfolio of Investments –
continued
Issuer
|
|
| Shares/Par
| Value ($)
|
Common Stocks – continued
|
Utilities - Electric Power – 1.8%
|
|
Iberdrola S.A.
|
| 51,992
| $677,967
|
Total Common Stocks (Identified Cost, $18,746,885)
|
| $20,090,957
|
Bonds – 37.7%
|
Asset-Backed & Securitized – 0.3%
|
LAD Auto Receivables Trust, 2023-2A, “A2”, 5.93%, 6/15/2027 (n)
|
| $
| 61,000
| $60,702
|
Toyota Lease Owner Trust, 2023-A, “A1”, 5.388%, 4/22/2024 (n)
|
|
| 9,113
| 9,109
|
Toyota Lease Owner Trust, 2023-A, “A2”, 5.3%, 8/20/2025 (n)
|
|
| 29,000
| 28,863
|
|
|
|
| $98,674
|
Automotive – 0.3%
|
RAC Bond Co. PLC, 5.25%, 11/04/2027
|
| GBP
| 100,000
| $100,962
|
Broadcasting – 0.3%
|
WMG Acquisition Corp., 3.875%, 7/15/2030 (n)
|
| $
| 149,000
| $128,529
|
Building – 1.5%
|
Foundation Building Materials LLC, 6%, 3/01/2029 (n)
|
| $
| 75,000
| $62,625
|
Interface, Inc., 5.5%, 12/01/2028 (n)
|
|
| 149,000
| 120,783
|
New Enterprise Stone & Lime Co., Inc., 5.25%, 7/15/2028 (n)
|
|
| 160,000
| 145,605
|
Standard Industries, Inc., 3.375%, 1/15/2031 (n)
|
|
| 272,000
| 218,972
|
|
|
|
| $547,985
|
Consumer Products – 0.3%
|
Coty, Inc., 6.5%, 4/15/2026 (n)
|
| $
| 127,000
| $125,908
|
Consumer Services – 1.6%
|
Arches Buyer, Inc., 6.125%, 12/01/2028 (n)
|
| $
| 267,000
| $230,114
|
Match Group Holdings II LLC, 4.625%, 6/01/2028 (n)
|
|
| 251,000
| 230,568
|
Realogy Group LLC/Realogy Co-Issuer Corp., 5.75%, 1/15/2029 (n)
|
|
| 178,000
| 133,182
|
|
|
|
| $593,864
|
Containers – 0.4%
|
Can-Pack S.A./Eastern PA Land Investment Holding LLC, 3.875%, 11/15/2029 (n)
|
| $
| 200,000
| $162,681
|
Electronics – 0.3%
|
Sensata Technologies B.V., 5%, 10/01/2025 (n)
|
| $
| 65,000
| $63,637
|
Sensata Technologies, Inc., 3.75%, 2/15/2031 (n)
|
|
| 50,000
| 42,774
|
|
|
|
| $106,411
|
Portfolio of Investments –
continued
Issuer
|
|
| Shares/Par
| Value ($)
|
Bonds – continued
|
Financial Institutions – 0.9%
|
Global Aircraft Leasing Co. Ltd., 6.5% (6.5% Cash or 7.25% PIK), 9/15/2024 (n)(p)
|
| $
| 180,294
| $165,032
|
Global Aircraft Leasing Co. Ltd., 6.5% (6.5% Cash or 7.25% PIK), 9/15/2024 (n)(p)
|
|
| 108,806
| 99,596
|
Nationstar Mortgage Holdings, Inc., 6%, 1/15/2027 (n)
|
|
| 56,000
| 52,096
|
|
|
|
| $316,724
|
Insurance - Property & Casualty – 1.0%
|
Acrisure LLC/Acrisure Finance, Inc., 4.25%, 2/15/2029 (n)
|
| $
| 159,000
| $137,248
|
Hub International Ltd., 7%, 5/01/2026 (n)
|
|
| 253,000
| 252,331
|
|
|
|
| $389,579
|
Medical & Health Technology & Services – 0.4%
|
Charles River Laboratories International, Inc., 4%, 3/15/2031 (n)
|
| $
| 172,000
| $149,392
|
Medical Equipment – 0.4%
|
Teleflex, Inc., 4.625%, 11/15/2027
|
| $
| 142,000
| $133,835
|
Metals & Mining – 0.1%
|
Coeur Mining, Inc., 5.125%, 2/15/2029 (n)
|
| $
| 44,000
| $36,300
|
Midstream – 1.0%
|
Peru LNG, 5.375%, 3/22/2030
|
| $
| 200,000
| $160,917
|
Venture Global LNG, Inc., 8.125%, 6/01/2028 (n)
|
|
| 72,000
| 73,126
|
Venture Global LNG, Inc., 8.375%, 6/01/2031 (n)
|
|
| 133,000
| 134,086
|
|
|
|
| $368,129
|
Mortgage-Backed – 3.1%
|
|
Freddie Mac, UMBS, 5%, 2/01/2038
|
| $
| 50,000
| $49,676
|
Freddie Mac, UMBS, 4.5%, 7/01/2038 - 10/01/2052
|
|
| 249,750
| 241,107
|
Freddie Mac, UMBS, 6%, 1/01/2053
|
|
| 75,000
| 75,657
|
Freddie Mac, UMBS, 5.5%, 5/01/2053
|
|
| 200,000
| 199,060
|
Ginnie Mae, 5.5%, 2/20/2053
|
|
| 174,201
| 173,455
|
Ginnie Mae, 5%, 4/20/2053
|
|
| 199,495
| 196,087
|
Ginnie Mae, TBA, 4.5%, 7/15/2053
|
|
| 100,000
| 96,516
|
UMBS, TBA, 4.5%, 7/18/2038
|
|
| 50,000
| 49,023
|
UMBS, TBA, 5%, 7/18/2038
|
|
| 50,000
| 49,670
|
|
|
|
| $1,130,251
|
Precious Metals & Minerals – 0.2%
|
IAMGOLD Corp., 5.75%, 10/15/2028 (n)
|
| $
| 103,000
| $77,060
|
Portfolio of Investments –
continued
Issuer
|
|
| Shares/Par
| Value ($)
|
Bonds – continued
|
Telecommunications - Wireless – 0.8%
|
SBA Communications Corp., 3.875%, 2/15/2027
|
| $
| 142,000
| $130,811
|
SBA Communications Corp., 3.125%, 2/01/2029
|
|
| 200,000
| 169,531
|
|
|
|
| $300,342
|
Transportation - Services – 0.7%
|
Q-Park Holding I B.V., 2%, 3/01/2027
|
| EUR
| 265,000
| $246,154
|
U.S. Treasury Obligations – 23.2%
|
U.S. Treasury Bonds, TIPS, 2.375%, 1/15/2025
|
| $
| 384,619
| $380,589
|
U.S. Treasury Notes, 1.375%, 9/30/2023 (f)
|
|
| 1,374,000
| 1,360,960
|
U.S. Treasury Notes, 2.625%, 12/31/2023
|
|
| 1,365,000
| 1,347,298
|
U.S. Treasury Notes, 2.25%, 3/31/2024
|
|
| 1,388,000
| 1,355,523
|
U.S. Treasury Notes, 3%, 6/30/2024
|
|
| 1,373,000
| 1,340,606
|
U.S. Treasury Notes, 4.25%, 9/30/2024
|
|
| 740,000
| 730,288
|
U.S. Treasury Notes, TIPS, 0.5%, 4/15/2024
|
|
| 1,226,809
| 1,197,121
|
U.S. Treasury Notes, TIPS, 0.125%, 4/15/2027
|
|
| 898,502
| 831,570
|
|
|
|
| $8,543,955
|
Utilities - Electric Power – 0.9%
|
Clearway Energy Operating LLC, 4.75%, 3/15/2028 (n)
|
| $
| 150,000
| $138,393
|
Clearway Energy Operating LLC, 3.75%, 2/15/2031 (n)
|
|
| 118,000
| 97,922
|
Pacific Gas & Electric Co., 6.1%, 1/15/2029
|
|
| 46,000
| 45,260
|
Pacific Gas & Electric Co., 6.4%, 6/15/2033
|
|
| 56,000
| 55,694
|
|
|
|
| $337,269
|
