0001193125-22-013224.txt : 20220120 0001193125-22-013224.hdr.sgml : 20220120 20220120100902 ACCESSION NUMBER: 0001193125-22-013224 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20211130 FILED AS OF DATE: 20220120 DATE AS OF CHANGE: 20220120 EFFECTIVENESS DATE: 20220120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MFS INTERMEDIATE HIGH INCOME FUND CENTRAL INDEX KEY: 0000833021 IRS NUMBER: 046593681 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05567 FILM NUMBER: 22541056 BUSINESS ADDRESS: STREET 1: 111 HUNTINGTON AVENUE STREET 2: 24TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6179545000 MAIL ADDRESS: STREET 1: 111 HUNTINGTON AVENUE STREET 2: 24TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL INTERMEDIATE HIGH INCOME FUND DATE OF NAME CHANGE: 19920703 N-CSR 1 d295010dncsr.htm MFS INTERMEDIATE HIGH INCOME FUND N-CSR MFS INTERMEDIATE HIGH INCOME FUND N-CSR

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 811-05567

MFS INTERMEDIATE HIGH INCOME FUND

(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

111 Huntington Avenue

Boston, Massachusetts 02199

(Name and address of agents for service)

Registrant’s telephone number, including area code: (617) 954-5000

Date of fiscal year end: November 30

Date of reporting period: November 30, 2021


ITEM 1.

REPORTS TO STOCKHOLDERS.

 

Item 1(a):


Annual Report
November 30, 2021
MFS®  Intermediate High  
Income Fund
CIH-ANN


MANAGED DISTRIBUTION POLICY DISCLOSURE
The MFS Intermediate High Income Fund’s (the fund) Board of Trustees adopted a managed distribution policy. The fund seeks to pay monthly distributions based on an annual rate of 9.50% of the fund’s average monthly net asset value. The primary purpose of the managed distribution policy is to provide shareholders with a constant, but not guaranteed, fixed minimum rate of distribution each month. You should not draw any conclusions about the fund’s investment performance from the amount of the current distribution or from the terms of the fund’s managed distribution policy. The Board may amend or terminate the managed distribution policy at any time without prior notice to fund shareholders. The amendment or termination of the managed distribution policy could have an adverse effect on the market price of the fund’s shares.
With each distribution, the fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the fund’s investment experience during its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Please refer to “Tax Matters and Distributions” under Note 2 of the Notes to Financial Statements for information regarding the tax character of the fund’s distributions.
Under a managed distribution policy the fund may at times distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. Any such returns of capital will decrease the fund’s total assets and, therefore, could have the effect of increasing the fund’s expense ratio. In addition, in order to make the level of distributions called for under its managed distribution policy, the fund may have to sell portfolio securities at a less than opportune time. A return of capital does not necessarily reflect the fund’s investment performance and should not be confused with ‘yield’ or ‘income’. The fund’s total return in relation to changes in net asset value is presented in the Financial Highlights.


MFS® Intermediate High  
Income Fund
New York Stock Exchange Symbol: CIF

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back cover
    
NOT FDIC INSURED  •  MAY LOSE VALUE  •  NO BANK GUARANTEE




LETTER FROM THE CEO
Dear Shareholders:
After experiencing dramatic swings in the early days of the coronavirus pandemic, global equity markets have performed strongly over the past year. Though the speedy development of vaccines brightened the economic and market outlook, uncertainty remains as variants of the virus appear, the effectiveness of vaccines appears to wane over time, and their uneven distribution impacts the developing world.
After having taken aggressive steps to cushion the economic and market fallout related to the virus, some global central banks have begun to recalibrate monetary policy. For example, the U.S. Federal Reserve has begun to taper its bond buying, which has pushed up Treasury yields, particularly on the short end of the yield curve. Fiscal stimulus has been abundant as the U.S. Congress passed a $1.9 trillion COVID-19 relief bill in March and a $1.1 trillion infrastructure bill in November. Along with the high levels of government spending, production and transportation bottlenecks and labor shortages stemming from the pandemic have fueled a rise in inflation.
Since midyear, global economic growth has moderated, with the spread of the Delta and Omicron variants of the coronavirus and a regulatory crackdown in China featuring prominently. Stress in China’s property development sector has contributed to a slowdown there. Tightening global energy and raw materials supplies are a further concern for investors.
The policy measures put in place to counteract the pandemic’s effects have helped build a supportive environment and are encouraging economic recovery; however, if markets disconnect from fundamentals, they can sow the seeds of instability. As such, recent dramatic increases in speculative trading in cryptocurrencies, special purpose acquisition companies (SPACs), and the like bear watching.
In the aftermath of the crisis, we could see societal changes as households, businesses, and governments adjust to a new reality, and any such alterations could affect the investment landscape. For investors, events such as the COVID-19 outbreak demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
At MFS®, we put our clients’ assets to work responsibly by carefully navigating the increasing complexity of global markets and economies. Guided by our commitment to long-term investing, we tune out the noise and aim to uncover what we believe are the best, most durable investment opportunities in the market. Our unique global investment platform combines collective expertise, long-term discipline, and thoughtful risk management to create sustainable value for investors over time.
Respectfully,
Michael W. Roberge
Chief Executive Officer
MFS Investment Management
January 14, 2022
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
1


Portfolio Composition
Portfolio structure (i)
Top five industries (i)
Cable TV 11.6%
Gaming & Lodging 9.4%
Medical & Health Technology & Services 8.9%
Midstream 6.4%
Metals & Mining 5.6%
Composition including fixed income credit quality (a)(i)
BBB 1.0%
BB 62.6%
B 54.5%
CCC 19.1%
CC 0.1%
C 0.1%
Not Rated (1.8)%
Non-Fixed Income 1.7%
Cash & Cash Equivalents
(Less Liabilities) (b)
(39.3)%
Other 2.0%
Portfolio facts (i)
Average Duration (d) 5.6
Average Effective Maturity (m) 5.2 yrs.
 
(a) For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. Not Rated includes fixed income securities and fixed income derivatives that have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and/or commodity-linked derivatives. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.
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Portfolio Composition - continued
(b) Cash & Cash Equivalents (Less Liabilities) includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Liabilities include the value of outstanding borrowings made by the fund for leverage transactions. Cash & Cash Equivalents (Less Liabilities) is negative due to these borrowings. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities. Please see Note 6 in the Notes to Financial Statements for more information on the fund's outstanding borrowings.
(d) Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move.
(i) For purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts.
(m) In determining each instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity.
Where the fund holds convertible bonds, they are treated as part of the equity portion of the portfolio.
Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of November 30, 2021.
The portfolio is actively managed and current holdings may be different.
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Management Review
Summary of Results
For the twelve months ended November 30, 2021, shares of the MFS Intermediate High Income Fund (fund) provided a total return of 2.25%, at net asset value and a total return of 30.89%, at market value. Because the fund's shares trade in the stock market based on investor demand, the fund's shares may trade at a price higher or lower than its net asset value due to various factors. Past performance is no guarantee of future results. This compares with a return of 5.27% for the fund’s benchmark, the Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index.
The performance commentary below is based on the net asset value performance of the fund, which reflects the performance of the underlying pool of assets held by the fund. The total return at market value represents the return earned by owners of the shares of the fund, which are traded publicly on the exchange.
Market Environment
Over the past year, the global economy was buffeted by an array of crosscurrents as it adjusted to the ebbs and flows of the pandemic. Among the supportive currents were ample fiscal stimulus, loose monetary policy and the rollout of several highly effective coronavirus vaccines. Negative currents included the rapid spread of several coronavirus variants, widespread global production bottlenecks and a surge in inflation. After experiencing a burst of exceptionally strong economic activity as the global economy began to reopen, growth slowed lately as shortages of raw materials, labor, intermediate goods and even energy in some countries, disrupted supply chains.
Amid rising inflation, markets anticipated a transition from an exceptionally accommodative environment to a more mixed monetary landscape ahead. Indeed, several central banks in emerging markets have already tightened policy and the US Federal Reserve reduced the pace of its asset purchases in November. However, the European Central Bank, the Bank of Japan and the People's Bank of China are expected to maintain accommodative policies. Sovereign bond yields moved modestly higher late in the period amid higher inflation and on expectations of a tighter Fed but slipped lower as the highly-transmissible Omicron variant began to spread at the end of the period.
A harsher Chinese regulatory environment toward industries such as online gaming, food delivery and education increased market volatility as has stress in China's highly leveraged property development sector. Trade relations between the United States and China remained quite strained despite a change in presidential administrations.
Signs of excess investor enthusiasm continued to be seen in pockets of the market such as “meme stocks” popular with users of online message boards, cryptocurrencies and heavy retail participation in the market for short-dated options.
Factors Affecting Performance
Relative to the Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index, the fund’s greater allocation to “B” rated(r) bonds within both the energy and capital goods sectors held back performance. Bond selection within “BB”, “CCC” and “B” rated bonds further weighed on the fund’s relative results, led by security selection
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Management Review - continued
within the consumer cyclical, basic industry, consumer non-cyclical and technology sectors. The fund's longer duration stance(d) was another area of relative weakness as interest rates generally rose during the reporting period.
Conversely, the fund’s yield curve(y) positioning supported relative performance.
The fund employs leverage that has been created through the use of loan agreements with a bank. To the extent that investments are purchased through the use of leverage, the fund’s net asset value will increase or decrease at a greater rate than a comparable unleveraged fund. During the reporting period, the fund’s use of leverage was a contributor to relative performance.
The fund has a managed distribution policy, the primary purpose of which is to provide shareholders with a constant, but not guaranteed, fixed rate of distribution each month. This policy had no material impact on the fund's investment strategies during its most recent fiscal year. The level of distributions paid by the fund pursuant to its managed distribution policy may cause the fund's NAV per share to decline more so than if the policy were not in place, including if distributions are in excess of fund returns. For the twelve months ended November 30, 2021, the tax character of dividends paid pursuant to the managed distribution policy includes an ordinary income distribution of $2,704,910 and a tax return of capital distribution of $1,782,784. See “Managed Distribution Policy Disclosure” in the inside cover page of this Annual Report for additional details regarding the policy and related implications for the fund and shareholders.
Respectfully,
Portfolio Manager(s)
David Cole and Michael Skatrud
(d) Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value.
(r) Securities rated “BBB”, “Baa”, or higher are considered investment grade; securities rated “BB”, “Ba”, or below are considered non-investment grade. Ratings are assigned to underlying securities utilizing ratings from Moody's, Fitch, and Standard & Poor's and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). For securities that are not rated by any of the rating agencies, the security is considered Not Rated.
(y) A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates.
The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
5


Performance Summary THROUGH 11/30/21
The following chart illustrates the fund’s historical performance in comparison to its benchmark(s). Performance results reflect the percentage change in net asset value and market value, including reinvestment of fund distributions. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect 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 sale of fund shares.
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns through 11/30/21
  Inception Date 1-yr 5-yr 10-yr
Market Value (r) 7/21/88 30.89% 13.98% 10.22%
Net Asset Value (r) 7/21/88 2.25% 6.11% 7.56%
Comparative benchmark(s)
       
Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index (f) 5.27% 6.27% 6.90%
    
(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of all distributions. Market value references New York Stock Exchange Price.
Benchmark Definition(s)
Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index(a) – a component of the Bloomberg U.S. Corporate High-Yield Bond Index, which measures performance of non-investment grade, fixed rate debt. The index limits the maximum exposure to any one issuer to 2%.
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Performance Summary  - continued
It is not possible to invest directly in an index.
(a) Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg's licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
Notes to Performance Summary
The fund’s shares may trade at a discount or premium to net asset value. When fund shares trade at a premium, buyers pay more than the net asset value underlying fund shares, and shares purchased at a premium would receive less than the amount paid for them in the event of the fund’s concurrent liquidation.
The fund's target annual distribution rate is calculated based on an annual rate of 9.50% of the fund's average monthly net asset value, not a fixed share price, and the fund's dividend amount will fluctuate with changes in the fund's average monthly net assets.
Net asset values and performance results based on net asset value per share 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 Statement of Assets and Liabilities or the Financial Highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
In accordance with Section 23(c) of the Investment Company Act of 1940, the fund hereby gives notice that it may from time to time repurchase shares of the fund in the open market at the option of the Board of Trustees and on such terms as the Trustees shall determine.
7