Total Bonds (Identified Cost, $14,334,063)
|
| $13,894,004
|
Exchange-Traded Funds – 1.6%
|
Gold ETFs – 1.6%
|
|
VanEck Gold Miners UCITS ETF (a)
|
| 6,184
| $202,279
|
VanEck Junior Gold Miners UCITS ETF (a)
|
| 12,416
| 381,916
|
Total Exchange-Traded Funds (Identified Cost, $756,661)
|
| $584,195
|
Investment Companies (h) – 6.0%
|
Money Market Funds – 6.0%
|
|
MFS Institutional Money Market Portfolio, 5.04% (v) (Identified Cost, $2,206,028)
|
|
| 2,206,037
| $2,206,478
|
Portfolio of Investments –
continued
Underlying/Expiration Date/Exercise Price
| Put/Call
| Counterparty
| Notional
Amount
| Par Amount/
Number of
Contracts
| Value ($)
|
Purchased Options – 0.5%
|
|
Computer Software - Systems – 0.0%
|
|
Apple, Inc. – September 2023 @ $145
| Put
| Goldman Sachs International
| $ 1,862,112
| 96
| $2,880
|
Apple, Inc. – March 2024 @ $145
| Put
| Goldman Sachs International
| 659,498
| 34
| 6,562
|
|
|
|
|
| $9,442
|
Internet – 0.0%
|
|
Tencent Holdings Ltd. – September 2023 @ HKD 470.157
| Call
| Goldman Sachs International
| $ 434,138
| 102
| $1,603
|
Market Index Securities – 0.4%
|
|
Russell 2000 Index – December 2023 @ $1,650
| Put
| Goldman Sachs International
| $ 944,367
| 5
| $11,800
|
Russell 2000 Index – June 2024 @ $1,400
| Put
| Goldman Sachs International
| 944,367
| 5
| 12,200
|
Russell 2000 Index – June 2024 @ $1,500
| Put
| Goldman Sachs International
| 755,494
| 4
| 15,280
|
Russell 2000 Index – December 2025 @ $1,400
| Put
| Goldman Sachs International
| 944,367
| 5
| 28,285
|
S&P 500 Index – December 2023 @ $3,200
| Put
| Goldman Sachs International
| 890,076
| 2
| 2,438
|
S&P 500 Index – December 2023 @ $3,300
| Put
| Goldman Sachs International
| 890,076
| 2
| 2,860
|
S&P 500 Index – June 2024 @ $3,150
| Put
| Goldman Sachs International
| 1,335,114
| 3
| 9,810
|
S&P 500 Index – June 2024 @ $3,250
| Put
| Goldman Sachs International
| 890,076
| 2
| 7,392
|
S&P 500 Index – June 2024 @ $3,350
| Put
| Goldman Sachs International
| 890,076
| 2
| 8,600
|
S&P 500 Index – December 2024 @ $3,250
| Put
| Goldman Sachs International
| 1,335,114
| 3
| 19,140
|
S&P 500 Index – December 2025 @ $3,300
| Put
| Goldman Sachs International
| 1,335,114
| 3
| 39,660
|
|
|
|
|
| $157,465
|
Medical Equipment – 0.1%
|
|
Mettler-Toledo International, Inc. – December 2023 @ $1,530
| Put
| Goldman Sachs International
| $ 131,164
| 1
| $23,400
|
Total Purchased Options
(Premiums Paid, $714,863)
|
| $191,910
|
Portfolio of Investments –
continued
|
|
|
| Value ($)
|
Written Options (see table below) – (0.0)%
|
|
(Premiums Received, $39,146)
| $(1,886)
|
|
|
Other Assets, Less Liabilities – (0.4)%
|
| (132,697)
|
Net Assets – 100.0%
| $36,832,961
|
(a)
| Non-income producing security.
|
|
|
|
(f)
| All or a portion of the security has been segregated as collateral for open futures contracts.
|
|
|
|
(h)
| An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common
control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $2,206,478 and $34,761,066, respectively.
|
|
|
|
(n)
| Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions
exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $3,176,634, representing 8.6% of net assets.
|
|
|
|
(p)
| Payment-in-kind (PIK) security for which interest income may be received in additional securities and/or cash.
|
|
|
|
(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:
|
ETF
| Exchange-Traded Fund
|
REIT
| Real Estate Investment Trust
|
TBA
| To Be Announced
|
TIPS
| Treasury Inflation Protected Security
|
UMBS
| Uniform Mortgage-Backed Security
|
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:
|
EUR
| Euro
|
GBP
| British Pound
|
HKD
| Hong Kong Dollar
|
Derivative Contracts at 6/30/23
Written Options
|
Underlying
| Put/
Call
| Counterparty
| Par Amount/
Number of
Contracts
| Notional
Amount
| Exercise
Price
| Expiration
Date
| Value
|
Liability Derivatives
|
Computer Software - Systems
|
|
|
|
Apple, Inc.
| Put
| Goldman Sachs International
| 96
| $1,862,112
| $100.00
| September – 2023
| $(288)
|
Apple, Inc.
| Put
| Goldman Sachs International
| 34
| 659,498
| 110.00
| March – 2024
| (1,598)
|
|
|
|
|
|
|
| $(1,886)
|
Portfolio of Investments –
continued
Forward Foreign Currency Exchange Contracts
|
Currency
Purchased
| Currency
Sold
| Counterparty
| Settlement
Date
| Unrealized
Appreciation
(Depreciation)
|
Asset Derivatives
|
USD
| 275,971
| EUR
| 250,722
| HSBC Bank
| 7/21/2023
| $2,155
|
Liability Derivatives
|
USD
| 105,845
| GBP
| 84,604
| State Street Bank Corp.
| 7/21/2023
| $(1,613)
|
Futures Contracts
|
Description
| Long/
Short
| Currency
| Contracts
| Notional
Amount
| Expiration
Date
| Value/Unrealized
Appreciation
(Depreciation)
|
Liability Derivatives
|
Equity Futures
|
|
|
MSCI EAFE Index
| Short
| USD
| 3
| $323,325
| September – 2023
| $(2,632)
|
S&P 500 E-Mini Index
| Short
| USD
| 4
| 897,650
| September – 2023
| (29,201)
|
|
|
|
|
|
| $(31,833)
|
At June 30, 2023, the fund had
liquid securities with an aggregate value of $56,459 to cover any collateral or margin obligations for certain derivative contracts.
See Notes to Financial Statements
Financial Statements
Statement of Assets and
Liabilities
At 6/30/23
This statement represents your
fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets
|
|
Investments in unaffiliated issuers, at value (identified cost, $34,552,472)
| $34,761,066
|
Investments in affiliated issuers, at value (identified cost, $2,206,028)
| 2,206,478
|
Cash
| 30
|
Receivables for
|
|
Forward foreign currency exchange contracts
| 2,155
|
Investments sold
| 16,446
|
Fund shares sold
| 2,087
|
Interest and dividends
| 135,037
|
Receivable from investment adviser
| 19,033
|
Other assets
| 155
|
Total assets
| $37,142,487
|
Liabilities
|
|
Payables for
|
|
Forward foreign currency exchange contracts
| $1,613
|
Net daily variation margin on open futures contracts
| 14,295
|
Investments purchased
| 462
|
TBA purchase commitments
| 196,037
|
Written options (premiums received, $39,146)
| 1,886
|
Payable to affiliates
|
|
Administrative services fee
| 94
|
Shareholder servicing costs
| 9,585
|
Distribution and service fees
| 418
|
Payable for independent Trustees' compensation
| 3
|
Accrued expenses and other liabilities
| 85,133
|
Total liabilities
| $309,526
|
Net assets
| $36,832,961
|
Net assets consist of
|
|
Paid-in capital
| $37,892,349
|
Total distributable earnings (loss)
| (1,059,388)
|
Net assets
| $36,832,961
|
Shares of beneficial interest outstanding
| 3,369,145
|
Statement of Assets and Liabilities – continued
| Net assets
| Shares
outstanding
| Net asset value
per share (a)
|
Class A
| $8,516,414
| 778,294
| $10.94
|
Class B
| 73,626
| 6,787
| 10.85
|
Class C
| 5,204,104
| 482,568
| 10.78
|
Class I
| 11,703,157
| 1,067,859
| 10.96
|
Class R1
| 263,980
| 24,339
| 10.85
|
Class R2
| 57,797
| 5,285
| 10.94
|
Class R3
| 58,591
| 5,350
| 10.95
|
Class R4
| 59,394
| 5,416
| 10.97
|
Class R6
| 10,895,898
| 993,247
| 10.97
|
(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 $11.61 [100 /
94.25 x $10.94]. 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
Financial Statements
Statement of Operations
Year ended 6/30/23
This statement describes how much
your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Net investment income (loss)
|
|
Income
|
|
Interest
| $497,245
|
Dividends
| 359,359
|
Dividends from affiliated issuers
| 80,320
|
Income on securities loaned
| 212
|
Foreign taxes withheld
| (31,868)
|
Total investment income
| $905,268
|
Expenses
|
|
Management fee
| $307,007
|
Distribution and service fees
| 89,821
|
Shareholder servicing costs
| 31,969
|
Administrative services fee
| 17,500
|
Independent Trustees' compensation
| 3,025
|
Custodian fee
| 15,913
|
Shareholder communications
| 9,851
|
Audit and tax fees
| 72,315
|
Legal fees
| 282
|
Registration fees
| 131,032
|
Miscellaneous
| 32,549
|
Total expenses
| $711,264
|
Reduction of expenses by investment adviser and distributor
| (248,104)
|
Net expenses
| $463,160
|
Net investment income (loss)
| $442,108
|
Statement of Operations –
continued
Realized and unrealized gain (loss)
|
Realized gain (loss) (identified cost basis)
|
|
Unaffiliated issuers
| $(724,112)
|
Affiliated issuers
| (251)
|
Written options
| 2,529
|
Futures contracts
| (71,024)
|
Forward foreign currency exchange contracts
| (3,575)
|
Foreign currency
| (166)
|
Net realized gain (loss)
| $(796,599)
|
Change in unrealized appreciation or depreciation
|
|
Unaffiliated issuers
| $2,766,864
|
Affiliated issuers
| 602
|
Written options
| 37,260
|
Futures contracts
| (45,969)
|
Forward foreign currency exchange contracts
| (11,587)
|
Translation of assets and liabilities in foreign currencies
| 1,257
|
Net unrealized gain (loss)
| $2,748,427
|
Net realized and unrealized gain (loss)
| $1,951,828
|
Change in net assets from operations
| $2,393,936
|
See Notes to Financial Statements
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
|
| 6/30/23
| 6/30/22
|
Change in net assets
|
|
|
From operations
|
|
|
Net investment income (loss)
| $442,108
| $135,052
|
Net realized gain (loss)
| (796,599)
| 51,483
|
Net unrealized gain (loss)
| 2,748,427
| (6,930,020)
|
Change in net assets from operations
| $2,393,936
| $(6,743,485)
|
Total distributions to shareholders
| $(425,103)
| $(1,216,364)
|
Change in net assets from fund share transactions
| $(7,226,513)
| $(6,332,978)
|
Total change in net assets
| $(5,257,680)
| $(14,292,827)
|
Net assets
|
|
|
At beginning of period
| 42,090,641
| 56,383,468
|
At end of period
| $36,832,961
| $42,090,641
|
See Notes to Financial Statements
Financial Statements
Financial Highlights
The financial highlights table is
intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Class A
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.33
| $12.06
| $11.32
| $10.60
| $10.07
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.11
| $0.03
| $0.07
| $0.07
| $0.12
|
Net realized and unrealized gain (loss)
| 0.61
| (1.51)
| 0.83
| 0.77
| 0.54
|
Total from investment operations
| $0.72
| $(1.48)
| $0.90
| $0.84
| $0.66
|
Less distributions declared to shareholders
|
From net investment income
| $(0.11)
| $(0.07)
| $(0.06)
| $(0.11)
| $(0.13)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.11)
| $(0.25)
| $(0.16)
| $(0.12)
| $(0.13)
|
Net asset value, end of period (x)
| $10.94
| $10.33
| $12.06
| $11.32
| $10.60
|
Total return (%) (r)(s)(t)(x)
| 7.04
| (12.58)
| 7.99
| 8.01
| 6.63
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 1.88
| 1.69
| 1.74
| 2.35
| 2.74
|
Expenses after expense reductions (f)
| 1.24
| 1.24
| 1.24
| 1.24
| 1.21
|
Net investment income (loss)
| 1.08
| 0.23
| 0.56
| 0.61
| 1.16
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $8,516
| $11,779
| $16,738
| $7,992
| $3,485
|
See Notes to Financial Statements
Financial Highlights – continued
Class B
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.24
| $11.99
| $11.28
| $10.56
| $10.03
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.04
| $(0.06)
| $(0.04)
| $(0.02)
| $0.05
|
Net realized and unrealized gain (loss)
| 0.61
| (1.51)
| 0.85
| 0.78
| 0.53
|
Total from investment operations
| $0.65
| $(1.57)
| $0.81
| $0.76
| $0.58
|
Less distributions declared to shareholders
|
From net investment income
| $(0.04)
| $—
| $—
| $(0.03)
| $(0.05)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.04)
| $(0.18)
| $(0.10)
| $(0.04)
| $(0.05)
|
Net asset value, end of period (x)
| $10.85
| $10.24
| $11.99
| $11.28
| $10.56
|
Total return (%) (r)(s)(t)(x)
| 6.36
| (13.31)
| 7.19
| 7.25
| 5.84
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 2.64
| 2.44
| 2.50
| 3.11
| 3.50
|
Expenses after expense reductions (f)
| 1.99
| 1.99
| 1.99
| 1.99
| 1.96
|
Net investment income (loss)
| 0.35
| (0.49)
| (0.33)
| (0.16)
| 0.46
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $74
| $87
| $100
| $94
| $65
|
See Notes to Financial Statements
Financial Highlights – continued
Class C
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.17
| $11.90
| $11.20
| $10.52
| $10.03
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.03
| $(0.06)
| $(0.02)
| $(0.01)
| $0.05
|
Net realized and unrealized gain (loss)
| 0.60
| (1.49)
| 0.82
| 0.77
| 0.53
|
Total from investment operations
| $0.63
| $(1.55)
| $0.80
| $0.76
| $0.58
|
Less distributions declared to shareholders
|
From net investment income
| $(0.02)
| $—
| $(0.00)(w)
| $(0.07)
| $(0.09)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.02)
| $(0.18)
| $(0.10)
| $(0.08)