Investment Objective, Principal Investment Strategies and Principal Risks
Investment Objective
The fund’s investment objective is to seek high current income, but may also consider capital appreciation. The fund’s objective may be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests at least 80% of the fund’s net assets, including borrowings for investment purposes, in high income debt instruments.
MFS may invest the fund’s assets in other types of debt instruments and equity securities.
MFS may invest up to 100% of the fund’s assets in below investment grade quality debt instruments.
MFS may invest the fund’s assets in foreign securities.
MFS normally invests the fund's assets across different industries and sectors, but MFS may invest a significant percentage of the fund's assets in issuers in a single industry or sector.
The fund’s dollar-weighted average effective maturity will normally be between three and ten years. In determining an instrument’s effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a call, put, pre-refunding, prepayment or redemption provision, or an adjustable coupon) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity.
The fund seeks to make a monthly distribution at an annual fixed rate of 9.50% of the fund’s average monthly net asset value.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate exposure, or as alternatives to direct investments.
MFS uses an active bottom-up investment approach to buying and selling investments for the fund. Investments are selected primarily based on fundamental analysis of individual issuers and/or instruments in light of the issuer’s financial condition and market, economic, political, and regulatory conditions. Factors considered for debt instruments may include the instrument’s credit quality, collateral characteristics, and indenture provisions, and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Factors considered for equity securities may include analysis of an issuer’s earnings, cash flows, competitive position, and management ability. MFS may also consider environmental, social, and governance (ESG) factors in its fundamental investment analysis where MFS believes such factors could materially impact the economic value of an issuer or instrument. ESG factors
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Investment Objective, Principal Investment Strategies and Principal Risks - continued
considered may include, but are not limited to, climate change, resource depletion, an issuer's governance structure and practices, data protection and privacy issues, and diversity and labor practices. Quantitative screening tools that systematically evaluate the structure of a debt instrument and its features or the valuation, price and earnings momentum, earnings quality, and other factors of the issuer of an equity security may also be considered.
The fund may use leverage by borrowing up to 33 1/3% of the fund’s assets, including borrowings for investment purposes, and investing the proceeds pursuant to its investment strategies. If approved by the fund’s Board of Trustees, the fund may use leverage by other methods.
MFS may engage in active and frequent trading in pursuing the fund's principal investment strategies.
In response to market, economic, political, or other conditions, MFS may depart from the fund’s principal investment strategies by temporarily investing for defensive purposes.
Principal Investment Types
The principal investment types in which the fund may invest are:
Debt Instruments: Debt instruments represent obligations of corporations, governments, and other entities to repay money borrowed, or other instruments believed to have debt-like characteristics. The issuer or borrower usually pays a fixed, variable, or floating rate of interest, and must repay the amount borrowed, usually at the maturity of the instrument. Debt instruments generally trade in the over-the-counter market and can be less liquid than other types of investments, particularly during adverse market and economic conditions. During certain market conditions, debt instruments in some or many segments of the debt market can trade at a negative interest rate (i.e., the price to purchase the debt instrument is more than the present value of expected interest payments and principal due at the maturity of the instrument). Some debt instruments, such as zero coupon bonds or payment-in-kind bonds, do not pay current interest. Other debt instruments, such as certain mortgage-backed securities and other securitized instruments, make periodic payments of interest and/or principal. Some debt instruments are partially or fully secured by collateral supporting the payment of interest and principal.
Corporate Bonds: Corporate bonds are debt instruments issued by corporations or similar entities.
U.S. Government Securities: U.S. Government securities are securities issued or guaranteed as to the payment of principal and interest by the U.S. Treasury, by an agency or instrumentality of the U.S. Government, or by a U.S. Government-sponsored entity. Certain U.S. Government securities are not supported as to the payment of principal and interest by the full faith and credit of the U.S. Treasury or the ability to borrow from the U.S. Treasury. Some U.S. Government securities are supported as to the payment of principal and interest only by the credit of the entity issuing or guaranteeing the security. U.S. Government securities include mortgage-backed securities and other types of securitized instruments guaranteed by the U.S. Treasury, by an agency or instrumentality of the U.S. Government, or by a U.S. Government-sponsored entity.
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Investment Objective, Principal Investment Strategies and Principal Risks - continued
Foreign Government Securities: Foreign government securities are debt instruments issued, guaranteed, or supported, as to the payment of principal and interest, by foreign governments, foreign government agencies, foreign semi-governmental entities or supranational entities, or debt instruments issued by entities organized and operated for the purpose of restructuring outstanding foreign government securities. Foreign government securities may not be supported as to the payment of principal and interest by the full faith and credit of the foreign government.
Floating Rate Loans: Floating rate loans are debt instruments issued by companies or other entities with interest rates that reset periodically (typically daily, monthly, quarterly, or semiannually), based on a base lending rate such as the London Interbank Bank Offered Rate (LIBOR), plus a premium. Floating rate loans are typically structured and administered by a third party that acts as agent for the lenders participating in the floating rate loan. Floating rate loans can be acquired directly through the agent, by assignment from a third party holder of the loan, or as a participation interest in a third party holder’s portion of the loan. Senior floating rate loans are secured by specific collateral of the borrower, and are senior to most other securities of the borrower (e.g., common stocks or other debt instruments) in the event of bankruptcy. Floating rate loans can be subject to restrictions on resale and can be less liquid than other types of securities.
Equity Securities: Equity securities represent an ownership interest, or the right to acquire an ownership interest, in a company or other issuer. Different types of equity securities provide different voting and dividend rights and priorities in the event of bankruptcy of the issuer. Equity securities include common stocks, preferred stocks, securities convertible into stocks, equity interests in real estate investment trusts (REITS), and depositary receipts for such securities.
Derivatives: Derivatives are financial contracts whose value is based on the value of one or more underlying indicators or the difference between underlying indicators. Underlying indicators may include a security or other financial instrument, asset, currency, interest rate, credit rating, commodity, volatility measure, or index. Derivatives often involve a counterparty to the transaction. Derivatives include futures, forward contracts, options, swaps, and certain complex structured securities.
Principal Risks
The share price of the fund will change daily based on changes in market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. As with any mutual fund, the fund may not achieve its objective and/or you could lose money on your investment in the fund. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The significance of any specific risk to an investment in the fund will vary over time depending on the composition of the fund's portfolio, market conditions, and other factors. You should read all of the risk information below carefully, because any one or more of these risks may result in losses to the fund.
The principal risks of investing in the fund are:
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Investment Objective, Principal Investment Strategies and Principal Risks - continued
Investment Selection Risk: MFS' investment analysis and its selection of investments may not produce the intended results and/or can lead to an investment focus that results in the fund underperforming other funds with similar investment strategies and/or underperforming the markets in which the fund invests. In addition, MFS or the fund's other service providers may experience disruptions or operating errors that could negatively impact the fund.
Debt Market Risk: Debt markets can be volatile and can decline significantly in response to, or investor perceptions of, issuer, market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. These conditions can affect a single instrument, issuer, or borrower, a particular type of instrument, issuer, or borrower, a segment of the debt markets, or debt markets generally. Certain changes or events, such as political, social, or economic developments, including increasing and negative interest rates or the U.S. government's inability at times to agree on a long-term budget and deficit reduction plan (which has in the past resulted and may in the future result in a government shutdown); market closures and/or trading halts; government or regulatory actions, including the imposition of tariffs or other protectionist actions and changes in fiscal, monetary, or tax policies; natural disasters; outbreaks of pandemic and epidemic diseases; terrorist attacks; war; and other geopolitical changes or events can have a dramatic adverse effect on debt markets and may lead to periods of high volatility and reduced liquidity in a debt market or a segment of a debt market.
Interest Rate Risk: The price of a debt instrument typically changes in response to interest rate changes. Interest rates can change in response to the supply and demand for credit, government and/or central bank monetary policy and action, inflation rates, and other factors. In general, the price of a debt instrument falls when interest rates rise and rises when interest rates fall. The current period of historically low interest rates may heighten the risks associated with rising interest rates because there may be a greater likelihood of interest rates increasing and interest rates may increase rapidly. Interest rate risk is generally greater for fixed-rate instruments than floating-rate instruments and for instruments with longer maturities, or that do not pay current interest. In addition, short-term and long-term interest rates, and interest rates in different countries, do not necessarily move in the same direction or by the same amount. An instrument’s reaction to interest rate changes depends on the timing of its interest and principal payments and the current interest rate for each of those time periods. The price of an instrument trading at a negative interest rate responds to interest rate changes like other debt instruments; however, an instrument purchased at a negative interest rate is expected to produce a negative return if held to maturity. Changes in government and/or central bank monetary policy may affect the level of interest rates. To the extent the fund invests in fixed-rate instruments, fluctuations in the market price of such investments may not affect interest income derived from those instruments, but may nonetheless affect the fund's share price, especially if the instrument has a longer maturity.
Credit Risk: The price of a debt instrument depends, in part, on the issuer's or borrower's credit quality or ability to pay principal and interest when due. The price of a debt instrument is likely to fall if an issuer or borrower defaults on its obligation to pay principal or interest, if the instrument's credit rating is downgraded by a credit rating agency, or based on other changes in, or perceptions of, the financial condition of the issuer or borrower. For certain types of instruments, including derivatives, the
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Investment Objective, Principal Investment Strategies and Principal Risks - continued
price of the instrument depends in part on the credit quality of the counterparty to the transaction. For other types of debt instruments, including securitized instruments, the price of the debt instrument also depends on the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying assets or collateral may be difficult.
Below investment grade quality debt instruments can involve a substantially greater risk of default or can already be in default, and their values can decline significantly over short periods of time. Below investment grade quality debt instruments are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and principal. Below investment grade quality debt instruments tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. The market for below investment grade quality debt instruments can be less liquid, especially during periods of recession or general market decline.
Foreign Risk: Investments in securities of foreign issuers, securities of companies with significant foreign exposure, and foreign currencies can involve additional risks relating to market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. Political, social, diplomatic, and economic developments, U.S. and foreign government action such as the imposition of currency or capital blockages, controls, or tariffs, economic and trade sanctions or embargoes, security trading suspensions, entering or exiting trade or other intergovernmental agreements, or the expropriation or nationalization of assets in a particular country, can cause dramatic declines in certain or all securities with exposure to that country and other countries. In the event of nationalization, expropriation, confiscation or other government action, intervention, or restriction, the fund could lose its entire investment in a particular foreign issuer or country. Economies and financial markets are interconnected, which increases the likelihood that conditions in one country or region can adversely impact issuers in different countries and regions. Less stringent regulatory, accounting, auditing, and disclosure requirements for issuers and markets are more common in certain foreign countries. Enforcing legal rights can be difficult, costly, and slow in certain foreign countries and with respect to certain types of investments, and can be particularly difficult against foreign governments. Changes in currency exchange rates can significantly impact the financial condition of a company or other issuer with exposure to multiple countries as well as affect the U.S. dollar value of foreign currency investments and investments denominated in foreign currencies. Additional risks of foreign investments include trading, settlement, custodial, and other operational risks, and withholding and other taxes. These factors can make foreign investments, especially those tied economically to emerging and frontier markets (emerging markets that are early in their development), more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions than the U.S. market.
Focus Risk: Issuers in a single industry, sector, country, or region can react similarly to market, currency, political, economic, regulatory, geopolitical, environmental, public health, and other conditions. These conditions include business environment changes;
12


Investment Objective, Principal Investment Strategies and Principal Risks - continued
economic factors such as fiscal, monetary, and tax policies; inflation and unemployment rates; and government and regulatory changes. The fund's performance will be affected by the conditions in the industries, sectors, countries and regions to which the fund is exposed.
Prepayment/Extension Risk: Many types of debt instruments, including mortgage-backed securities, securitized instruments, certain corporate bonds, and municipal housing bonds, and certain derivatives, are subject to the risk of prepayment and/or extension. Prepayment occurs when unscheduled payments of principal are made or the instrument is called or redeemed prior to an instrument’s maturity. When interest rates decline, the instrument is called, or for other reasons, these debt instruments may be repaid more quickly than expected. As a result, the holder of the debt instrument may not be able to reinvest the proceeds at the same interest rate or on the same terms, reducing the potential for gain. When interest rates increase or for other reasons, these debt instruments may be repaid more slowly than expected, increasing the potential for loss. In addition, prepayment rates are difficult to predict and the potential impact of prepayment on the price of a debt instrument depends on the terms of the instrument.
Equity Market Risk: Equity markets can be volatile and can decline significantly in response to, or investor perceptions of, issuer, market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. These conditions can affect a single issuer or type of security, issuers within a broad market sector, industry or geographic region, or the equity markets in general. Different parts of the market and different types of securities can react differently to these conditions. For example, the stocks of growth companies can react differently from the stocks of value companies, and the stocks of large cap companies can react differently from the stocks of small cap companies. Certain changes or events, such as political, social, or economic developments, including increasing or negative interest rates or the U.S. government's inability at times to agree on a long-term budget and deficit reduction plan (which has in the past resulted and may in the future result in a government shutdown); market closures and/or trading halts; government or regulatory actions, including the imposition of tariffs or other protectionist actions and changes in fiscal, monetary, or tax policies; natural disasters; outbreaks of pandemic and epidemic diseases; terrorist attacks; war; and other geopolitical changes or events, can have a dramatic adverse effect on equity markets and may lead to periods of high volatility in an equity market or a segment of an equity market.
Company Risk: Changes in the financial condition of a company or other issuer, changes in specific market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions that affect a particular type of investment or issuer, and changes in general market, economic, political, regulatory, geopolitical, environmental, public health, and other conditions can adversely affect the prices of investments. The prices of securities of smaller, less well-known issuers can be more volatile than the prices of securities of larger issuers or the market in general.
Leveraging Risk: If the fund utilizes investment leverage, there can be no assurance that such a leveraging strategy will be successful during any period in which it is employed. The use of leverage is a speculative investment technique that results in greater volatility in the fund’s net asset value. To the extent that investments are purchased with the proceeds from the borrowings from a bank, the issuance of
13


Investment Objective, Principal Investment Strategies and Principal Risks - continued
preferred shares, or the creation of tender option bonds, the fund’s net asset value will increase or decrease at a greater rate than a comparable unleveraged fund. If the investment income or gains earned from the investments purchased with the proceeds from the borrowings from a bank, the issuance of preferred shares, or the creation of tender option bonds, fails to cover the expenses of leveraging, the fund’s net asset value is likely to decrease more quickly than if the fund weren’t leveraged. In addition, the fund’s distributions could be reduced. The fund is currently required under the Investment Company Act of 1940 (the “1940 Act”) to maintain asset coverage of 200% on outstanding preferred shares and 300% on outstanding indebtedness. The fund may be required to sell a portion of its investments at a time when it may be disadvantageous to do so in order to redeem preferred shares or to reduce outstanding indebtedness to comply with asset coverage or other restrictions including those imposed by the 1940 Act and the rating agencies that rate the preferred shares. The expenses of leveraging are paid by the holders of common shares. Borrowings from a bank or preferred shares may have a stated maturity. If this leverage is not extended prior to maturity or replaced with the same or a different form of leverage, distributions to common shareholders may be decreased.
Certain transactions and investment strategies can result in leverage. Because movements in a fund’s share price generally correlate over time with the fund’s net asset value, the market price of a leveraged fund will also tend to be more volatile than that of a comparable unleveraged fund. The costs of an offering of preferred shares and/or borrowing program would be borne by shareholders.
Under the terms of any loan agreement or of a purchase agreement between the fund and the investor in the preferred shares, as the case may be, the fund may be required to, among other things, limit its ability to pay distributions in certain circumstances, incur additional debts, engage in certain transactions, and pledge some or all of its assets. Such agreements could limit the fund’s ability to pursue its investment strategies. The terms of any loan agreement or purchase agreement could be more or less restrictive than those described.
Managed Distribution Plan Risk: The fund may not be able to maintain a monthly distribution at an annual fixed rate of up to 9.50% of the fund’s average monthly net asset value due to many factors, including but not limited to, changes in market returns, fluctuations in market interest rates, and other factors. If income from the fund’s investments is less than the amount needed to make a monthly distribution, portfolio investments may be sold at less than opportune times to fund the distribution. Distributions that are treated as tax return of capital will have the effect of reducing the fund’s assets and could increase the fund’s expense ratio. If a portion of the fund’s distributions represents returns of capital over extended periods, the fund’s assets may be reduced over time to levels where the fund is no longer viable and might be liquidated.
Derivatives Risk: Derivatives can be highly volatile and involve risks in addition to, and potentially greater than, the risks of the underlying indicator(s). Gains or losses from derivatives can be substantially greater than the derivatives’ original cost and can sometimes be unlimited. Derivatives can involve leverage. Derivatives can be complex instruments and can involve analysis and processing that differs from that required for other investment types used by the fund. If the value of a derivative does not change as expected relative to the value of the market or other indicator to which the derivative is
14


Investment Objective, Principal Investment Strategies and Principal Risks - continued
intended to provide exposure, the derivative may not have the effect intended. Derivatives can also reduce the opportunity for gains or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments.
Anti-Takeover Provisions Risk: The fund’s declaration of trust includes provisions that could limit the ability of other persons or entities to acquire control of the fund, to convert the fund to an open-end fund, or to change the composition of the fund’s Board of Trustees. These provisions could reduce the opportunities for shareholders to sell their shares at a premium over the then-current market price.
Market Discount/Premium Risk: The market price of shares of the fund will be based on factors such as the supply and demand for shares in the market and general market, economic, industry, political or regulatory conditions. Whether shareholders will realize gains or losses upon the sale of shares of the fund will depend on the market price of shares at the time of the sale, not on the fund’s net asset value. The market price may be lower or higher than the fund’s net asset value. Shares of closed-end funds frequently trade at a discount to their net asset value.
Counterparty and Third Party Risk: Transactions involving a counterparty other than the issuer of the instrument, including clearing organizations, or a third party responsible for servicing the instrument or effecting the transaction, are subject to the credit risk of the counterparty or third party, and to the counterparty’s or third party’s ability or willingness to perform in accordance with the terms of the transaction. If a counterparty or third party fails to meet its contractual obligations, goes bankrupt, or otherwise experiences a business interruption, the fund could miss investment opportunities, lose value on its investments, or otherwise hold investments it would prefer to sell, resulting in losses for the fund.
Liquidity Risk: Certain investments and types of investments are subject to restrictions on resale, may trade in the over-the-counter market, or may not have an active trading market due to adverse market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions, including investors trying to sell large quantities of a particular investment or type of investment, or lack of market makers or other buyers for a particular investment or type of investment. At times, all or a significant portion of a market may not have an active trading market. Without an active trading market, it may be difficult to value, and it may not be possible to sell, these investments and the fund could miss other investment opportunities and hold investments it would prefer to sell, resulting in losses for the fund. In addition, the fund may have to sell certain of these investments at prices or times that are not advantageous in order to meet redemptions or other cash needs, which could result in dilution of remaining investors' interests in the fund. The prices of illiquid securities may be more volatile than more liquid investments.
Defensive Investing Risk: When MFS invests defensively, different factors could affect the fund’s performance and the fund may not achieve its investment objective. In addition, the defensive strategy may not work as intended.
Frequent Trading Risk: Frequent trading increases transaction costs, which may reduce the Fund's return. Frequent trading can also result in the realization of a higher percentage of short-term capital gains and a lower percentage of long-term capital
15