| $(0.09)
|
Net asset value, end of period (x)
| $10.78
| $10.17
| $11.90
| $11.20
| $10.52
|
Total return (%) (r)(s)(t)(x)
| 6.25
| (13.25)
| 7.17
| 7.29
| 5.83
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 2.64
| 2.44
| 2.49
| 3.08
| 3.49
|
Expenses after expense reductions (f)
| 1.99
| 1.99
| 1.99
| 1.99
| 1.96
|
Net investment income (loss)
| 0.32
| (0.51)
| (0.18)
| (0.12)
| 0.46
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $5,204
| $7,200
| $8,893
| $4,624
| $1,311
|
See Notes to Financial Statements
Financial Highlights – continued
Class I
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.35
| $12.09
| $11.34
| $10.61
| $10.08
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.14
| $0.05
| $0.09
| $0.09
| $0.14
|
Net realized and unrealized gain (loss)
| 0.61
| (1.51)
| 0.84
| 0.79
| 0.53
|
Total from investment operations
| $0.75
| $(1.46)
| $0.93
| $0.88
| $0.67
|
Less distributions declared to shareholders
|
From net investment income
| $(0.14)
| $(0.10)
| $(0.08)
| $(0.14)
| $(0.14)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.14)
| $(0.28)
| $(0.18)
| $(0.15)
| $(0.14)
|
Net asset value, end of period (x)
| $10.96
| $10.35
| $12.09
| $11.34
| $10.61
|
Total return (%) (r)(s)(t)(x)
| 7.38
| (12.41)
| 8.24
| 8.33
| 6.81
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 1.64
| 1.43
| 1.48
| 2.08
| 2.49
|
Expenses after expense reductions (f)
| 0.99
| 0.99
| 0.99
| 0.99
| 0.96
|
Net investment income (loss)
| 1.39
| 0.42
| 0.76
| 0.87
| 1.41
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $11,703
| $12,499
| $18,654
| $5,093
| $1,870
|
See Notes to Financial Statements
Financial Highlights – continued
Class R1
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.24
| $11.99
| $11.29
| $10.56
| $10.03
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.05
| $(0.05)
| $(0.01)
| $(0.02)
| $0.04
|
Net realized and unrealized gain (loss)
| 0.60
| (1.52)
| 0.81
| 0.79
| 0.54
|
Total from investment operations
| $0.65
| $(1.57)
| $0.80
| $0.77
| $0.58
|
Less distributions declared to shareholders
|
From net investment income
| $(0.04)
| $—
| $—
| $(0.03)
| $(0.05)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.04)
| $(0.18)
| $(0.10)
| $(0.04)
| $(0.05)
|
Net asset value, end of period (x)
| $10.85
| $10.24
| $11.99
| $11.29
| $10.56
|
Total return (%) (r)(s)(t)(x)
| 6.41
| (13.32)
| 7.10
| 7.32
| 5.81
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 2.64
| 2.44
| 2.49
| 3.10
| 3.49
|
Expenses after expense reductions (f)
| 1.99
| 1.99
| 1.99
| 1.99
| 1.96
|
Net investment income (loss)
| 0.44
| (0.47)
| (0.05)
| (0.15)
| 0.39
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $264
| $223
| $240
| $57
| $53
|
See Notes to Financial Statements
Financial Highlights – continued
Class R2
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.33
| $12.06
| $11.32
| $10.59
| $10.06
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.09
| $0.00(w)
| $0.03
| $0.04
| $0.09
|
Net realized and unrealized gain (loss)
| 0.61
| (1.51)
| 0.83
| 0.78
| 0.54
|
Total from investment operations
| $0.70
| $(1.51)
| $0.86
| $0.82
| $0.63
|
Less distributions declared to shareholders
|
From net investment income
| $(0.09)
| $(0.04)
| $(0.02)
| $(0.08)
| $(0.10)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.09)
| $(0.22)
| $(0.12)
| $(0.09)
| $(0.10)
|
Net asset value, end of period (x)
| $10.94
| $10.33
| $12.06
| $11.32
| $10.59
|
Total return (%) (r)(s)(t)(x)
| 6.86
| (12.80)
| 7.62
| 7.82
| 6.31
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 2.14
| 1.94
| 2.01
| 2.60
| 2.99
|
Expenses after expense reductions (f)
| 1.49
| 1.49
| 1.49
| 1.49
| 1.46
|
Net investment income (loss)
| 0.91
| 0.01
| 0.27
| 0.35
| 0.90
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $58
| $54
| $62
| $58
| $53
|
See Notes to Financial Statements
Financial Highlights – continued
Class R3
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.34
| $12.08
| $11.33
| $10.60
| $10.07
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.12
| $0.03
| $0.06
| $0.07
| $0.12
|
Net realized and unrealized gain (loss)
| 0.61
| (1.52)
| 0.84
| 0.78
| 0.53
|
Total from investment operations
| $0.73
| $(1.49)
| $0.90
| $0.85
| $0.65
|
Less distributions declared to shareholders
|
From net investment income
| $(0.12)
| $(0.07)
| $(0.05)
| $(0.11)
| $(0.12)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.12)
| $(0.25)
| $(0.15)
| $(0.12)
| $(0.12)
|
Net asset value, end of period (x)
| $10.95
| $10.34
| $12.08
| $11.33
| $10.60
|
Total return (%) (r)(s)(t)(x)
| 7.13
| (12.65)
| 7.96
| 8.07
| 6.56
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 1.89
| 1.69
| 1.76
| 2.35
| 2.74
|
Expenses after expense reductions (f)
| 1.24
| 1.24
| 1.24
| 1.24
| 1.21
|
Net investment income (loss)
| 1.16
| 0.26
| 0.51
| 0.60
| 1.15
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $59
| $55
| $63
| $58
| $54
|
See Notes to Financial Statements
Financial Highlights – continued
Class R4
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.36
| $12.10
| $11.34
| $10.61
| $10.08
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.15
| $0.06
| $0.09
| $0.09
| $0.14
|
Net realized and unrealized gain (loss)
| 0.60
| (1.52)
| 0.85
| 0.79
| 0.53
|
Total from investment operations
| $0.75
| $(1.46)
| $0.94
| $0.88
| $0.67
|
Less distributions declared to shareholders
|
From net investment income
| $(0.14)
| $(0.10)
| $(0.08)
| $(0.14)
| $(0.14)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.14)
| $(0.28)
| $(0.18)
| $(0.15)
| $(0.14)
|
Net asset value, end of period (x)
| $10.97
| $10.36
| $12.10
| $11.34
| $10.61
|
Total return (%) (r)(s)(t)(x)
| 7.39
| (12.40)
| 8.31
| 8.33
| 6.81
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 1.64
| 1.44
| 1.51
| 2.10
| 2.49
|
Expenses after expense reductions (f)
| 0.99
| 0.99
| 0.99
| 0.99
| 0.96
|
Net investment income (loss)
| 1.41
| 0.51
| 0.77
| 0.86
| 1.40
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $59
| $55
| $63
| $58
| $54
|
See Notes to Financial Statements
Financial Highlights – continued
Class R6
| Year ended
|
| 6/30/23
| 6/30/22
| 6/30/21
| 6/30/20
| 6/30/19
|
Net asset value, beginning of period
| $10.36
| $12.10
| $11.35
| $10.62
| $10.08
|
Income (loss) from investment operations
|
Net investment income (loss) (d)
| $0.15
| $0.07
| $0.10
| $0.10
| $0.14
|
Net realized and unrealized gain (loss)
| 0.61
| (1.53)
| 0.83
| 0.78
| 0.55
|
Total from investment operations
| $0.76
| $(1.46)
| $0.93
| $0.88
| $0.69
|
Less distributions declared to shareholders
|
From net investment income
| $(0.15)
| $(0.10)
| $(0.08)
| $(0.14)
| $(0.15)
|
From net realized gain
| —
| (0.18)
| (0.10)
| (0.01)
| —
|
Total distributions declared to shareholders
| $(0.15)
| $(0.28)
| $(0.18)
| $(0.15)
| $(0.15)
|
Net asset value, end of period (x)
| $10.97
| $10.36
| $12.10
| $11.35
| $10.62
|
Total return (%) (r)(s)(t)(x)
| 7.48
| (12.35)
| 8.26
| 8.33
| 6.92
|
Ratios (%) (to average net assets)
and Supplemental data:
|
Expenses before expense reductions (f)
| 1.57
| 1.37
| 1.45
| 2.07
| 2.48
|
Expenses after expense reductions (f)
| 0.92
| 0.92
| 0.93
| 0.95
| 0.95
|
Net investment income (loss)
| 1.48
| 0.58
| 0.83
| 0.89
| 1.41
|
Portfolio turnover
| 60
| 52
| 32
| 46
| 51
|
Net assets at end of period (000 omitted)
| $10,896
| $10,140
| $11,569
| $10,682
| $9,857
|
(d)
| Per share data is based on average shares outstanding.