Investment Objective, Principal Investment Strategies and Principal Risks - continued
gains as compared to a fund that trades less frequently. Because short-term capital gains are distributed as ordinary income, this would generally increase your tax liability unless you hold your shares through a tax-advantaged or tax-exempt vehicle.
Investment Restrictions
The Fund has adopted the following policies which cannot be changed without the approval of the holders of a majority of its shares as defined currently in the 1940 Act to be the lesser of (i) 67% or more of the voting securities present at a meeting at which holders of voting securities representing more than 50% of the outstanding voting securities are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities (“Majority Shareholder Vote”). Except for fundamental investment restriction (1), these investment restrictions are adhered to at the time of purchase or utilization of assets; a subsequent change in circumstances will not be considered to result in a violation of policy.
The Fund may not:
(1) borrow money except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act.
(2) underwrite securities issued by other persons, except that all or any portion of the assets of the Fund may be invested in one or more investment companies, to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act, and except insofar as the Fund may technically be deemed an underwriter under the Securities Act of 1933, as amended, in selling a portfolio security.
(3) issue any senior securities except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act. For purposes of this restriction, collateral arrangements with respect to any type of swap, option, Forward Contracts and Futures Contracts and collateral arrangements with respect to initial and variation margin are not deemed to be the issuance of a senior security.
(4) make loans except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act.
(5) purchase or sell real estate (excluding securities secured by real estate or interests therein and securities of companies, such as real estate investment trusts, which deal in real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contacts (excluding currencies and any type of option, Futures Contracts and Forward Contracts or other derivative instruments whose value is related to commodities or other commodity contracts) in the ordinary course of its business. The Fund reserves the freedom of action to hold and to sell real estate, mineral leases, commodities or commodity contracts (including currencies and any type of option, Futures Contracts and Forward Contracts) acquired as a result of the ownership of securities.
(6) purchase any securities of an issuer in a particular industry if as a result 25% or more of its total assets (taken at market value at the time of purchase) would be invested in securities of issuers whose principal business activities are in the same industry.
16


Investment Objective, Principal Investment Strategies and Principal Risks - continued
For purposes of fundamental investment restriction (6), investments in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities and tax-exempt obligations issued or guaranteed by a U.S. territory or possession, a state or local government, or a political subdivision of any of the foregoing, are not considered an investment in any particular industry.
For purposes of fundamental investment restriction (6), investments in other investment companies are not considered an investment in any particular industry and portfolio securities held by an underlying fund in which the Fund may invest are not considered to be securities purchased by the Fund.
For purposes of fundamental investment restriction (6), MFS uses a customized set of industry groups for classifying securities based on classifications developed by third party providers.
17


Effects of Leverage
The following table is furnished in response to requirements of the Securities and Exchange Commission (the “SEC”). It is designed to, among other things, illustrate the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the Investment Company Act of 1940 (the “1940 Act”), on fund total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in a fund’s portfolio) of –10%, –5%, 0%, 5% and 10%. The table below assumes the fund’s continued use of line of credit borrowings (“leverage”), as applicable, as of November 30, 2021, as a percentage of total assets (including assets attributable to such leverage), the estimated annual effective interest expense rate payable by the fund on such line of credit borrowings (based on market conditions as of November 30, 2021), and the annual return that the fund’s portfolio would need to experience (net of expenses) in order to cover such costs. The information below does not reflect the fund’s possible use of certain other forms of economic leverage through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, if any.
The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with line of credit borrowings used by the fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
Line of Credit Borrowings as a Percentage of Total Assets (Including Assets Attributable to Leverage) 29.16%
Estimated Annual Effective Rate of Interest Expense on Line of Credit Borrowings 0.70%
Annual Return Fund Portfolio Must Experience (net of expenses) to Cover Estimated Annual Effective Interest Expense on Line of Credit Borrowings 0.20%
Assumed Return on Portfolio (Net of Expenses) -10.00% -5.00% 0.00% 5.00% 10.00%
Corresponding Return to Shareholder -14.41% -7.35% -0.29% 6.77% 13.83%
The table reflects hypothetical performance of the fund’s portfolio and not the actual performance of the fund’s shares, the value of which is determined by market forces and other factors.
Should the fund elect to add additional leverage to its portfolio, any benefits of such additional leverage cannot be fully achieved until the proceeds resulting from the use of such leverage have been received by the fund and invested in accordance with the fund’s investment objectives and policies. The fund’s willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors.
18


Portfolio Managers' Profiles
Portfolio Manager Primary Role Since Title and Five Year History
David Cole Portfolio Manager 2007 Investment Officer of MFS; employed in the investment management area of MFS since 2004.
Michael Skatrud Portfolio Manager 2018 Investment Officer of MFS; employed in the investment management area of MFS since 2013.
19


Dividend Reinvestment And Cash Purchase Plan
The fund offers a Dividend Reinvestment and Cash Purchase Plan (the “Plan”) that allows common shareholders to reinvest either all of the distributions paid by the fund or only the long-term capital gains. Generally, purchases are made at the market price unless that price exceeds the net asset value (the shares are trading at a premium). If the shares are trading at a premium, the fund will issue shares at a price of either the net asset value or 95% of the market price, whichever is greater. You can also buy shares on a quarterly basis in any amount $100 and over. Computershare Trust Company, N.A. (the Transfer Agent for the fund) (the “Plan Agent”) will purchase shares under the Plan on the 15th of January, April, July, and October or shortly thereafter. You may obtain a copy of the Plan by contacting the Plan Agent at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time or by visiting the Plan Agent's Web site at www.computershare.com/investor.
If shares are registered in your own name, new shareholders will automatically participate in the Plan, unless you have indicated that you do not wish to participate. If your shares are in the name of a brokerage firm, bank, or other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan, you may wish to request that your shares be re-registered in your own name so that you can participate. There is no service charge to reinvest distributions, nor are there brokerage charges for shares issued directly by the fund. However, when shares are bought on the New York Stock Exchange or otherwise on the open market, each participant pays a pro rata share of the transaction expenses, including commissions. The tax status of dividends and capital gain distributions does not change whether received in cash or reinvested in additional shares – the automatic reinvestment of distributions does not relieve you of any income tax that may be payable (or required to be withheld) on the distributions.
If your shares are held directly with the Plan Agent, you may withdraw from the Plan at any time by contacting the Plan Agent. Please have available the name of the fund and your account number. For certain types of registrations, such as corporate accounts, instructions must be submitted in writing. Please call for additional details. When you withdraw from the Plan, you can receive the value of the reinvested shares in one of three ways: your full shares will be held in your account, the Plan Agent will sell your shares and send the proceeds to you, or you may transfer your full shares to your investment professional who can hold or sell them. Additionally, the Plan Agent will sell your fractional shares and send the proceeds to you.
If you have any questions, contact the Plan Agent by calling 1-800-637-2304, visit the Plan Agent’s Web site at www.computershare.com/investor, or by writing to the Plan Agent at P.O. Box 505005, Louisville, KY 40233-5005.
20


Portfolio of Investments
11/30/21
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer     Shares/Par Value ($)
Bonds – 135.8%
Aerospace & Defense – 3.2%
Bombardier, Inc., 7.5%, 3/15/2025 (n)   $ 143,000  $    145,747
Bombardier, Inc., 7.125%, 6/15/2026 (n)     137,000    141,453
F-Brasile S.p.A./F-Brasile U.S. LLC, 7.375%, 8/15/2026 (n)     200,000    196,000
Moog, Inc., 4.25%, 12/15/2027 (n)     285,000    289,467
TransDigm, Inc., 6.25%, 3/15/2026 (n)     200,000    207,500
TransDigm, Inc., 6.375%, 6/15/2026      185,000    190,319
TransDigm, Inc., 5.5%, 11/15/2027      140,000    140,898
TransDigm, Inc., 4.625%, 1/15/2029      132,000    126,460
        $1,437,844
Automotive – 3.7%
Dana, Inc., 5.375%, 11/15/2027    $ 143,000  $    149,256
Dana, Inc., 5.625%, 6/15/2028      47,000     49,468
Dana, Inc., 4.25%, 9/01/2030      95,000     94,406
Dornoch Debt Merger Sub Inc., 6.625%, 10/15/2029 (n)     120,000    118,200
Ford Motor Co., 5.113%, 5/03/2029      210,000    232,491
Ford Motor Co., 4.75%, 1/15/2043      155,000    165,850
IAA Spinco, Inc., 5.5%, 6/15/2027 (n)     200,000    207,640
Panther BR Aggregator 2 LP/Panther Finance Co., Inc., 8.5%, 5/15/2027 (n)     285,000    299,962
PM General Purchaser LLC, 9.5%, 10/01/2028 (n)     90,000     92,148
Real Hero Merger Sub 2, Inc., 6.25%, 2/01/2029 (n)     130,000    130,398
Wheel Pros, Inc., 6.5%, 5/15/2029 (n)     120,000    116,909
        $1,656,728
Broadcasting – 4.6%
Advantage Sales & Marketing, Inc., 6.5%, 11/15/2028 (n)   $ 185,000  $    189,300
Gray Escrow II, Inc., 5.375%, 11/15/2031 (n)     305,000    305,653
iHeartCommunications, Inc., 8.375%, 5/01/2027      175,000    184,126
Nexstar Escrow Corp., 5.625%, 7/15/2027 (n)     120,000    124,500
Scripps Escrow II, Inc., 5.875%, 7/15/2027 (n)     240,000    246,228
Summer (BC) Bidco B LLC, 5.5%, 10/31/2026 (n)     200,000    201,500
Summer (BC) Holdco S.à r.l., “A”, 9.25%, 10/31/2027    EUR 90,105    109,750
Univision Communications, Inc., 4.5%, 5/01/2029 (n)   $ 355,000    354,755
WMG Acquisition Corp., 3.875%, 7/15/2030 (n)     340,000    340,850
        $2,056,662
21


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Brokerage & Asset Managers – 1.8%
Aretec Escrow Issuer, Inc., 7.5%, 4/01/2029 (n)   $ 120,000  $    123,900
LPL Holdings, Inc., 4.625%, 11/15/2027 (n)     265,000    271,625
LPL Holdings, Inc., 4%, 3/15/2029 (n)     191,000    191,800
NFP Corp., 4.875%, 8/15/2028 (n)     155,000    152,675
NFP Corp., 6.875%, 8/15/2028 (n)     65,000     64,396
            $804,396
Building – 4.7%
ABC Supply Co., Inc., 4%, 1/15/2028 (n)   $ 405,000  $    408,544
GYP Holding III Corp., 4.625%, 5/01/2029 (n)     240,000    235,596
Interface, Inc., 5.5%, 12/01/2028 (n)     205,000    213,456
New Enterprise Stone & Lime Co., Inc., 5.25%, 7/15/2028 (n)     95,000     94,763
New Enterprise Stone & Lime Co., Inc., 9.75%, 7/15/2028 (n)     109,000    116,651
Park River Holdings, Inc., 5.625%, 2/01/2029 (n)     135,000    127,912
Patrick Industries, Inc., 7.5%, 10/15/2027 (n)     200,000    212,000
SRM Escrow Issuer LLC, 6%, 11/01/2028 (n)     190,000    196,616
SRS Distribution, Inc., 6.125%, 7/01/2029 (n)     140,000    140,350
Standard Industries, Inc., 4.375%, 7/15/2030 (n)     206,000    202,652
Standard Industries, Inc., 3.375%, 1/15/2031 (n)     40,000     36,850
White Cap Buyer LLC, 6.875%, 10/15/2028 (n)     140,000    142,800
        $2,128,190
Business Services – 3.7%
Ascend Learning LLC, 6.875%, 8/01/2025 (n)   $ 130,000  $    132,344
Austin BidCo, Inc., 7.125%, 12/15/2028 (n)     115,000    118,050
HealthEquity, Inc., 4.5%, 10/01/2029 (n)     185,000    182,687
Iron Mountain, Inc., 5.25%, 3/15/2028 (n)     100,000    102,750
Iron Mountain, Inc., 5.25%, 7/15/2030 (n)     130,000    132,495
Iron Mountain, Inc., REIT, 4.875%, 9/15/2027 (n)     175,000    177,496
Nielsen Finance LLC, 4.5%, 7/15/2029 (n)     205,000    198,243
Paysafe Finance PLC, 4%, 6/15/2029 (z)     185,000    170,663
Switch Ltd., 3.75%, 9/15/2028 (n)     235,000    232,650
Switch Ltd., 4.125%, 6/15/2029 (n)     70,000     70,317
Verscend Escrow Corp., 9.75%, 8/15/2026 (n)     150,000    157,529
        $1,675,224
Cable TV – 11.4%
CCO Holdings LLC/CCO Holdings Capital Corp., 4.75%, 3/01/2030 (n)   $ 575,000  $    589,162
CCO Holdings LLC/CCO Holdings Capital Corp., 4.5%, 8/15/2030 (n)     150,000    151,192
CCO Holdings LLC/CCO Holdings Capital Corp., 4.25%, 2/01/2031 (n)     240,000    236,422
22


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Cable TV – continued
CCO Holdings LLC/CCO Holdings Capital Corp., 4.25%, 1/15/2034 (n)   $ 155,000  $    149,110
CSC Holdings LLC, 5.375%, 2/01/2028 (n)     200,000    204,250
CSC Holdings LLC, 5.75%, 1/15/2030 (n)     400,000    391,752
CSC Holdings LLC, 4.125%, 12/01/2030 (n)     200,000    191,394
DISH DBS Corp., 7.75%, 7/01/2026      80,000     82,200
DISH DBS Corp., 5.25%, 12/01/2026 (n)     150,000    148,561
DISH DBS Corp., 5.125%, 6/01/2029      135,000    118,550
Intelsat Jackson Holdings S.A., 5.5%, 8/01/2023 (a)(d)     130,000     63,050
Intelsat Jackson Holdings S.A., 9.75%, 7/15/2025 (a)(d)(z)     90,000     44,100
LCPR Senior Secured Financing DAC, 6.75%, 10/15/2027 (n)     200,000    207,348
Sirius XM Holdings, Inc., 3.875%, 9/01/2031 (n)     230,000    217,925
Sirius XM Radio, Inc., 4%, 7/15/2028 (n)     228,000    225,435
Sirius XM Radio, Inc., 5.5%, 7/01/2029 (n)     390,000    413,689
Telenet Finance Luxembourg S.A., 5.5%, 3/01/2028 (n)     400,000    412,200
Videotron Ltd., 5.375%, 6/15/2024 (n)     20,000     21,381
Videotron Ltd., 5.125%, 4/15/2027 (n)     400,000    410,476
Virgin Media Finance PLC, 5%, 7/15/2030 (n)     225,000    218,250
Virgin Media Vendor Financing Notes IV DAC, 5%, 7/15/2028 (n)     225,000    221,733
Ziggo Bond Finance B.V., 5.125%, 2/28/2030 (n)     400,000    399,542
        $5,117,722
Chemicals – 3.2%
Axalta Coating Systems Ltd., 4.75%, 6/15/2027 (n)   $ 150,000  $    155,017
Axalta Coating Systems Ltd., 3.375%, 2/15/2029 (n)     170,000    161,526
Consolidated Energy Finiance S.A., 5.625%, 10/15/2028 (n)     188,000    179,181
Element Solutions, Inc., 3.875%, 9/01/2028 (n)     213,000    210,870
Herens Holdco S.à r.l., 4.75%, 5/15/2028 (n)     200,000    194,500
Ingevity Corp., 3.875%, 11/01/2028 (n)     230,000    220,292
LSF11 A5 HoldCo LLC, 6.625%, 10/15/2029 (n)     120,000    116,850
S.P.C.M. S.A., 3.125%, 3/15/2027 (n)     200,000    195,500
        $1,433,736
Computer Software – 1.4%
Camelot Finance S.A., 4.5%, 11/01/2026 (n)   $ 165,000  $    171,187
Clarivate Science Holdings Corp., 4.875%, 7/01/2029 (n)     215,000    210,539
PTC, Inc., 3.625%, 2/15/2025 (n)     160,000    160,800
PTC, Inc., 4%, 2/15/2028 (n)     95,000     95,475
            $638,001
Computer Software - Systems – 2.1%
Fair Isaac Corp., 5.25%, 5/15/2026 (n)   $ 385,000  $    423,019
Fair Isaac Corp., 4%, 6/15/2028 (n)     36,000     35,910
SS&C Technologies Holdings, Inc., 5.5%, 9/30/2027 (n)     250,000    259,844
23


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Computer Software - Systems – continued
Viavi Solutions, Inc., 3.75%, 10/01/2029 (n)   $ 235,000  $    229,712
            $948,485
Conglomerates – 4.5%
Amsted Industries Co., 5.625%, 7/01/2027 (n)   $ 255,000  $    263,288
BWX Technologies, Inc., 4.125%, 6/30/2028 (n)     58,000     58,000
BWX Technologies, Inc., 4.125%, 4/15/2029 (n)     300,000    299,899
EnerSys, 4.375%, 12/15/2027 (n)     55,000     56,650
Gates Global LLC, 6.25%, 1/15/2026 (n)     165,000    169,125
Granite Holdings U.S. Acquisition Co., 11%, 10/01/2027 (n)     135,000    146,745
Griffon Corp., 5.75%, 3/01/2028      223,000    229,829
Madison IAQ LLC, 5.875%, 6/30/2029 (n)     160,000    153,928
Stevens Holding Co., Inc., 6.125%, 10/01/2026 (n)     200,000    214,000
TriMas Corp., 4.125%, 4/15/2029 (n)     432,000    432,000
        $2,023,464
Construction – 2.3%
Empire Communities Corp., 7%, 12/15/2025 (n)   $ 145,000  $    148,550
Mattamy Group Corp., 5.25%, 12/15/2027 (n)     95,000     98,646
Mattamy Group Corp., 4.625%, 3/01/2030 (n)     155,000    153,653
Shea Homes LP/Shea Homes Funding Corp., 4.75%, 2/15/2028 (n)     235,000    234,412
Taylor Morrison Communities, Inc., 5.75%, 1/15/2028 (n)     110,000    120,619
Taylor Morrison Communities, Inc., 5.125%, 8/01/2030 (n)     100,000    107,250
Weekley Homes LLC/Weekley Finance Corp., 4.875%, 9/15/2028 (n)     181,000    186,309
        $1,049,439
Consumer Products – 1.6%
Mattel, Inc., 3.375%, 4/01/2026 (n)   $ 147,000  $    149,211
Mattel, Inc., 5.875%, 12/15/2027 (n)     109,000    116,085
Mattel, Inc., 5.45%, 11/01/2041      55,000     64,824
Prestige Consumer Healthcare, Inc., 5.125%, 1/15/2028 (n)     175,000    181,563
Prestige Consumer Healthcare, Inc., 3.75%, 4/01/2031 (n)     80,000     76,650
SWF Escrow Issuer Corp., 6.5%, 10/01/2029 (n)     155,000    148,800
            $737,133
Consumer Services – 5.1%
Allied Universal Holdco LLC, 6.625%, 7/15/2026 (n)   $ 59,000  $     60,634
Allied Universal Holdco LLC, 9.75%, 7/15/2027 (n)     180,000    188,550
ANGI Group LLC, 3.875%, 8/15/2028 (n)     210,000    199,466
Arches Buyer, Inc., 6.125%, 12/01/2028 (n)     175,000    176,698
Garda World Security Corp., 4.625%, 2/15/2027 (n)     75,000     73,313
GoDaddy, Inc., 3.5%, 3/01/2029 (n)     328,000    311,954
GW B-CR Security Corp., 9.5%, 11/01/2027 (n)     131,000    136,533
24


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Consumer Services – continued
Match Group Holdings II LLC, 3.625%, 10/01/2031 (n)   $ 15,000  $     14,141
Match Group, Inc., 5%, 12/15/2027 (n)     185,000    192,863
Match Group, Inc., 4.625%, 6/01/2028 (n)     235,000    238,527
Match Group, Inc., 4.125%, 8/01/2030 (n)     65,000     64,431
Realogy Group LLC, 9.375%, 4/01/2027 (n)     145,000    156,536
Realogy Group LLC, 5.75%, 1/15/2029 (n)     90,000     91,013
TriNet Group, Inc., 3.5%, 3/01/2029 (n)     278,000    274,664
WASH Multifamily Acquisition, Inc., 5.75%, 4/15/2026 (n)     120,000    123,600
        $2,302,923
Containers – 2.7%
Ardagh Metal Packaging, 4%, 9/01/2029 (n)   $ 200,000  $    193,930
Ardagh Packaging Finance PLC/Ardagh MP Holdings USA, Inc., 5.25%, 8/15/2027 (n)     255,000    249,900
Can-Pack S.A., 3.875%, 11/15/2029 (n)     275,000    267,437
Crown Americas LLC/Crown Americas Capital Corp. V, 4.25%, 9/30/2026      250,000    263,125
Crown Americas LLC/Crown Americas Capital Corp. VI, 4.75%, 2/01/2026      45,000     46,208
Greif, Inc., 6.5%, 3/01/2027 (n)     165,000    171,386
        $1,191,986
Electrical Equipment – 0.6%
CommScope Technologies LLC, 5%, 3/15/2027 (n)   $ 285,000  $    255,904
Electronics – 2.7%
Diebold Nixdorf, Inc., 8.5%, 4/15/2024    $ 65,000  $     64,160
Diebold Nixdorf, Inc., 9.375%, 7/15/2025 (n)     106,000    112,508
Entegris, Inc., 4.375%, 4/15/2028 (n)     75,000     76,406
Entegris, Inc., 3.625%, 5/01/2029 (n)     160,000    158,800
Sensata Technologies B.V., 5.625%, 11/01/2024 (n)     140,000    152,600
Sensata Technologies B.V., 5%, 10/01/2025 (n)     285,000    308,461
Sensata Technologies, Inc., 4.375%, 2/15/2030 (n)     125,000    129,650
Synaptics, Inc., 4%, 6/15/2029 (n)     215,000    217,150
        $1,219,735
Energy - Independent – 5.5%
Apache Corp., 5.35%, 7/01/2049    $ 65,000  $     74,110
Ascent Resources Utica Holdings LLC/ARU Finance Corp., 7%, 11/01/2026 (n)     65,000     65,975
Callon Petroleum Co., 6.125%, 10/01/2024      90,000     86,625
Callon Petroleum Co., 8%, 8/01/2028 (n)     80,000     78,322
CNX Resources Corp., 6%, 1/15/2029 (n)     215,000    220,003
Comstock Resources, Inc., 6.75%, 3/01/2029 (n)     155,000    161,200
25


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Energy - Independent – continued
Encino Acquisition Partners Holdings LLC, 8.5%, 5/01/2028 (n)   $ 100,000  $    100,750
EQT Corp., 3.125%, 5/15/2026 (n)     30,000     29,981
EQT Corp., 5%, 1/15/2029      158,000    173,010
Murphy Oil Corp., 5.875%, 12/01/2027      65,000     66,163
Occidental Petroleum Corp., 5.875%, 9/01/2025      165,000    177,375
Occidental Petroleum Corp., 5.5%, 12/01/2025      160,000    171,074
Occidental Petroleum Corp., 6.625%, 9/01/2030      160,000    191,947
Occidental Petroleum Corp., 6.45%, 9/15/2036      80,000     99,339
Occidental Petroleum Corp., 6.6%, 3/15/2046      115,000    146,378
Ovintiv, Inc., 6.5%, 2/01/2038      40,000     50,959
Range Resources Corp., 8.25%, 1/15/2029 (n)     120,000    132,283
SM Energy Co., 5.625%, 6/01/2025      95,000     94,050
SM Energy Co., 6.5%, 7/15/2028      70,000     70,700
Southwestern Energy Co., 6.45%, 1/23/2025      53,300     57,833
Southwestern Energy Co., 8.375%, 9/15/2028      90,000     99,154
Southwestern Energy Co., 5.375%, 3/15/2030      125,000    130,156
        $2,477,387
Entertainment – 4.9%
AMC Entertainment Holdings, Inc., 12%, (10% cash or 12% PIK) 6/15/2026 (n)(p)   $ 65,000  $     66,056
Boyne USA, Inc., 4.75%, 5/15/2029 (n)     220,000    221,650
Carnival Corp. PLC, 7.625%, 3/01/2026 (n)     355,000    364,049
Carnival Corp. PLC, 5.75%, 3/01/2027 (n)     150,000    146,603
Carnival Corp. PLC, 6%, 5/01/2029 (n)     45,000     43,733
Cedar Fair LP/Canada's Wonderland Co./Magnum Management Corp./Millennium Operations LLC, 5.375%, 4/15/2027      105,000    106,838
Live Nation Entertainment, Inc., 5.625%, 3/15/2026 (n)     218,000    223,995
Live Nation Entertainment, Inc., 3.75%, 1/15/2028 (n)     100,000     96,050
Motion Bondco DAC, 6.625%, 11/15/2027 (n)     200,000    199,500
NCL Corp. Ltd., 3.625%, 12/15/2024 (n)     100,000     91,788
NCL Corp. Ltd., 5.875%, 3/15/2026 (n)     115,000    112,081
Royal Caribbean Cruises Ltd., 5.5%, 4/01/2028 (n)     225,000    218,812
SeaWorld Parks & Entertainment, 5.25%, 8/15/2029 (n)     240,000    239,160
Viking Cruises Ltd. Co., 5.875%, 9/15/2027 (n)     95,000     88,139
        $2,218,454
Financial Institutions – 4.2%
Avation Capital S.A., 8.25%, (8.25% cash or 9% PIK) 10/31/2026 (n)(p)   $ 203,202  $    168,658
Credit Acceptance Corp., 5.125%, 12/31/2024 (n)     220,000    224,400
Freedom Mortgage Corp., 7.625%, 5/01/2026 (n)     185,000    178,573
Global Aircraft Leasing Co. Ltd., 6.5%,(6.5% cash or 7.25% PIK) 9/15/2024 (n)(p)     448,020    434,212
26


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Financial Institutions – continued
Howard Hughes Corp., 4.125%, 2/01/2029 (n)   $ 264,000  $    260,196
Nationstar Mortgage Holdings, Inc., 6%, 1/15/2027 (n)     200,000    206,506
OneMain Finance Corp., 6.875%, 3/15/2025      95,000    104,500
OneMain Finance Corp., 8.875%, 6/01/2025      99,000    106,178
OneMain Finance Corp., 7.125%, 3/15/2026      100,000    112,396
PennyMac Financial Services, Inc., 5.75%, 9/15/2031 (n)     105,000    102,039
        $1,897,658
Food & Beverages – 5.2%
Aramark Services, Inc., 6.375%, 5/01/2025 (n)   $ 270,000  $    281,610
JBS USA Lux S.A./JBS USA Finance, Inc., 6.75%, 2/15/2028 (n)     295,000    318,158
JBS USA Lux S.A./JBS USA Finance, Inc., 5.5%, 1/15/2030 (n)     115,000    123,359
Kraft Heinz Co., 4.25%, 3/01/2031      315,000    360,354
Lamb Weston Holdings, Inc., 4.125%, 1/31/2030 (n)     360,000    358,990
Performance Food Group Co., 5.5%, 10/15/2027 (n)     210,000    216,300
Post Holdings, Inc., 5.625%, 1/15/2028 (n)     150,000    154,397
Post Holdings, Inc., 4.625%, 4/15/2030 (n)     150,000    148,125
Primo Water Holding, Inc., 4.375%, 4/30/2029 (n)     145,000    143,509
U.S. Foods Holding Corp., 4.75%, 2/15/2029 (n)     230,000    232,852
        $2,337,654
Gaming & Lodging – 9.3%
Boyd Gaming Corp., 4.75%, 12/01/2027    $ 190,000  $    192,850
Boyd Gaming Corp., 4.75%, 6/15/2031 (n)     75,000     74,588
Caesars Entertainment, Inc., 4.625%, 10/15/2029 (n)     150,000    146,250
CCM Merger, Inc., 6.375%, 5/01/2026 (n)     165,000    171,600
Colt Merger Sub, Inc., 5.75%, 7/01/2025 (n)     131,000    136,068
Colt Merger Sub, Inc., 8.125%, 7/01/2027 (n)     162,000    177,738
Hilton Domestic Operating Co., Inc., 3.75%, 5/01/2029 (n)     238,000    235,794
Hilton Domestic Operating Co., Inc., 3.625%, 2/15/2032 (n)     191,000    185,398
International Game Technology PLC, 4.125%, 4/15/2026 (n)     200,000    203,500
International Game Technology PLC, 6.25%, 1/15/2027 (n)     200,000    220,000
Marriott Ownership Resorts, Inc., 4.5%, 6/15/2029 (n)     185,000    181,619
MGM China Holdings Ltd., 5.875%, 5/15/2026 (n)     200,000    201,242
MGM Growth Properties LLC, 4.625%, 6/15/2025 (n)     185,000    197,025
MGM Growth Properties LLC, 5.75%, 2/01/2027      75,000     84,937
MGM Growth Properties LLC, 3.875%, 2/15/2029 (n)     145,000    152,250
Penn National Gaming, Inc., 4.125%, 7/01/2029 (n)     150,000    141,555
Scientific Games Corp., 8.625%, 7/01/2025 (n)     45,000     47,908
Scientific Games Corp., 8.25%, 3/15/2026 (n)     120,000    126,316
Scientific Games International, Inc., 7%, 5/15/2028 (n)     115,000    122,209
VICI Properties LP, REIT, 4.25%, 12/01/2026 (n)     135,000    139,387
VICI Properties LP, REIT, 3.75%, 2/15/2027 (n)     200,000    205,000
Wyndham Hotels & Resorts, Inc., 4.375%, 8/15/2028 (n)     284,000    286,941
27