|
(f)
| Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information.
|
(r)
| Certain expenses have been reduced without which performance would have been lower.
|
(s)
| From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
|
(t)
| Total returns do not include any applicable sales charges.
|
(w)
| Per share amount was less than $0.01.
|
(x)
| The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at
period end for financial reporting purposes.
|
See Notes to Financial Statements
Notes to Financial Statements
(1) Business and
Organization
MFS Prudent Investor Fund (the fund)
is a diversified series of MFS Series Trust XVI (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, environmental, public health, and other conditions.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International
Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and
Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which
a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note
under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — Subject to its oversight, the fund's Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments to MFS as
the fund's adviser, pursuant to the fund’s valuation policy and procedures which have been adopted by the adviser and approved by the Board. In accordance with Rule 2a-5 under the Investment Company Act of
1940, the Board of Trustees designated the adviser as the “valuation designee” of the fund. If the adviser, as valuation designee, determines that reliable market quotations are not readily available for
an investment, the investment is valued at fair value as determined in good faith by the adviser in accordance with the adviser’s fair valuation policy and procedures.
Notes to Financial Statements -
continued
Under the fund's valuation policy
and procedures, equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing
service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing
service. Debt instruments and floating rate loans, including restricted 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.
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. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided
by a third-party pricing service.
Under the fund’s valuation
policy and procedures, market quotations are not considered to be readily available for debt instruments, floating rate loans, and many types of derivatives. These investments are generally valued at fair value based
on information from third-party pricing services or otherwise determined by the adviser in accordance with the adviser’s fair valuation policy and procedures. Securities and other assets generally valued on the
basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information
such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, spreads and other market data. An investment may also be valued at fair value if the adviser determines that the
investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the
determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally
traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be
deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on
third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of
Notes to Financial Statements -
continued
the security; the business and financial condition
of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s
net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted
or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund
determines its net asset value per share.
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or
liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes significant
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, forward foreign
currency exchange contracts, and written options. The following is a summary of the levels used as of June 30, 2023 in valuing the fund's assets and liabilities:
Notes to Financial Statements -
continued
Financial Instruments
| Level 1
| Level 2
| Level 3
| Total
|
Equity Securities:
|
|
|
|
|
United States
| $4,531,335
| $190,307
| $—
| $4,721,642
|
Japan
| —
| 3,216,807
| —
| 3,216,807
|
Germany
| 3,073,935
| —
| —
| 3,073,935
|
France
| 1,827,122
| —
| —
| 1,827,122
|
United Kingdom
| 1,585,435
| —
| —
| 1,585,435
|
Spain
| 1,432,905
| —
| —
| 1,432,905
|
Netherlands
| 1,278,239
| —
| —
| 1,278,239
|
Switzerland
| 1,193,699
| —
| —
| 1,193,699
|
South Korea
| —
| 769,591
| —
| 769,591
|
Other Countries
| 1,766,084
| 1,603
| —
| 1,767,687
|
U.S. Treasury Bonds & U.S. Government Agencies & Equivalents
| —
| 8,543,955
| —
| 8,543,955
|
U.S. Corporate Bonds
| —
| 3,108,722
| —
| 3,108,722
|
Residential Mortgage-Backed Securities
| —
| 1,130,251
| —
| 1,130,251
|
Asset-Backed Securities (including CDOs)
| —
| 98,674
| —
| 98,674
|
Foreign Bonds
| —
| 1,012,402
| —
| 1,012,402
|
Mutual Funds
| 2,206,478
| —
| —
| 2,206,478
|
Total
| $18,895,232
| $18,072,312
| $—
| $36,967,544
|
Other Financial Instruments
|
|
|
|
|
Futures Contracts – Liabilities
| $(31,833)
| $—
| $—
| $(31,833)
|
Forward Foreign Currency Exchange Contracts – Assets
| —
| 2,155
| —
| 2,155
|
Forward Foreign Currency Exchange Contracts – Liabilities
| —
| (1,613)
| —
| (1,613)
|
Written Options - Liabilities
| —
| (1,886)
| —
| (1,886)
|
For further information regarding
security characteristics, see the Portfolio of Investments.
Inflation-Adjusted Debt
Securities — The fund invests in inflation-adjusted debt securities issued by the U.S. Treasury. The principal value of these debt securities is adjusted through income according to changes in
the Consumer Price Index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is
typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other
measures of inflation.
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
Notes to Financial Statements -
continued
are recorded for financial statement purposes as
foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately
disclosed.
Derivatives — The fund uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency
exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses
derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by
the fund during the period were written options, purchased options, futures contracts, and forward foreign currency exchange contracts. Depending on the type of derivative, a fund may exit a derivative
position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement with the derivative counterparty, or novating the position to a third party. The fund may be unable to
promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by the exchange. The fund's period end derivatives, as presented in
the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by
major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2023 as reported in the Statement of Assets and Liabilities:
|
| Fair Value (a)
|
Risk
| Derivative Contracts
| Asset Derivatives
| Liability Derivatives
|
Equity
| Written Option Contracts
| $—
| $(1,886)
|
Equity
| Purchased Option Contracts
| 191,910
| —
|
Equity
| Futures Contracts
| —
| (31,833)
|
Foreign Exchange
| Forward Foreign Currency Exchange Contracts
| 2,155
| (1,613)
|
Total
|
| $194,065
| $(35,332)
|
(a)
| The value of purchased options outstanding is included in investments in unaffiliated issuers, at value, within the Statement of Assets and Liabilities. Values presented in this table
for futures contracts correspond to the values reported in the Portfolio of Investments. Only the current day net variation margin for futures contracts is reported separately within the Statement of Assets and
Liabilities.
|
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 June 30, 2023 as reported in the Statement of Operations:
Risk
| Futures
Contracts
| Forward Foreign
Currency
Exchange
Contracts
| Unaffiliated Issuers
(Purchased
Options)
| Written
Options
|
Foreign Exchange
| $—
| $(3,575)
| $—
| $—
|
Equity
| (71,024)
| —
| 463,534
| 2,529
|
Total
| $(71,024)
| $(3,575)
| $463,534
| $2,529
|
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 June 30, 2023 as reported in the Statement of Operations:
Risk
| Futures
Contracts
| Forward Foreign
Currency
Exchange
Contracts
| Unaffiliated Issuers
(Purchased
Options)
| Written
Options
|
Foreign Exchange
| $—
| $(11,587)
| $—
| $—
|
Equity
| (45,969)
| —
| (624,387)
| 37,260
|
Total
| $(45,969)
| $(11,587)
| $(624,387)
| $37,260
|
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 credit support annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount
is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts, if any, will be
reported separately in the Statement of Assets and Liabilities as restricted
Notes to Financial Statements -
continued
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.