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Gaming & Lodging – continued
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.25%, 5/15/2027 (n)   $ 120,000  $    117,634
Wynn Macau Ltd., 5.5%, 1/15/2026 (n)     105,000     98,175
Wynn Macau Ltd., 5.625%, 8/26/2028 (n)     200,000    183,952
Wynn Resorts Finance LLC/Wynn Resorts Capital Corp., 5.125%, 10/01/2029 (n)     150,000    146,625
        $4,176,561
Industrial – 1.4%
APi Escrow Corp., 4.75%, 10/15/2029 (n)   $ 170,000  $    172,125
Dycom Industries, Inc., 4.5%, 4/15/2029 (n)     215,000    216,464
Williams Scotsman International, Inc., 4.625%, 8/15/2028 (n)     222,000    225,885
            $614,474
Insurance - Property & Casualty – 1.5%
Alliant Holdings Intermediate LLC, 6.75%, 10/15/2027 (n)   $ 285,000  $    287,961
AssuredPartners, Inc., 5.625%, 1/15/2029 (n)     120,000    115,200
GTCR (AP) Finance, Inc., 8%, 5/15/2027 (n)     65,000     66,500
Hub International Ltd., 5.625%, 12/01/2029 (n)     180,000    179,618
            $649,279
Machinery & Tools – 0.4%
Terex Corp., 5%, 5/15/2029 (n)   $ 185,000  $    188,469
Medical & Health Technology & Services – 8.8%
180 Medical, Inc., 3.875%, 10/15/2029 (n)   $ 200,000  $    196,392
Avantor Funding, Inc., 4.625%, 7/15/2028 (n)     279,000    288,123
BCPE Cycle Merger Sub II, Inc., 10.625%, 7/15/2027 (n)     135,000    138,038
Catalent, Inc., 3.125%, 2/15/2029 (n)     363,000    346,102
Charles River Laboratories International, Inc., 3.75%, 3/15/2029 (n)     414,000    409,342
CHS/Community Health Systems, Inc., 8%, 12/15/2027 (n)     105,000    112,301
CHS/Community Health Systems, Inc., 6.125%, 4/01/2030 (n)     265,000    253,738
DaVita, Inc., 4.625%, 6/01/2030 (n)     140,000    138,250
DaVita, Inc., 3.75%, 2/15/2031 (n)     122,000    113,121
Encompass Health Corp., 5.75%, 9/15/2025      30,000     30,488
HCA, Inc., 5.875%, 2/15/2026      275,000    308,151
HCA, Inc., 3.5%, 9/01/2030      260,000    270,654
HealthSouth Corp., 5.125%, 3/15/2023      88,000     88,000
IQVIA Holdings, Inc., 5%, 5/15/2027 (n)     400,000    412,000
LifePoint Health, Inc., 4.375%, 2/15/2027 (n)     30,000     29,534
MPH Acquisition Holdings LLC, 5.5%, 9/01/2028 (n)     115,000    111,390
Regional Care/LifePoint Health, Inc., 9.75%, 12/01/2026 (n)     130,000    136,338
Syneos Health, Inc., 3.625%, 1/15/2029 (n)     275,000    270,927
Tenet Healthcare Corp., 6.125%, 10/01/2028 (n)     150,000    153,210
28


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Medical & Health Technology & Services – continued
US Acute Care Solutions LLC, 6.375%, 3/01/2026 (n)   $ 135,000  $    138,206
        $3,944,305
Medical Equipment – 0.9%
Mozart Debt Merger Sub, Inc., 5.25%, 10/01/2029 (n)   $ 150,000  $    149,813
Teleflex, Inc., 4.625%, 11/15/2027      240,000    246,900
            $396,713
Metals & Mining – 5.5%
Baffinland Iron Mines Corp./Baffinland Iron Mines LP, 8.75%, 7/15/2026 (n)   $ 220,000  $    229,350
Coeur Mining, Inc., 5.125%, 2/15/2029 (n)     215,000    205,368
Compass Minerals International, Inc., 6.75%, 12/01/2027 (n)     185,000    188,931
Eldorado Gold Corp., 6.25%, 9/01/2029 (n)     175,000    176,115
First Quantum Minerals Ltd., 6.875%, 10/15/2027 (n)     200,000    211,400
FMG Resources Ltd., 4.375%, 4/01/2031 (n)     225,000    227,984
Freeport-McMoRan, Inc., 4.375%, 8/01/2028      100,000    104,273
Freeport-McMoRan, Inc., 5.25%, 9/01/2029      165,000    178,200
GrafTech Finance, Inc., 4.625%, 12/15/2028 (n)     145,000    146,769
Kaiser Aluminum Corp., 4.625%, 3/01/2028 (n)     282,000    276,199
Kaiser Aluminum Corp., 4.5%, 6/01/2031 (n)     125,000    121,406
Novelis Corp., 3.25%, 11/15/2026 (n)     78,000     77,932
Novelis Corp., 4.75%, 1/30/2030 (n)     180,000    181,742
Novelis Corp., 3.875%, 8/15/2031 (n)     93,000     89,745
Petra Diamonds US$ Treasury PLC, 10.5%, (0% cash or 10.5% PIK) 3/08/2026 (n)(p)     67,105     69,118
        $2,484,532
Midstream – 6.3%
Cheniere Energy Partners LP, 4.5%, 10/01/2029    $ 90,000  $     94,601
Cheniere Energy, Inc., 4%, 3/01/2031 (n)     230,000    234,600
DT Midstream, Inc., 4.125%, 6/15/2029 (n)     144,000    143,100
DT Midstream, Inc., 4.375%, 6/15/2031 (n)     244,000    242,475
EnLink Midstream Partners LP, 5.625%, 1/15/2028 (n)     135,000    138,375
EQM Midstream Partners LP, 6%, 7/01/2025 (n)     48,000     51,017
EQM Midstream Partners LP, 6.5%, 7/01/2027 (n)     32,000     34,560
EQM Midstream Partners LP, 5.5%, 7/15/2028      365,000    386,900
EQM Midstream Partners LP, 4.5%, 1/15/2029 (n)     90,000     89,325
Genesis Energy LP/Genesis Energy Finance Corp., 6.25%, 5/15/2026      82,500     79,459
Northriver Midstream Finance LP, 5.625%, 2/15/2026 (n)     235,000    242,320
Targa Resources Partners LP/Targa Resources Finance Corp., 6.875%, 1/15/2029      260,000    287,997
29


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Midstream – continued
Targa Resources Partners LP/Targa Resources Finance Corp., 4.875%, 2/01/2031    $ 135,000  $    144,787
Targa Resources Partners LP/Targa Resources Finance Corp., 4%, 1/15/2032 (n)     80,000     82,642
Venture Global Calcasieu Pass LLC, 3.875%, 8/15/2029 (n)     135,000    135,560
Venture Global Calcasieu Pass LLC, 4.125%, 8/15/2031 (n)     135,000    138,059
Western Midstream Operating LP, 5.3%, 2/01/2030      160,000    172,208
Western Midstream Operation LP, 4.65%, 7/01/2026      65,000     69,388
Western Midstream Operation LP, 5.5%, 8/15/2048      45,000     51,975
        $2,819,348
Municipals – 0.1%
Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities Financing Authority Rev. (Cogeneration Facilities - AES Puerto Rico Project), 9.12%, 6/01/2022    $ 35,000  $     35,875
Network & Telecom – 0.8%
Front Range BidCo, Inc., 6.125%, 3/01/2028 (n)   $ 140,000  $    131,775
Iliad Holding S.A.S., 7%, 10/15/2028 (n)     200,000    204,404
            $336,179
Oil Services – 0.2%
Solaris Midstream Holding LLC, 7.625%, 4/01/2026 (n)   $ 100,000  $    104,522
Oils – 0.9%
Parkland Corp., 4.625%, 5/01/2030 (n)   $ 245,000  $    241,489
PBF Holding Co. LLC/PBF Finance Corp., 7.25%, 6/15/2025      120,000     80,250
PBF Holding Co. LLC/PBF Finance Corp., 6%, 2/15/2028      130,000     77,545
            $399,284
Personal Computers & Peripherals – 0.8%
NCR Corp., 5%, 10/01/2028 (n)   $ 220,000  $    222,200
NCR Corp., 5.125%, 4/15/2029 (n)     115,000    116,213
            $338,413
Pharmaceuticals – 3.1%
Bausch Health Companies, Inc., 6.125%, 4/15/2025 (n)   $ 371,000  $    374,710
Bausch Health Companies, Inc., 5%, 1/30/2028 (n)     350,000    311,248
Bausch Health Companies, Inc., 5%, 2/15/2029 (n)     95,000     81,463
Endo Luxembourg Finance Co I S.à r.l., 6.125%, 4/01/2029 (n)     105,000    102,853
Jazz Securities DAC, 4.375%, 1/15/2029 (n)     200,000    203,764
Organon Finance 1 LLC, 5.125%, 4/30/2031 (n)     200,000    204,250
Par Pharmaceutical, Inc., 7.5%, 4/01/2027 (n)     105,000    105,857
        $1,384,145
30


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Pollution Control – 1.2%
GFL Environmental, Inc., 4%, 8/01/2028 (n)   $ 180,000  $    174,615
GFL Environmental, Inc., 4.75%, 6/15/2029 (n)     60,000     59,992
GFL Environmental, Inc., 4.375%, 8/15/2029 (n)     80,000     77,827
Stericycle, Inc., 3.875%, 1/15/2029 (n)     210,000    204,750
            $517,184
Precious Metals & Minerals – 0.6%
IAMGOLD Corp., 5.75%, 10/15/2028 (n)   $ 155,000  $    150,297
Taseko Mines Ltd., 7%, 2/15/2026 (n)     120,000    121,800
            $272,097
Printing & Publishing – 0.7%
Cimpress N.V., 7%, 6/15/2026 (n)   $ 300,000  $    310,125
Railroad & Shipping – 0.4%
Watco Cos. LLC/Watco Finance Corp., 6.5%, 6/15/2027 (n)   $ 187,000  $    195,950
Real Estate - Other – 0.9%
InterMed Holdings Ltd., 5.875%, 10/01/2028 (n)   $ 235,000  $    242,284
XHR LP, REIT, 4.875%, 6/01/2029 (n)     180,000    181,350
            $423,634
Retailers – 1.6%
Asbury Automotive Group, Inc., 4.625%, 11/15/2029 (n)   $ 101,000  $    101,638
Bath & Body Works, Inc., 5.25%, 2/01/2028      410,000    439,725
Victoria's Secret & Co., 4.625%, 7/15/2029 (n)     170,000    167,834
            $709,197
Specialty Chemicals – 0.4%
Univar Solutions USA, Inc., 5.125%, 12/01/2027 (n)   $ 186,000  $    194,370
Specialty Stores – 2.5%
Group 1 Automotive, Inc., 4%, 8/15/2028 (n)   $ 161,000  $    159,271
Magic Mergeco, Inc., 5.25%, 5/01/2028 (n)     100,000     98,938
Magic Mergeco, Inc., 7.875%, 5/01/2029 (n)     125,000    124,063
Penske Automotive Group Co., 3.75%, 6/15/2029      243,000    236,943
PetSmart, Inc./PetSmart Finance Corp., 4.75%, 2/15/2028 (n)     250,000    253,026
PetSmart, Inc./PetSmart Finance Corp., 7.75%, 2/15/2029 (n)     250,000    267,187
        $1,139,428
Supermarkets – 0.8%
Albertsons Cos. LLC/Safeway, Inc., 4.625%, 1/15/2027 (n)   $ 215,000  $    222,880
Albertsons Cos. LLC/Safeway, Inc., 3.5%, 3/15/2029 (n)     150,000    148,657
            $371,537
31


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Bonds – continued
Telecommunications - Wireless – 3.3%
Altice France S.A., 6%, 2/15/2028 (n)   $ 200,000  $    186,750
SBA Communications Corp., 3.875%, 2/15/2027      161,000    164,796
SBA Communications Corp., 3.125%, 2/01/2029 (n)     305,000    289,750
Sprint Capital Corp., 6.875%, 11/15/2028      265,000    327,161
Sprint Corp., 7.125%, 6/15/2024      75,000     84,040
Sprint Corp., 7.625%, 3/01/2026      360,000    425,250
        $1,477,747
Tobacco – 0.5%
Vector Group Ltd., 10.5%, 11/01/2026 (n)   $ 105,000  $    108,114
Vector Group Ltd., 5.75%, 2/01/2029 (n)     105,000     99,881
            $207,995
Utilities - Electric Power – 3.8%
Calpine Corp., 4.5%, 2/15/2028 (n)   $ 185,000  $    183,993
Calpine Corp., 5.125%, 3/15/2028 (n)     240,000    237,590
Clearway Energy Operating LLC, 4.75%, 3/15/2028 (n)     90,000     94,500
Clearway Energy Operating LLC, 3.75%, 2/15/2031 (n)     355,000    350,889
NextEra Energy, Inc., 4.25%, 7/15/2024 (n)     130,000    132,989
NextEra Energy, Inc., 4.25%, 9/15/2024 (n)     29,000     30,284
NextEra Energy, Inc., 4.5%, 9/15/2027 (n)     150,000    158,719
TerraForm Global Operating LLC, 6.125%, 3/01/2026 (n)     120,000    122,400
TerraForm Power Operating LLC, 5%, 1/31/2028 (n)     275,000    286,000
TerraForm Power Operating LLC, 4.75%, 1/15/2030 (n)     110,000    111,623
        $1,708,987
Total Bonds (Identified Cost, $61,108,583)   $ 61,009,075
Common Stocks – 1.7%
Construction – 0.0%  
ICA Tenedora, S.A. de C.V. (a)(u)   11,385  $      9,026
Oil Services – 0.2%  
LTRI Holdings LP (a)(u)        200  $     57,518
Special Products & Services – 1.5%  
iShares iBoxx $ High Yield Corporate Bond ETF      8,000  $    685,120
Total Common Stocks (Identified Cost, $714,438)      $ 751,664
    
32


Portfolio of Investments – continued
Issuer Strike
Price
First
Exercise
Shares/Par Value ($)
Warrants – 0.0%        
Forest & Paper Products – 0.0%
Appvion Holdings Corp. - Tranche A (1 share for 1 warrant, Expiration 6/13/23) (a)  $11.50 8/24/18       84  $          1
Appvion Holdings Corp. - Tranche B (1 share for 1 warrant, Expiration 6/13/23) (a)  13.23 8/24/18       84          1
                  $2
Other Banks & Diversified Financials – 0.0%
Avation Capital S.A. (1 share for 1 warrant, Expiration 10/31/26) (a)(u) GBP 1.14 3/16/21    3,500  $        461
Total Warrants (Identified Cost, $0)          $ 463
    
         
Investment Companies (h) – 1.8%
Money Market Funds – 1.8%  
MFS Institutional Money Market Portfolio, 0.05% (v) (Identified Cost, $828,311)     828,333  $    828,333
Other Assets, Less Liabilities – (39.3)%   (17,646,349)
Net Assets – 100.0% $44,943,186
    
(a) Non-income producing security.
(d) In default.
(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 $828,333 and $61,761,202, 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 $51,276,850, representing 114.1% of net assets.
(p) Payment-in-kind (PIK) security for which interest income may be received in additional securities and/or cash.
(u) The security was valued using significant unobservable inputs and is considered level 3 under the fair value hierarchy. For further information about the fund’s level 3 holdings, please see Note 2 in the Notes to Financial Statements.
(v) Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities:
    
33


Portfolio of Investments – continued
Restricted Securities Acquisition
Date
Cost Value
Intelsat Jackson Holdings S.A., 9.75%, 7/15/2025 2/12/20  $86,384  $44,100
Paysafe Finance PLC, 4%, 6/15/2029 6/10/21-9/09/21  184,137  170,663
Total Restricted Securities     $214,763
% of Net assets     0.5%
    
The following abbreviations are used in this report and are defined:
ETF Exchange-Traded Fund
REIT Real Estate Investment Trust
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below:
EUR Euro
GBP British Pound
Derivative Contracts at 11/30/21
Forward Foreign Currency Exchange Contracts
Currency
Purchased
Currency
Sold
Counterparty Settlement
Date
Unrealized
Appreciation
(Depreciation)
Asset Derivatives
USD 115,475 EUR 99,766 JPMorgan Chase Bank N.A. 1/14/2022  $2,139
    
Futures Contracts
Description Long/
Short
Currency Contracts Notional
Amount
Expiration
Date
Value/Unrealized
Appreciation
(Depreciation)
Asset Derivatives
Interest Rate Futures    
U.S. Treasury Bond Long USD 6  $972,750 March – 2022  $24,254
U.S. Treasury Ultra Bond Long USD 1  200,562 March – 2022  8,434
            $32,688
Liability Derivatives
Interest Rate Futures    
U.S. Treasury Note 10 yr Short USD 16  $2,093,000 March – 2022  $(28,683)
At November 30, 2021, the fund had cash collateral of $11,900 to cover any collateral or margin obligations for certain derivative contracts. Restricted cash and/or deposits with brokers in the Statement of Assets and Liabilities are comprised of cash collateral.
See Notes to Financial Statements
34


Financial Statements
Statement of Assets and Liabilities
At 11/30/21
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, $61,823,021) $61,761,202
Investments in affiliated issuers, at value (identified cost, $828,311) 828,333
Cash 2,508
Deposits with brokers for  
Futures contracts 11,900
Receivables for  
Forward foreign currency exchange contracts 2,139
Net daily variation margin on open futures contracts 5,064
Investments sold 92,953
Interest 854,561
Other assets 2,018
Total assets $63,560,678
Liabilities  
Notes payable $18,500,000
Payable to affiliates  
Investment adviser 8,146
Administrative services fee 94
Transfer agent and dividend disbursing costs 253
Payable for independent Trustees' compensation 2
Accrued interest expense 10,760
Accrued expenses and other liabilities 98,237
Total liabilities $18,617,492
Net assets $44,943,186
Net assets consist of  
Paid-in capital $50,156,230
Total distributable earnings (loss) (5,213,044)
Net assets $44,943,186
Shares of beneficial interest outstanding 19,342,135
Net asset value per share (net assets of $44,943,186 / 19,342,135 shares of beneficial interest outstanding) $2.32
See Notes to Financial Statements
35


Financial Statements
Statement of Operations
Year ended 11/30/21
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 $3,217,810
Dividends 36,786
Other 4,270
Dividends from affiliated issuers 759
Foreign taxes withheld (782)
Total investment income $3,258,843
Expenses  
Management fee $468,058
Transfer agent and dividend disbursing costs 15,183
Administrative services fee 17,500
Independent Trustees' compensation 5,153
Stock exchange fee 23,741
Custodian fee 3,127
Shareholder communications 57,193
Audit and tax fees 87,898
Legal fees 2,786
Interest expense and fees 146,058
Miscellaneous 42,140
Total expenses $868,837
Reduction of expenses by investment adviser (91,645)
Net expenses $777,192
Net investment income (loss) $2,481,651
36


Statement of Operations – continued
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)  
Unaffiliated issuers $1,526,539
Affiliated issuers 38
Futures contracts (1,663)
Forward foreign currency exchange contracts 3,390
Foreign currency (15)
Net realized gain (loss) $1,528,289
Change in unrealized appreciation or depreciation  
Unaffiliated issuers $(2,376,388)
Affiliated issuers (39)
Futures contracts 4,005
Forward foreign currency exchange contracts 2,139
Translation of assets and liabilities in foreign currencies (5)
Net unrealized gain (loss) $(2,370,288)
Net realized and unrealized gain (loss) $(841,999)
Change in net assets from operations $1,639,652
See Notes to Financial Statements
37


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
  11/30/21 11/30/20
Change in net assets    
From operations    
Net investment income (loss) $2,481,651 $2,694,648
Net realized gain (loss) 1,528,289 (698,521)
Net unrealized gain (loss) (2,370,288) 435,652
Change in net assets from operations $1,639,652 $2,431,779
Distributions to shareholders $(2,704,910) $(2,905,561)
Tax return of capital distributions to shareholders $(1,782,784) $(1,563,056)
Change in net assets from fund share transactions $206,540 $(765,301)
Total change in net assets $(2,641,502) $(2,802,139)
Net assets    
At beginning of period 47,584,688 50,386,827
At end of period $44,943,186 $47,584,688
See Notes to Financial Statements
38


Financial Statements
Statement of Cash Flows
Year ended 11/30/21
This statement provides a summary of cash flows from investment activity for the fund.
Cash flows from operating activities:  
Change in net assets from operations $1,639,652
Adjustments to reconcile change in net assets from operations to net cash provided by operating activities:  
Purchase of investment securities (42,881,023)
Proceeds from disposition of investment securities 43,546,559
Proceeds from disposition of short-term investments, net 1,039,591
Realized gain/loss on investments (1,526,539)
Unrealized appreciation/depreciation on investments 2,376,427
Unrealized appreciation/depreciation on foreign currency contracts (2,139)
Net amortization/accretion of income 116,935
Decrease in interest receivable 5,663
Decrease in accrued expenses and other liabilities (13,695)
Increase in receivable for net daily variation margin on open futures contracts (5,064)
Increase in other assets (57)
Decrease in interest payable (1,452)
Net cash provided by operating activities $4,294,858
Cash flows from financing activities:  
Distributions paid in cash $(4,281,154)
Net increase in cash and restricted cash $13,704
Cash and restricted cash:  
Beginning of period $704
End of period $14,408
Supplemental disclosure of cash flow information:
Non-cash financing activities not included herein consist of reinvestment of dividends and distributions of $206,540.
Cash paid during the year ended November 30, 2021 for interest was $147,510.
See Notes to Financial Statements
39


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.
  Year ended
  11/30/21 11/30/20 11/30/19 11/30/18 11/30/17
Net asset value, beginning of period $2.47 $2.56 $2.46 $2.79 $2.77
Income (loss) from investment operations
Net investment income (loss) (d) $0.13 $0.14 $0.14 $0.14(c) $0.16
Net realized and unrealized gain (loss) (0.05) (0.00)(w) 0.20 (0.22) 0.12
 Total from investment operations  $0.08  $0.14  $0.34  $(0.08)  $0.28
Less distributions declared to shareholders
From net investment income $(0.14) $(0.15) $(0.14) $(0.15) $(0.17)
From tax return of capital (0.09) (0.08) (0.10) (0.10) (0.10)
 Total distributions declared to shareholders  $(0.23)  $(0.23)  $(0.24)  $(0.25)  $(0.27)
 Net increase from repurchase of capital shares  $—  $0.00(w)  $0.00(w)  $—  $0.01
 Net asset value, end of period (x)  $2.32  $2.47  $2.56  $2.46  $2.79
 Market value, end of period  $2.97  $2.47  $2.70  $2.29  $2.75
 Total return at market value (%) 30.89 0.89 29.74 (8.21) 22.30
 Total return at net asset value (%) (j)(r)(s)(x) 2.25 6.40 14.52 (2.81)(c) 11.09
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 1.84 2.05 2.56 2.50(c) 2.15
Expenses after expense reductions (f) 1.65 1.82 2.49 2.41(c) 2.05
Net investment income (loss) 5.27 5.75 5.43 5.50(c) 5.75
Portfolio turnover 65 57 56 45 49
Net assets at end of period (000 omitted)  $44,943  $47,585  $50,387  $48,508  $54,950
Supplemental Ratios (%):
Ratios of expenses to average net assets after expense reductions and excluding interest expense and fees (f) 1.34 1.34 1.34 1.33(c) 1.34
Senior Securities:
Total notes payable outstanding (000 omitted) $18,500 $18,500 $20,000 $20,000 $22,000
Asset coverage per $1,000 of indebtedness (k) $3,429 $3,572 $3,519 $3,425 $3,498
    
See Notes to Financial Statements
40


Financial Highlights – continued
(c) Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.
(d) Per share data is based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly, if applicable.
(j) Total return at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than the total return at market value.
(k) Calculated by subtracting the fund's total liabilities (not including notes payable) from the fund's total assets and dividing this number by the notes payable outstanding and then multiplying by 1,000.
(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.
(w) Per share amount was less than $0.01.
(x) The net asset values and total returns at net asset value 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
41


Notes to Financial Statements
(1) Business and Organization
MFS Intermediate High Income Fund (the fund) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified closed-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 high-yield securities rated below investment grade. Investments in below investment grade quality securities can involve a substantially greater risk of default or can already be in default, and their values can decline significantly. Below investment grade quality securities tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. 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 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. Futures contracts
42


Notes to Financial Statements  - continued
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. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted
43


Notes to Financial Statements  - continued
quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes 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 and forward foreign currency exchange contracts. The following is a summary of the levels used as of November 30, 2021 in valuing the fund's assets and liabilities:
Financial Instruments Level 1 Level 2 Level 3 Total
Equity Securities:        
United States $685,120 $2 $57,518 $742,640
Mexico 9,026 9,026
United Kingdom 461 461
Municipal Bonds 35,875 35,875
U.S. Corporate Bonds 52,710,579 52,710,579
Foreign Bonds 8,262,621 8,262,621
Mutual Funds 828,333 828,333
Total $1,513,453 $61,009,077 $67,005 $62,589,535
Other Financial Instruments        
Futures Contracts – Assets $32,688 $— $— $32,688
Futures Contracts – Liabilities (28,683) (28,683)
Forward Foreign Currency Exchange Contracts – Assets 2,139 2,139
For further information regarding security characteristics, see the Portfolio of Investments.
The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The table presents the activity of level 3 securities held at the beginning and the end of the period.
  Equity
Securities
Balance as of 11/30/20 $56,504
Change in unrealized appreciation or depreciation 1,014
Transfers into level 3 9,026
Received as part of a corporate action 461
Balance as of 11/30/21 $67,005
The net change in unrealized appreciation or depreciation from investments held as level 3 at November 30, 2021 is $1,014. At November 30, 2021, the fund held three level 3 securities.
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
44


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 exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund during the period were futures contracts 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 November 30, 2021 as reported in the Statement of Assets and Liabilities:
    Fair Value (a)
Risk Derivative Contracts Asset Derivatives Liability Derivatives
Interest Rate Futures Contracts $32,688 $(28,683)
Foreign Exchange Forward Foreign Currency Exchange Contracts 2,139
Total   $34,827 $(28,683)
(a) Values presented in this table for futures contracts correspond to the values reported in the Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the Statement of Assets and Liabilities.
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended November 30, 2021 as reported in the Statement of Operations:
Risk Futures
Contracts
Forward Foreign
Currency
Exchange
Contracts
Interest Rate $(1,663) $—
Foreign Exchange 3,390
Total $(1,663) $3,390
45


Notes to Financial Statements  - continued
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 November 30, 2021 as reported in the Statement of Operations:
Risk Futures
Contracts
Forward Foreign
Currency
Exchange
Contracts
Interest Rate $4,005 $—
Foreign Exchange 2,139
Total $4,005 $2,139
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each agreement to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
Collateral and margin requirements differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in the form of cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund's custodian in connection with these agreements. For derivatives traded under an ISDA Master Agreement, which contains a collateral support annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any such payments are included in “Interest expense and fees” in the Statement of Operations.
Futures Contracts — The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
46


Notes to Financial Statements  - continued
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.
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.
Loans and Other Direct Debt Instruments — The fund invests in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which contractually obligate the fund to supply additional cash to the borrower on demand. The fund generally provides this financial support in order to preserve its existing investment or to obtain a more senior secured interest in the assets of the borrower. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
47


Notes to Financial Statements  - continued
Statement of Cash Flows — Information on financial transactions which have been settled through the receipt or disbursement of cash or restricted cash is presented in the Statement of Cash Flows. Cash as presented in the fund's Statement of Assets and Liabilities includes cash on hand at the fund's custodian bank and does not include any short-term investments. Restricted cash is presented in the fund's Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives and represents cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts.
The following table provides a reconciliation of cash and restricted cash reported within the Statement of Assets and Liabilities with that shown in the Statement of Cash Flows:
  11/30/21
Cash $2,508
Restricted cash
Restricted cash included in deposits with brokers 11,900
Total cash and restricted cash in the Statement of Cash Flows $14,408
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income — Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. The fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Debt obligations may be placed on non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations may be further reduced by the write-off of the related interest receivables when deemed uncollectible.
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.
48


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. The fund seeks to pay monthly distributions based on an annual rate of 9.50% of the fund’s average monthly net asset value. As a result, distributions may exceed actual earnings which may result in a tax return of capital. 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.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
  Year ended
11/30/21
Year ended
11/30/20
Ordinary income (including any short-term capital gains) $2,704,910 $2,905,561
Tax return of capital (b) 1,782,784 1,563,056
Total distributions $4,487,694 $4,468,617
    
(b) Distributions in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 11/30/21  
Cost of investments $62,787,845
Gross appreciation 1,045,225
Gross depreciation (1,237,391)
Net unrealized appreciation (depreciation) $ (192,166)
Capital loss carryforwards (5,020,873)
Other temporary differences (5)
Total distributable earnings (loss) $ (5,213,044)
49


Notes to Financial Statements  - continued
As of November 30, 2021, 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 $(155,706)
Long-Term (4,865,167)
Total $(5,020,873)
(3) Transactions with Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.65% of the fund’s average daily net assets. The fund pays the adviser a monthly fee equal to 20% of the fund’s leverage income after deducting the expenses of leveraging (“net leverage income”); provided, however, if the fund’s net leverage income is less than zero, MFS will reduce its management fee by an amount equivalent to the percentage indicated of the fund’s net leverage income. The management fee incurred for the year ended November 30, 2021 was equivalent to an annual effective rate of 0.99% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed 1.34% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until November 30, 2022. For the year ended November 30, 2021, this reduction amounted to $91,645, which is included in the reduction of total expenses in the Statement of Operations.
Transfer Agent — The fund engages Computershare Trust Company, N.A. (“Computershare”) as the sole transfer agent for the fund. MFS Service Center, Inc. (MFSC) monitors and supervises the activities of Computershare for an agreed upon fee approved by the Board of Trustees. For the year ended November 30, 2021, these fees paid to MFSC amounted to $3,016.
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the year ended November 30, 2021 was equivalent to an annual effective rate of 0.0372% of the fund's average daily net assets.
Trustees’ and Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS and MFSC.
50