Written Options — In exchange for a premium, the fund wrote call options on securities for which it anticipated the price would decline and also 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 call option is exercised, the premium received is offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the security purchased by the 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 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 call and put options for a premium. Purchased call and 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 call options may hedge against an anticipated increase in the dollar cost of securities or currency
to be acquired or increase the fund’s exposure to an underlying instrument. 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
Notes to Financial Statements -
continued
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.
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.
Notes to Financial Statements -
continued
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.
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, 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 June 30, 2023, there were no securities on loan or collateral outstanding.
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to
the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown
as this would involve future claims that may be made against the fund that have not yet occurred.
Notes to Financial Statements -
continued
Investment Transactions and
Income — Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such 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. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward based on the rate of inflation. Interest is accrued based on the
principal amount, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even
though the adjusted principal is not received until maturity.
The fund may receive proceeds from
litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in
unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Investment transactions are recorded
on the trade date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund may purchase or sell
mortgage-backed securities on a “To Be Announced” (TBA) basis. A TBA transaction is subject to extended settlement and typically does not designate the actual security to be delivered, but instead includes
an approximate principal amount. The price of the TBA security and the date that it will be settled are fixed at the time the transaction is negotiated. The value of the security varies with market fluctuations and no
interest accrues to the fund until settlement takes place. TBA purchase and sale commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy
and included in TBA purchase and TBA sale commitments in the Statement of Assets and Liabilities, as applicable. Losses may arise as a result of changes in the value of the TBA investment prior to settlement date or
due to counterparty non-performance.
The fund may also enter into
mortgage dollar rolls, typically TBA dollar rolls, in which the fund sells TBA mortgage-backed securities to financial institutions and simultaneously agrees to repurchase similar (same issuer, type and coupon)
securities at a later date at an agreed-upon price. During the period between the sale and repurchase, the fund will not be entitled to receive interest and principal payments on the securities sold. The fund accounts
for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. Dollar roll transactions involve the risk that the market value of the securities that the fund is required to
purchase may decline below the agreed upon repurchase price of those securities.
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. For the year ended
June 30, 2023, custody fees were not reduced.
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 amortization and accretion of debt securities, 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
6/30/23
| Year ended
6/30/22
|
Ordinary income (including any short-term capital gains)
| $425,103
| $408,811
|
Long-term capital gains
| —
| 807,553
|
Total distributions
| $425,103
| $1,216,364
|
The federal tax cost and the tax
basis components of distributable earnings were as follows:
As of 6/30/23
|
|
Cost of investments
| $37,062,484
|
Gross appreciation
| 3,425,600
|
Gross depreciation
| (3,553,717)
|
Net unrealized appreciation (depreciation)
| $(128,117)
|
Undistributed ordinary income
| 294,496
|
Capital loss carryforwards
| (1,226,169)
|
Other temporary differences
| 402
|
Total distributable earnings (loss)
| $(1,059,388)
|
Notes to Financial Statements -
continued
As of June 30, 2023, 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
| $(912,338)
|
Long-Term
| (313,831)
|
Total
| $(1,226,169)
|
Multiple Classes of Shares of
Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common
expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in
separate class expenses. Class B and Class C shares will convert to Class A shares approximately eight years after purchase. 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
6/30/23
|
| Year
ended
6/30/22
|
Class A
| $99,764
|
| $316,149
|
Class B
| 316
|
| 1,466
|
Class C
| 14,767
|
| 137,983
|
Class I
| 157,763
|
| 485,200
|
Class R1
| 964
|
| 3,562
|
Class R2
| 479
|
| 1,096
|
Class R3
| 625
|
| 1,258
|
Class R4
| 773
|
| 1,424
|
Class R6
| 149,652
|
| 268,226
|
Total
| $425,103
|
| $1,216,364
|
(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
| 0.80%
|
In excess of $1 billion and up to $2.5 billion
| 0.75%
|
In excess of $2.5 billion
| 0.70%
|
MFS has agreed in writing to reduce
its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. MFS has also agreed in writing to waive at least 0.01% of its management
fee as part of this agreement. The agreement to waive at least 0.01% of the management fee will continue until modified by the fund's Board of Trustees, but such agreement will continue at least until October 31,
2024. For the year ended June 30, 2023, this management fee reduction amounted to $5,103, which is included
Notes to Financial Statements -
continued
in the reduction of total expenses in the Statement
of Operations. The management fee incurred for the year ended June 30, 2023 was equivalent to an annual effective rate of 0.79% 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, certain tax reclaim recovery expenses (including
contingency fees and closing agreement expenses), 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
|
1.24%
| 1.99%
| 1.99%
| 0.99%
| 1.99%
| 1.49%
| 1.24%
| 0.99%
| 0.95%
|
This written agreement will continue
until modified by the fund’s Board of Trustees, but such agreement will continue at least until October 31, 2024. For the year ended June 30, 2023, this reduction amounted to $242,999, 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 $1,369 for the year ended June 30, 2023, as its portion of the initial sales charge on
sales of Class A shares of the fund.
The Board of Trustees has adopted a
distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan
provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. The
distribution and service fees are computed daily and paid monthly.
Distribution Plan Fee Table:
| Distribution
Fee Rate (d)
| Service
Fee Rate (d)
| Total
Distribution
Plan (d)
| Annual
Effective
Rate (e)
| Distribution
and Service
Fee
|
Class A
| —
| 0.25%
| 0.25%
| 0.25%
| $ 24,359
|
Class B
| 0.75%
| 0.25%
| 1.00%
| 1.00%
| 812
|
Class C
| 0.75%
| 0.25%
| 1.00%
| 1.00%
| 61,909
|
Class R1
| 0.75%
| 0.25%
| 1.00%
| 1.00%
| 2,330
|
Class R2
| 0.25%
| 0.25%
| 0.50%
| 0.50%
| 273
|
Class R3
| —
| 0.25%
| 0.25%
| 0.25%
| 138
|
Total Distribution and Service Fees
|
|
|
|
| $89,821
|
(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 June 30, 2023 based on each class's average daily net assets. MFD has
voluntarily
|
Notes to Financial Statements -
continued
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
June 30, 2023, this rebate amounted to $2 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 June
30, 2023, were as follows:
| Amount
|
Class A
| $8,140
|
Class B
| —
|
Class C
| 1,915
|
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 June 30, 2023, the fee was $2,585, which equated to 0.0067% annually of the
fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service
providers. Class R6 shares do not incur sub-accounting fees. For the year ended June 30, 2023, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $29,384.
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the
fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee is
computed daily and paid monthly. The administrative services fee incurred for the year ended June 30, 2023 was equivalent to an annual effective rate of 0.0456% of the fund's average daily net assets.
Trustees’ and Officers’
Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons.
Independent Trustees’ compensation is accrued daily and paid subsequent to each Trustee Board meeting. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers
of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money
market fund does not pay a management fee to MFS but does incur investment and operating costs.
On August 3, 2022, MFS redeemed 77
shares of Class I for an aggregate amount of $816.
Notes to Financial Statements -
continued
At June 30, 2023, MFS held
approximately 76% of the outstanding shares of Class B and 100% of the outstanding shares of Class R2, Class R3, Class R4, and Class R6.