Notes to Financial Statements  - continued
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.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended November 30, 2021, the fund engaged in sale transactions pursuant to this policy, which amounted to $5,216. The sales transactions resulted in net realized gains (losses) of $0.
(4) Portfolio Securities
For the year ended November 30, 2021, purchases and sales of investments, other than short-term obligations, aggregated $41,465,171 and $42,785,977, respectively.
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. The Trustees have authorized the repurchase by the fund of up to 10% annually of its own shares of beneficial interest.
During the year ended November 30, 2021, the fund did not repurchase any shares.
The fund repurchased 410,292 shares of beneficial interest during the year ended November 30, 2020 at an average price per share of $2.01 and a weighted average discount of 9.14% per share. Transactions in fund shares were as follows:
  Year ended
11/30/21
  Year ended
11/30/20
  Shares Amount   Shares Amount
Shares issued to shareholders in reinvestment of distributions 75,458 $206,540   23,422 $61,008
Capital shares repurchased   (410,292) (826,309)
Net change 75,458 $206,540   (386,870) $(765,301)
(6) Loan Agreement
The fund has a credit agreement with a bank for a revolving secured line of credit that can be drawn upon up to $21,000,000. At November 30, 2021, the fund had outstanding borrowings under this agreement in the amount of $18,500,000, which are secured by a lien on the fund’s assets. The loan’s carrying value in the fund’s Statement of Assets and Liabilities approximates its fair value. The loan value as of the reporting date is considered level 2 under the fair value hierarchy. The credit agreement matures on August 19, 2022. Borrowings under the agreement can be made for liquidity or leverage purposes. Interest is charged at a rate per annum equal to LIBOR plus an agreed upon spread with the option to choose LIBOR periods of overnight, 1, 3, or 6 months, or at the option of the borrower an alternate base rate plus an agreed upon spread. The fund incurred interest expense of $142,814 during the period, which is included in “Interest expense and fees” in the Statement of Operations. The fund may also be charged a commitment fee based on the average daily unused portion of the line of credit. The fund paid a commitment fee of $3,244 during the period, which is included in “Interest expense and fees” in the Statement of Operations. For the year
51


Notes to Financial Statements  - continued
ended November 30, 2021, the average loan balance was $18,500,000 at a weighted average annual interest rate of 0.77%. The fund is subject to certain covenants including, but not limited to, requirements with respect to asset coverage, portfolio diversification and liquidity.
(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  $1,867,963  $19,011,970  $20,051,599  $38  $(39)  $828,333
    
Affiliated Issuers Dividend
Income
Capital Gain
Distributions
MFS Institutional Money Market Portfolio  $759  $—
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. Multiple surges in cases globally, the availability and widespread adoption of vaccines, and the emergence of variant strains of the virus continue to create uncertainty as to the future and long-term impacts resulting from the pandemic including impacts to the prices and liquidity of the fund's investments and the fund's performance.
(9) LIBOR Transition
Certain of the fund's investments, including its investments in derivatives, as well as any debt issued by the fund and other contractual arrangements of the fund may be based on reference interest rates such as the London Interbank Offered Rate (“LIBOR”). In 2017, the regulatory authority that oversees financial services firms in the United Kingdom announced plans to transition away from LIBOR by the end of 2021. In March 2021, the administrator of LIBOR announced the extension of the publication of the more commonly used U.S. dollar LIBOR settings to the end of June 2023. Although the full impacts of the transition away from LIBOR are not fully known, the transition may result in, among other things, an increase in volatility or illiquidity of the markets for instruments that currently rely on LIBOR to determine interest rates and this could have an adverse impact on the fund's performance. With respect to the fund's accounting for investments, including its investments in derivatives, as well as any debt issued by the fund and other contractual arrangements of the fund that undergo reference rate-related modifications as a result of the transition, management will rely upon the relief provided by FASB Codification Topic 848 – Reference Rate Reform (Topic 848). The guidance in Topic 848 permits the fund to disregard the GAAP accounting
52


Notes to Financial Statements  - continued
requirements around certain contract modifications resulting from the LIBOR transition such that for contracts considered in scope, the fund can account for those modified contracts as a continuation of the existing contracts. While the cessation of the one-week and two-month U.S. dollar LIBOR tenors along with certain other non-U.S. dollar denominated LIBOR settings at December 31, 2021 did not have a material impact on the fund, management is still evaluating the impact to the fund of the June 30, 2023 planned discontinuation of the more commonly used U.S. dollar LIBOR settings.
53


Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of MFS Intermediate High Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS Intermediate High Income Fund (the “Fund”), including the portfolio of investments, as of November 30, 2021, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund at November 30, 2021, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the 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 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 the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
54


Report of Independent Registered Public Accounting Firm – continued
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more MFS investment companies since 1993.
Boston, Massachusetts
January 14, 2022
55


Results of Shareholder Meeting (unaudited)
At the annual meeting of shareholders of MFS Intermediate High Income Fund, which was held on October 7, 2021, the following action was taken:
Item 1: To elect the following individuals as Trustees:
    Number of Shares
Nominee   For   Withheld Authority
John A. Caroselli   12,337,706.602   333,367.000
James W. Kilman, Jr.   12,346,417.602   324,656.000
Clarence Otis, Jr.   12,322,066.602   349,007.000
56


Trustees and Officers — Identification and Background
The Trustees and Officers of the Trust, as of January 1, 2022, 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)   Term
Expiring
  Number
of MFS
Funds
overseen
by the
Trustee
  Principal
Occupations
During
the Past
Five Years
  Other
Directorships
During
the Past
Five Years (j)
INTERESTED TRUSTEES                        
Michael W. Roberge (k)
(age 55)
  Trustee   January 2021   2023   135   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 67)
  Trustee and Chair of Trustees   January 2009   2023   135   Private investor   N/A
Steven E. Buller
(age 70)
  Trustee   February 2014   2023   135   Private investor   N/A
John A. Caroselli
(age 67)
  Trustee   March 2017   2024   135   Private investor; JC Global Advisors, LLC (management consulting), President (since 2015)   N/A
Maureen R. Goldfarb
(age 66)
  Trustee   January 2009   2022   135   Private investor   N/A
Peter D. Jones
(age 66)
  Trustee   January 2019   2023   135   Private investor   N/A
James W. Kilman, Jr.
(age 60)
  Trustee   January 2019   2024   135   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)
57


Trustees and Officers - continued
Name, Age   Position(s) Held with Fund   Trustee/Officer Since(h)   Term
Expiring
  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 65)
  Trustee   March 2017   2024   135   Private investor   VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director
Maryanne L. Roepke
(age 65)
  Trustee   May 2014   2022   135   Private investor   N/A
Laurie J. Thomsen
(age 64)
  Trustee   March 2005   2022   135   Private investor   The Travelers Companies, Director; Dycom Industries, Inc., Director
    
Name, Age   Position(s) Held with
Fund
  Trustee/Officer Since(h)   Term Expiring   Number
of MFS
Funds
overseen
by the
Trustee
  Principal
Occupations
During
the Past
Five Years
OFFICERS
Christopher R. Bohane (k)
(age 47)
  Assistant Secretary and Assistant Clerk   July 2005   N/A   135   Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel
Kino Clark (k)
(age 53)
  Assistant Treasurer   January 2012   N/A   135   Massachusetts Financial Services Company, Vice President
John W. Clark, Jr. (k)
(age 54)
  Assistant Treasurer   April 2017   N/A   135   Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head - Treasurer's Office (until February 2017)
Thomas H. Connors (k)
(age 62)
  Assistant Secretary and Assistant Clerk   September 2012   N/A   135   Massachusetts Financial Services Company, Vice President and Senior Counsel
David L. DiLorenzo (k)
(age 53)
  President   July 2005   N/A   135   Massachusetts Financial Services Company, Senior Vice President
58


Trustees and Officers - continued
Name, Age   Position(s) Held with
Fund
  Trustee/Officer Since(h)   Term Expiring   Number
of MFS
Funds
overseen
by the
Trustee
  Principal
Occupations
During
the Past
Five Years
Heidi W. Hardin (k)
(age 54)
  Secretary and Clerk   April 2017   N/A   135   Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (until January 2017)
Brian E. Langenfeld (k)
(age 48)
  Assistant Secretary and Assistant Clerk   June 2006   N/A   135   Massachusetts Financial Services Company, Vice President and Senior Counsel
Amanda S. Mooradian (k)
(age 42)
  Assistant Secretary and Assistant Clerk   September 2018   N/A   135   Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel
Susan A. Pereira (k)
(age 51)
  Assistant Secretary and Assistant Clerk   July 2005   N/A   135   Massachusetts Financial Services Company, Vice President and Assistant General Counsel
Kasey L. Phillips (k)
(age 51)
  Assistant Treasurer   September 2012   N/A   135   Massachusetts Financial Services Company, Vice President
Matthew A. Stowe (k)
(age 47)
  Assistant Secretary and Assistant Clerk   October 2014   N/A   135   Massachusetts Financial Services Company, Vice President and Assistant General Counsel
Martin J. Wolin (k)
(age 54)
  Chief Compliance Officer   July 2015   N/A   135   Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer
James O. Yost (k)
(age 61)
  Treasurer   September 1990   N/A   135   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.
59


Trustees and Officers - continued
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are elected for fixed terms. The Board of Trustees is currently divided into three classes, each having a term of three years which term expires on the date of the third annual meeting following the election to office of the Trustee’s class. Each year the term of one class expires. Each Trustee and officer will serve until next elected or his or her earlier death, resignation, retirement or removal. 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.

Investment Adviser Custodian
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618
State Street Bank and Trust Company
1 Lincoln Street
Boston, MA 02111-2900
    
Portfolio Manager(s) Independent Registered Public Accounting Firm
David Cole
Michael Skatrud
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
60


Board Review of Investment Advisory Agreement
MFS Intermediate High Income Fund
The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times by videoconference (in accordance with Securities and Exchange Commission relief) over the course of three months beginning in May and ending in July, 2021 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by an independent consultant who was retained by and reported to the independent Trustees.
In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance (based on net asset value) of the Fund for various time periods ended December 31, 2020 and the investment performance (based on net asset value) of a group of funds with substantially similar investment classifications/ objectives (the “Broadridge performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Broadridge as well as all other funds in the same investment classification/category (the “Broadridge expense group and universe”), (iii) information provided by MFS on the advisory fees of portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and
61


Board Review of Investment Advisory Agreement - continued
portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.
Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the Broadridge performance universe over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s common shares in comparison to the performance of funds in its Broadridge performance universe over the five-year period ended December 31, 2020, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s common shares ranked 11th out of a total of 27 funds in the Broadridge performance universe for the five-year period (a ranking of first place out of the total number of funds in the performance universe indicating the best performer and a ranking of last place out of the total number of funds in the performance universe indicating the worst performer). The total return performance of the Fund’s common shares ranked 16th out of a total of 37 funds for the one-year period and 10th out of a total of 35 funds for the three-year period ended December 31, 2020. Given the size of the Broadridge performance universe and information previously provided by MFS regarding differences between the Fund and other funds in its Broadridge performance universe, the Trustees also reviewed the Fund’s performance in comparison to the Bloomberg Barclays U.S. High-Yield Corporate Bond 2% Issuer Capped Index. The Fund outperformed its benchmark for each of the three- and five-year periods ended December 31, 2020 and underperformed its benchmark for the one-year period ended December 31, 2020 (one-year: 6.0% total return for the Fund versus 7.0% total return for the benchmark; three-year: 6.3% total return for the Fund versus 6.2% total return for the benchmark; five-year: 9.5% total return for the Fund versus 8.6% total return for the benchmark). Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of
62


Board Review of Investment Advisory Agreement - continued
the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s common shares as a percentage of average daily net assets and the advisory fee and total expense ratios of the Broadridge expense group based on information provided by Broadridge. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each lower than the Broadridge expense group median.
The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund, if any. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds.
The Trustees considered that, as a closed-end fund, the Fund is unlikely to experience meaningful asset growth. As a result, the Trustees did not view the potential for realization of economies of scale as the Fund’s assets grow to be a material factor in their deliberations. The Trustees noted that they would consider economies of scale in the future in the event the Fund experiences significant asset growth, such as through an offering of preferred shares (which is not currently contemplated) or a material increase in the market value of the Fund’s portfolio securities.
The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing investment companies. In this regard, the Trustees
63


Board Review of Investment Advisory Agreement - continued
also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of administrative services provided to the Fund by MFS under agreements other than the investment advisory agreement. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
The Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the MFS Funds. The Trustees also considered that MFS discontinued its historic practice of obtaining investment research from portfolio brokerage commissions paid by certain MFS Funds effective January 2018, and directly pays or voluntarily reimburses a Fund, if applicable, for the costs of external research acquired through the use of the Fund’s portfolio brokerage commissions.
Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2021.
64


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/closedendfunds 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/closedendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Additional information about the fund (e.g., performance, dividends and the fund’s price history)  is also available at mfs.com/closedendfunds by choosing the fund's name, if any.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, transfer 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, 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 2021 income tax forms in January 2022. The following information is provided pursuant to provisions of the Internal Revenue Code.
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).
65


rev. 3/16
FACTS WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?
    
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
    
What? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances
• Account transactions and transaction history
• Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice.
    
How? All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing.
    
Reasons we can share your
personal information
Does MFS share? Can you limit
this sharing?
For our everyday business purposes –
such as to process your transactions, maintain your
account(s), respond to court orders and legal
investigations, or report to credit bureaus
Yes No
For our marketing purposes –
to offer our products and services to you
No We don't share
For joint marketing with other
financial companies
No We don't share
For our affiliates' everyday business purposes –
information about your transactions and experiences
No We don't share
For our affiliates' everyday business purposes –
information about your creditworthiness
No We don't share
For nonaffiliates to market to you No We don't share
    
Questions? Call 800-225-2606 or go to mfs.com.
66


Page 2
Who we are
Who is providing this notice? MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.
    
What we do
How does MFS
protect my personal
information?
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS
collect my personal
information?
We collect your personal information, for example, when you
• open an account or provide account information
• direct us to buy securities or direct us to sell your securities
• make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can't I limit all sharing? Federal law gives you the right to limit only
• sharing for affiliates' everyday business purposes – information about your creditworthiness
• affiliates from using your information to market to you
• sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing.
    
Definitions
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
•  MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates Companies not related by common ownership or control. They can be financial and nonfinancial companies.
•  MFS does not share with nonaffiliates so they can market to you.
Joint marketing A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
•  MFS doesn't jointly market.
    
Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.
67




CONTACT US
TRANSFER AGENT, REGISTRAR, AND
DIVIDEND DISBURSING AGENT
CALL
1-800-637-2304
9 a.m. to 5 p.m. Eastern time
WRITE
Computershare Trust Company, N.A.
P.O. Box 505005
Louisville, KY 40233-5005
New York Stock Exchange Symbol: CIF


Item 1(b):

A copy of the notice transmitted to the Registrant’s shareholders in reliance on Rule 30e-3 of the Investment Company Act of 1940, as amended that contains disclosure specified by paragraph (c)(3) of Rule 30e-3 is attached hereto as EX-99.30e-3Notice.


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 filed as an exhibit to this Form N-CSR.