(4) Portfolio Securities
For the year ended June 30, 2023,
purchases and sales of investments, other than purchased options with an expiration date of less than one year from the time of purchase and short-term obligations, were as follows:
| Purchases
| Sales
|
U.S. Government securities
| $14,784,492
| $16,855,127
|
Non-U.S. Government securities
| 6,736,402
| 10,780,097
|
(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
6/30/23
|
| Year ended
6/30/22
|
| Shares
| Amount
|
| Shares
| Amount
|
Shares sold
|
|
|
|
|
|
Class A
| 65,895
| $678,200
|
| 328,306
| $3,881,834
|
Class B
| —
| —
|
| 444
| 5,000
|
Class C
| 9,166
| 94,503
|
| 187,706
| 2,203,007
|
Class I
| 164,209
| 1,709,377
|
| 605,775
| 7,257,787
|
Class R1
| 5,151
| 53,020
|
| 3,967
| 45,636
|
| 244,421
| $2,535,100
|
| 1,126,198
| $13,393,264
|
Shares issued to shareholders
in reinvestment of distributions
|
|
|
|
|
|
Class A
| 9,800
| $99,764
|
| 26,792
| $316,149
|
Class B
| 31
| 316
|
| 125
| 1,466
|
Class C
| 1,465
| 14,767
|
| 11,824
| 137,983
|
Class I
| 15,498
| 157,763
|
| 41,084
| 485,200
|
Class R1
| 95
| 964
|
| 303
| 3,562
|
Class R2
| 47
| 479
|
| 93
| 1,096
|
Class R3
| 61
| 625
|
| 107
| 1,258
|
Class R4
| 76
| 773
|
| 120
| 1,424
|
Class R6
| 14,686
| 149,652
|
| 22,692
| 268,226
|
| 41,759
| $425,103
|
| 103,140
| $1,216,364
|
Notes to Financial Statements -
continued
| Year ended
6/30/23
|
| Year ended
6/30/22
|
| Shares
| Amount
|
| Shares
| Amount
|
Shares reacquired
|
|
|
|
|
|
Class A
| (438,202)
| $(4,466,178)
|
| (602,024)
| $(7,028,652)
|
Class B
| (1,705)
| (17,826)
|
| (466)
| (5,416)
|
Class C
| (236,159)
| (2,413,357)
|
| (238,569)
| (2,753,643)
|
Class I
| (319,523)
| (3,261,979)
|
| (981,872)
| (11,125,911)
|
Class R1
| (2,654)
| (27,376)
|
| (2,574)
| (28,984)
|
| (998,243)
| $(10,186,716)
|
| (1,825,505)
| $(20,942,606)
|
Net change
|
|
|
|
|
|
Class A
| (362,507)
| $(3,688,214)
|
| (246,926)
| $(2,830,669)
|
Class B
| (1,674)
| (17,510)
|
| 103
| 1,050
|
Class C
| (225,528)
| (2,304,087)
|
| (39,039)
| (412,653)
|
Class I
| (139,816)
| (1,394,839)
|
| (335,013)
| (3,382,924)
|
Class R1
| 2,592
| 26,608
|
| 1,696
| 20,214
|
Class R2
| 47
| 479
|
| 93
| 1,096
|
Class R3
| 61
| 625
|
| 107
| 1,258
|
Class R4
| 76
| 773
|
| 120
| 1,424
|
Class R6
| 14,686
| 149,652
|
| 22,692
| 268,226
|
| (712,063)
| $(7,226,513)
|
| (596,167)
| $(6,332,978)
|
Effective June 1, 2019, purchases of
the fund’s Class B shares were closed to new and existing investors subject to certain exceptions. On March 30, 2023, the fund announced that effective after the close of business on September 29, 2023,
purchases of Class R1 and Class R2 shares will be closed to new eligible investors.
(6) Line of Credit
The fund and certain other funds
managed by MFS participate in a $1.45 billion unsecured committed line of credit of which $1.2 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of
banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of 1) Daily Simple SOFR
(Secured Overnight Financing Rate) plus 0.10%, 2) the Federal Funds Effective Rate, or 3) the Overnight Bank Funding Rate, each plus an agreed upon spread. A commitment fee, based on the average daily unused portion
of the committed line of credit, is allocated among the participating funds. The line of credit expires on March 14, 2024 unless extended or renewed. In addition, the fund and other funds managed by MFS have
established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an
agreed upon spread. For the year ended June 30, 2023, the fund’s commitment fee and interest expense were $202 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of
Operations.
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
| $2,529,336
| $16,996,295
| $17,319,504
| $(251)
| $602
| $2,206,478
|
Affiliated Issuers
| Dividend
Income
| Capital Gain
Distributions
|
MFS Institutional Money Market Portfolio
| $80,320
| $—
|
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of MFS
Series Trust XVI and the Shareholders of
MFS Prudent Investor Fund:
Opinion on the Financial Statements
and Financial Highlights
We have audited the accompanying
statement of assets and liabilities of MFS Prudent Investor Fund (the “Fund”), including the portfolio of investments, as of June 30, 2023, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the
financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of June 30, 2023, and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements and
financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights.
Report of Independent Registered Public
Accounting Firm – continued
Our procedures included confirmation of securities
owned as of June 30, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis
for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 15, 2023
We have served as the auditor of
one or more of the MFS investment companies since 1924.
Trustees and
Officers — Identification and Background
The Trustees and Officers of the
Trust, as of August 1, 2023, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer is
111 Huntington Avenue, Boston, Massachusetts 02199-7618.
Name, Age
|
| Position(s) Held with Fund
|
| Trustee/Officer Since(h)
|
| Number of MFS Funds overseen by the Trustee
|
| Principal Occupations During
the Past Five Years
|
| Other Directorships During
the Past Five Years (j)
|
INTERESTED TRUSTEE
|
|
|
|
|
|
|
|
|
|
|
Michael W. Roberge (k)
(age 56)
|
| Trustee
|
| January 2021
|
| 136
|
| Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President
(until December 2018); Chief Investment Officer (until December 2018)
|
| N/A
|
INDEPENDENT TRUSTEES
|
|
|
|
|
|
|
|
|
|
|
John P. Kavanaugh
(age 68)
|
| Trustee and Chair of Trustees
|
| January 2009
|
| 136
|
| Private investor
|
| N/A
|
Steven E. Buller
(age 72)
|
| Trustee
|
| February 2014
|
| 136
|
| Private investor
|
| N/A
|
John A. Caroselli
(age 69)
|
| Trustee
|
| March 2017
|
| 136
|
| Private investor; JC Global Advisors, LLC (management consulting), President (since 2015)
|
| N/A
|
Maureen R. Goldfarb
(age 68)
|
| Trustee
|
| January 2009
|
| 136
|
| Private investor
|
| N/A
|
Peter D. Jones
(age 68)
|
| Trustee
|
| January 2019
|
| 136
|
| Private investor
|
| N/A
|
James W. Kilman, Jr.
(age 62)
|
| Trustee
|
| January 2019
|
| 136
|
| Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital
LLC (family office), Chief Executive Officer (since 2016)
|
| Alpha-En Corporation, Director (2016-2019)
|
Trustees and Officers - continued
Name, Age
|
| Position(s) Held with Fund
|
| Trustee/Officer Since(h)
|
| Number of MFS Funds overseen by the Trustee
|
| Principal Occupations During
the Past Five Years
|
| Other Directorships During
the Past Five Years (j)
|
Clarence Otis, Jr.
(age 67)
|
| Trustee
|
| March 2017
|
| 136
|
| Private investor
|
| VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director
|
Maryanne L. Roepke
(age 67)
|
| Trustee
|
| May 2014
|
| 136
|
| Private investor
|
| N/A
|
Laurie J. Thomsen
(age 65)
|
| Trustee
|
| March 2005
|
| 136
|
| Private investor
|
| The Travelers Companies, Director; Dycom Industries, Inc., Director
|
Name, Age
|
| Position(s) Held with
Fund
|
| Trustee/Officer Since(h)
|
| Number of MFS Funds for which the Person is an Officer
|
| Principal Occupations During
the Past Five Years
|
OFFICERS
|
|
|
|
|
|
|
|
|
Christopher R. Bohane (k)
(age 49)
|
| Assistant Secretary and Assistant Clerk
|
| July 2005
|
| 136
|
| Massachusetts Financial Services Company, Senior Vice President and Senior Managing Counsel
|
Kino Clark (k)
(age 55)
|
| Assistant Treasurer
|
| January 2012
|
| 136
|
| Massachusetts Financial Services Company, Vice President
|
John W. Clark, Jr. (k)
(age 56)
|
| Assistant Treasurer
|
| April 2017
|
| 136
|
| Massachusetts Financial Services Company, Vice President
|
David L. DiLorenzo (k)
(age 54)
|
| President
|
| July 2005
|
| 136
|
| Massachusetts Financial Services Company, Senior Vice President
|
Heidi W. Hardin (k)
(age 55)
|
| Secretary and Clerk
|
| April 2017
|
| 136
|
| Massachusetts Financial Services Company, Executive Vice President and General Counsel
|
Brian E. Langenfeld (k)
(age 50)
|
| Assistant Secretary and Assistant Clerk
|
| June 2006
|
| 136
|
| Massachusetts Financial Services Company, Vice President and Managing Counsel
|
Trustees and Officers - continued
Name, Age
|
| Position(s) Held with
Fund
|
| Trustee/Officer Since(h)
|
| Number of MFS Funds for which the Person is an Officer
|
| Principal Occupations During
the Past Five Years
|
Rosa E. Licea-Mailloux (k)
(age 46)
|
| Chief Compliance Officer
|
| March 2022
|
| 136
|
| Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American
Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018)
|
Amanda S. Mooradian (k)
(age 44)
|
| Assistant Secretary and Assistant Clerk
|
| September 2018
|
| 136
|
| Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel
|
Susan A. Pereira (k)
(age 52)
|
| Assistant Secretary and Assistant Clerk
|
| July 2005
|
| 136
|
| Massachusetts Financial Services Company, Vice President and Managing Counsel
|
Kasey L. Phillips (k)
(age 52)
|
| Assistant Treasurer
|
| September 2012
|
| 136
|
| Massachusetts Financial Services Company, Vice President
|
Matthew A. Stowe (k)
(age 48)
|
| Assistant Secretary and Assistant Clerk
|
| October 2014
|
| 136
|
| Massachusetts Financial Services Company, Vice President and Senior Managing Counsel
|
William B. Wilson (k)
(age 40)
|
| Assistant Secretary and Assistant Clerk
|
| October 2022
|
| 136
|
| Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel
|
James O. Yost (k)
(age 63)
|
| Treasurer
|
| September 1990
|
| 136
|
| Massachusetts Financial Services Company, Senior Vice President
|
(h)
| Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December
2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively.
|
(j)
| Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).
|
(k)
| “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing
investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.
|
Trustees and Officers - continued
Each Trustee (other than Messrs.
Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or
removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of
75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and
Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and
certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional
Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
Investment Adviser
| Custodian
|
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618
| JPMorgan Chase Bank, NA
4 Metrotech Center
New York, NY 11245
|
Distributor
| Independent Registered Public Accounting Firm
|
MFS Fund Distributors, Inc.
111 Huntington Avenue
Boston, MA 02199-7618
| Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
|
Portfolio Manager(s)
|
|
David Cole
Shanti Das-Wermes
Edward Dearing
Barnaby Wiener
|
|
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 March 2023 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from January 1, 2022 to
December 31, 2022 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively in all material respects 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.
Proxy Voting Policies and
Information
MFS votes proxies on behalf of the
fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund
voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio
Disclosure
The fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post
important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund
Contracts and Legal Claims
The fund has entered into
contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are
not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek
any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and
Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of
Massachusetts.
Federal Tax Information
(unaudited)
The fund will notify shareholders of
amounts for use in preparing 2023 income tax forms in January 2024. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum
amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund intends to pass through the
maximum amount allowable as Section 163(j) Interest Dividends as defined in Treasury Regulation §1.163(j)-1(b).
The fund designates the maximum
amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
FACTS
| WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?
|
Why?
| Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you
how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
|
What?
| The types of personal information we collect and share depend on the product or service you have with us. This information can include:
|
• Social Security number and account balances
|
• Account transactions and transaction history
|
• Checking account information and wire transfer instructions
|
When you are no longer our customer, we continue to share your information as described in this notice.
|
How?
| All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their
customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing.
|
Reasons we can share your
personal information
| Does MFS share?
| Can you limit
this sharing?
|
For our everyday business purposes –
such as to process your transactions, maintain your
account(s), respond to court orders and legal
investigations, or report to credit bureaus
| Yes
| No
|
For our marketing purposes –
to offer our products and services to you
| No
| We don't share
|
For joint marketing with other
financial companies
| No
| We don't share
|
For our affiliates' everyday business purposes –
information about your transactions and experiences
| No
| We don't share
|
For our affiliates' everyday business purposes –
information about your creditworthiness
| No
| We don't share
|
For nonaffiliates to market to you
| No
| We don't share
|
Questions?
| Call 800-225-2606 or go to mfs.com.
|
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.
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• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
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Nonaffiliates
| Companies not related by common ownership or control. They can be financial and nonfinancial companies.
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• MFS does not share with nonaffiliates so they can market to you.
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Joint marketing
| A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
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• MFS doesn't jointly market.
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Other important information
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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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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
Item 1(b):
Not applicable.
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 is attached hereto as EX-99.COE.
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 a 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 the 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 Fund ("MFS Related Entities").
For the fiscal years ended June 30, 2023 and 2022, audit fees billed to each Fund by Deloitte were as follows:
Fees billed by Deloitte:
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Audit Fees
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2023
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2022
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MFS Prudent Investor Fund
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56,143
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51,949
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For the fiscal years ended June 30, 2023 and 2022, fees billed by Deloitte 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:
Fees billed by Deloitte:
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Audit-Related Fees1
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Tax Fees2
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All Other Fees3
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2023
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2022
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2023
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2022
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2023
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2022
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To MFS Prudent Investor Fund
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0
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0
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0
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400
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0
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0
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Fees billed by Deloitte:
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Audit-Related Fees1
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Tax Fees2
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All Other Fees3
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2023
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2022
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2023
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2022
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2023
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2022
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To MFS and MFS Related
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Entities of MFS Prudent
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0
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0
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0
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0
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3,790
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3,790
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Investor Fund*
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Fees billed by Deloitte:
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Aggregate Fees for Non-audit Services
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2023
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2022
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To MFS Prudent Investor Fund, MFS and MFS Related
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Entities#
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3,790
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4,190
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*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 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.
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".
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.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. INVESTMENTS
A schedule of investments for each series covered by this Form N-CSR is included as part of the report to shareholders of such series under Item 1(a) 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.
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.
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.
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 XVI
By (Signature and Title)*
/S/ DAVID L. DILORENZO
David L. DiLorenzo, President
Date: August 15, 2023
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: August 15, 2023
By (Signature and Title)*
/S/ JAMES O. YOST
James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer) Date: August 15, 2023
* Print name and title of each signing officer under his or her signature.