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Messrs. Steven E. Buller, James Kilman, and Clarence Otis, Jr. and Ms. Maryanne L. Roepke, members of the Audit Committee, have been determined by the Board of Trustees in their reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in Form N-CSR. In addition, Messrs. Buller, Kilman, and Otis and Ms. Roepke are “independent” members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Items 4(a) through 4(d) and 4(g):

The Board of Trustees has appointed Ernst & Young LLP (“E&Y”) to serve as independent accountants to the Registrant (hereinafter the “Registrant” or the “Fund”). The tables below set forth the audit fees billed to the Fund as well as fees for non-audit services provided to the 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 November 30, 2021 and 2020, audit fees billed to the Fund by E&Y were as follows:

 

     Audit Fees  
     2021      2020  

Fees billed by E&Y:

     

MFS Intermediate High Income Fund

     63,082        62,222  


For the fiscal years ended November 30, 2021 and 2020, fees billed by E&Y for audit-related, tax and other services provided to the Fund and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:

 

     Audit-Related Fees1      Tax Fees2      All Other Fees3  
     2021      2020      2021      2020      2021      2020  

Fees billed by E&Y:

                 

To MFS Intermediate High Income Fund

     12,246        12,077        11,159        11,009        1,001        1,473  
     Audit-Related Fees1      Tax Fees2      All Other Fees3  
   2021      2020      2021      2020      2021      2020  

Fees billed by E&Y:

                 

To MFS and MFS Related Entities of MFS Intermediate High Income Fund*

     1,275,054        2,321,898        0        0        110,620        104,750  

 

     Aggregate Fees for Non-audit
Services
 
     2021      2020  

Fees Billed by E&Y:

     

To MFS Intermediate High Income Fund, MFS and MFS Related Entities#

     1,576,780        2,711,937  

 

* 

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 Fund (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 E&Y for non-audit services rendered to the Fund 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 E&Y other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to review of internal controls and review of Rule 38a-1 compliance program.

 

Item 4(e)(1):

Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services:

To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Fund and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is


currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 between such 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 were provided prior to the effectiveness of SEC rules requiring pre-approval or 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.

The Registrant has an Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Messrs. Steven E. Buller, James Kilman and Clarence Otis, Jr. and Ms. Maryanne L. Roepke.

 

ITEM 6.

SCHEDULE OF INVESTMENTS

A schedule of investments of the Registrant is included as part of the report to shareholders of the Registrant under Item 1(a) of this Form N-CSR.


ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

A copy of the proxy voting policies and procedures are attached hereto as EX-99.PROXYPOL.

 

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Portfolio Manager(s)

Information regarding the portfolio manager(s) of the MFS Intermediate High Income Fund (the “Fund”) is set forth below. Each portfolio manager is primarily responsible for the day-to-day management of the Fund.

 

Portfolio Manager

  

Primary Role

  

Since

  

Title and Five Year History

David Cole    Portfolio Manager            2007    Investment Officer of MFS; employed in the investment area of MFS since 2004
Michael Skatrud    Portfolio Manager    2018    Investment Officer of MFS; employed in the investment area of MFS since 2013

Compensation

MFS’ philosophy is to align portfolio manager compensation with the goal to provide shareholders with long-term value through a collaborative investment process. Therefore, MFS uses long-term investment performance as well as contribution to the overall investment process and collaborative culture as key factors in determining portfolio manager compensation. In addition, MFS seeks to maintain total compensation programs that are competitive in the asset management industry in each geographic market where it has employees. MFS uses competitive compensation data to ensure that compensation practices are aligned with its goals of attracting, retaining, and motivating the highest-quality professionals.

MFS reviews portfolio manager compensation annually. In determining portfolio manager compensation, MFS uses quantitative means and qualitative means to help ensure a sustainable investment process. As of December 31, 2020, portfolio manager total cash compensation is a combination of base salary and performance bonus:

Base Salary – Base salary generally represents a smaller percentage of portfolio manager total cash compensation than performance bonus.

Performance Bonus – Generally, the performance bonus represents more than a majority of portfolio manager total cash compensation.

The performance bonus is based on a combination of quantitative and qualitative factors, generally with more weight given to the former and less weight given to the latter.

The quantitative portion is primarily based on the pre-tax performance of accounts managed by the portfolio manager over a range of fixed-length time periods, intended to provide the ability to assess performance over time periods consistent with a full market cycle and a strategy’s investment horizon. The fixed-length time periods include the portfolio manager’s full tenure on each fund and, when available, ten-, five-, and three-year periods. For portfolio managers who have served for less than three years, shorter-term periods, including the one-year period, will also be considered, as will performance in previous roles, if any, held at the firm. Emphasis is generally placed on longer


performance periods when multiple performance periods are available. Performance is evaluated across the full set of strategies and portfolios managed by a given portfolio manager, relative to appropriate peer group universes and/or representative indices (“benchmarks”). As of December 31, 2020, the following benchmarks were used to measure the following portfolio manager’s performance for the Fund:

 

Fund

  

Portfolio Manager

  

Benchmark(s)

MFS Intermediate High Income Fund    David Cole    Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index
   Michael Skatrud    Bloomberg U.S. Corporate High-Yield Bond 2% Issuer Capped Index

Benchmarks may include versions and components of indices, custom indices, and linked indices that combine performance of different indices for different portions of the time period, where appropriate.    

The qualitative portion is based on the results of an annual internal peer review process (where portfolio managers are evaluated by other portfolio managers, analysts, and traders) and management’s assessment of overall portfolio manager contribution to the MFS investment process and the client experience (distinct from fund and other account performance).

The performance bonus is generally a combination of cash and a deferred cash award. A deferred cash award is issued for a cash value and becomes payable over a three-year vesting period if the portfolio manager remains in the continuous employ of MFS or its affiliates. During the vesting period, the value of the unfunded deferred cash award will fluctuate as though the portfolio manager had invested the cash value of the award in an MFS Fund(s) selected by the portfolio manager.

MFS Equity Plan – Portfolio managers also typically benefit from the opportunity to participate in the MFS Equity Plan. Equity interests are awarded by management, on a discretionary basis, taking into account tenure at MFS, contribution to the investment process, and other factors.

Finally, portfolio managers also participate in benefit plans (including a defined contribution plan and health and other insurance plans) and programs available generally to other employees of MFS. The percentage such benefits represent of any portfolio manager’s compensation depends upon the length of the individual’s tenure at MFS and salary level, as well as other factors.


Ownership of Fund Shares

The following table shows the dollar range of equity securities of the Fund beneficially owned by the Fund’s portfolio manager(s) as of the Fund’s fiscal year ended November 30, 2021. The following dollar ranges apply:

N. None

A. $1 – $10,000

B. $10,001 – $50,000

C. $50,001 – $100,000

D. $100,001 – $500,000

E. $500,001 – $1,000,000

F. Over $1,000,000

 

Name of Portfolio Manager

  

Dollar Range of Equity Securities in Fund

David Cole    N
Michael Skatrud    N

Other Accounts

In addition to the Fund, each portfolio manager of the Fund is named as a portfolio manager of certain other accounts managed or sub-advised by MFS or an affiliate. The number and assets of these accounts were as follows as of the Fund’s fiscal year ended November 30, 2021:

 

     Registered Investment Companies*    Other Pooled Investment
Vehicles
   Other Accounts

Name

   Number of
Accounts
   Total
Assets
   Number of
Accounts
   Total Assets    Number of
Accounts
   Total Assets

David Cole

   15    $11.2 billion    9    $6.7 billion    6    $491.9 million

Michael Skatrud

   13    $11.0 billion    8    $1.3 billion    4    $315.8 million

 

*

Includes the Fund.

Advisory fees are not based upon performance of any of the accounts identified in the table above.

Potential Conflicts of Interest

MFS seeks to identify potential conflicts of interest resulting from a portfolio manager’s management of both the Fund and other accounts, and has adopted policies and procedures designed to address such potential conflicts. There is no guarantee that MFS will be successful in identifying or mitigating conflicts of interest.

The management of multiple funds and accounts (including accounts in which MFS or an affiliate has an interest) gives rise to conflicts of interest if the funds and accounts have different objectives and strategies, benchmarks, time horizons, and fees, as a portfolio manager must allocate his or her time and investment ideas across multiple funds and accounts. In certain instances, there are securities which are suitable for the Fund’s portfolio as well as for one or more other accounts advised by MFS or its subsidiaries (including accounts in which MFS or an affiliate has an interest) with similar investment objectives. MFS’ trade allocation policies could have a detrimental effect on the Fund if the Fund’s orders do not get fully executed or are delayed in getting executed due to being aggregated with those of other accounts advised by MFS or its subsidiaries. A portfolio manager may execute transactions for another fund or account that may adversely affect the value of the Fund’s investments. Investments selected for funds or accounts other than the Fund may outperform investments selected for the Fund.


When two or more accounts are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed by MFS to be fair and equitable to each over time. Allocations may be based on many factors and may not always be pro rata based on assets managed. The allocation methodology could have a detrimental effect on the price or availability of a security with respect to the Fund.

MFS and/or a portfolio manager may have a financial incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor accounts other than the Fund; for instance, those that pay a higher advisory fee and/or have a performance adjustment and/or have a performance adjustment, those that include an investment by the portfolio manager, and/or those in which MFS, its officers and/or employees, and/or its affiliates own or have an interest.

To the extent permitted by applicable law, certain accounts may invest their assets in other accounts advised by MFS or its affiliates, including accounts that are advised by one or more of the same portfolio manager(s), which could result in conflicts of interest relating to asset allocation, timing of purchases and redemptions, and increased profitability for MFS, its affiliates, and/or its personnel, including portfolio managers.

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

MFS Intermediate High Income Fund

 

Period

   (a)
Total number
of Shares
Purchased
     (b)
Average
Price
Paid per
Share
     (c)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
     (d) Maximum
Number (or
Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
under the Plans
or Programs
 

12/01/20-12/31/20

     0        N/A        0        1,926,019  

1/01/21-1/31/21

     0        N/A        0        1,926,019  

2/01/21-2/28/21

     0        N/A        0        1,926,019  

3/01/21-3/31/21

     0        N/A        0        1,926,019  

4/01/21-4/30/21

     0        N/A        0        1,926,019  

5/01/21-5/31/21

     0        N/A        0        1,926,019  

6/01/21-6/30/21

     0        N/A        0        1,926,019  

7/01/21-7/31/21

     0        N/A        0        1,926,019  

8/01/21-8/31/21

     0        N/A        0        1,926,019  

9/01/21-9/30/21

     0        N/A        0        1,926,019  

10/1/21-10/31/21

     0        N/A        0        1,932,983  

11/1/21-11/30/21

     0        N/A        0        1,932,983  
  

 

 

       

 

 

    

Total

     0           0     
  

 

 

       

 

 

    


Note: The Board approved procedures to repurchase shares and reviews the results periodically. The notification to shareholders of the program is part of the semi-annual and annual reports sent to shareholders. These annual programs begin on October 1st of each year. The programs conform to the conditions of Rule 10b-18 of the Securities Exchange Act of 1934 and limit the aggregate number of shares that may be purchased in each annual period (October 1 through the following September 30) to 10% of the Registrant’s outstanding shares as of the first day of the plan year (October 1). The aggregate number of shares available for purchase for the October 1, 2021 plan year is 1,932,983.

 

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 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 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 has materially affected, or is 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.

During the fiscal year ended November 30, 2021, there were no fees or income related to securities lending activities of 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.

 

(c)

Registrant’s Rule 30e-3 Notice pursuant to Item 1(b) of Form N-CSR. Attached hereto as EX-99.30e-3Notice.

 

(d)

Proxy Voting Policies and Procedures pursuant to Item 7 of Form N-CSR. Attached hereto as EX-99.PROXYPOL.

 

(e)

Notices to Trust’s common shareholders in accordance with Investment Company Act Section 19(a) and Rule 19a-1. Attached hereto as EX-99.19a-1.


Notice

A copy of the Agreement and 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 INTERMEDIATE HIGH INCOME FUND

 

By (Signature and Title)*   /S/ DAVID L. DILORENZO
  David L. DiLorenzo, President

Date: January 14, 2022

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: January 14, 2022

 

By (Signature and Title)*   /S/ JAMES O. YOST
  James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer)

Date: January 14, 2022

 

*

Print name and title of each signing officer under his or her signature.

 

EX-99.CODE ETH 2 d295010dex99codeeth.htm CODE OF ETHICS CODE OF ETHICS

EX-99.COE

 

LOGO

Code of Ethics for Principal Executive and Principal Financial Officers

Effective February 13, 2018

 

I.

Policy Purpose and Summary

Section 406 of the Sarbanes-Oxley Act requires that each MFS Fund registered under the Investment Company Act of 1940 disclose whether or not it has adopted a code of ethics for senior financial officers, applicable to its principal financial officer and principal accounting officer.

 

II.

Overview

 

  A.

Covered Officers/Purpose of the Code

This code of ethics (this “Code”) has been adopted by the funds (collectively, “Funds” and each, “Fund”) under supervision of the MFS Funds Board (the “Board”) and applies to the Funds’ Principal Executive Officer and Principal Financial Officer (the “Covered Officers” each of whom is set forth in Exhibit A) for the purpose of promoting:

 

   

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

   

full, fair, accurate, timely and understandable disclosure in reports and documents that the Funds file with, or submit to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Funds;

 

   

compliance by the Funds with applicable laws and governmental rules and regulations;

 

   

the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

 

   

accountability for adherence to the Code.

 

  B.

Conduct Guidelines

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. In addition, each Covered Officer should not place his or her personal interests ahead of the Funds’ interests and should endeavor to act honestly and ethically. In furtherance of the foregoing, each Covered Officer must:

 

   

not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting for any Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; and


   

not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund.

The following activities, which could create the appearance of a conflict of interest, are permitted only with the approval of the Funds’ Chief Legal Officer (“CLO”):

 

   

service as a director on the board of any “for profit” company other than the board of the Funds’ investment adviser or its subsidiaries or board of a pooled investment vehicle sponsored by the Funds’ investment adviser or its subsidiaries;

 

   

running for political office;

 

   

the receipt of any Fund business-related gift or any entertainment from any company with which a Fund has current or prospective business dealings unless such gift or entertainment is permitted by the gifts and entertainment policy of the Funds’ investment adviser;

 

   

any material ownership interest in, or any consulting or employment relationship with, any Fund service providers (e.g., custodian banks, audit firms), other than the Funds’ investment adviser, principal underwriter, administrator or any affiliated person thereof;

 

   

a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officer’s employment or securities ownership.

 

  C.

Disclosure and Compliance

 

   

Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds;

 

   

each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Fund’s trustees and auditors, and to governmental regulators and self-regulatory organizations;

 

   

each Covered Officer should, to the extent appropriate within his or her area of Fund responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and

 

   

it is the responsibility of each Covered Officer to promote compliance within his or her area of Fund responsibility with the standards and restrictions imposed by applicable laws, rules and regulations.


  D.

Reporting and Accountability

Each Covered Officer must:

 

   

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code;

 

   

annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;

 

   

annually report to the CLO affiliations and relationships which are or may raise the appearance of a conflict of interest with the Covered Officer’s duties to the Funds, as identified in the annual Trustee and Officer Questionnaire;

 

   

not retaliate against any other Covered Officer or any officer or employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and

 

   

notify the CLO promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code.

The CLO is responsible for applying this Code to specific situations in which questions are presented under it, granting waivers upon consultation with the Board or its designee, investigating violations, and has the authority to interpret this Code in any particular situation. The CLO will report requests for waivers to the Board (or a designee thereof) promptly upon receipt of a waiver request and will periodically report to the Board any approvals granted since the last report.

The CLO will take all appropriate action to investigate any potential violations reported to him or her and to report any violations to the Board. If the Board concurs that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer.

Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

 

  E.

Confidentiality

All reports and records prepared or maintained pursuant to this Code and under the direction of the CLO will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Funds’ Board, its counsel, counsel to the Board’s independent trustees and senior management and the board of directors of the Fund’s investment adviser and its counsel.


  F.

Internal Use

The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion.

 

III.

Supervision

The Board of Trustees of the Funds, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of the Funds, shall review no less frequently than annually, a report from the CLO regarding the affirmations of the principal executive officer and the principal financial officer as to compliance with this Code.

 

IV.

Interpretation and Escalation

Breaches of the Code are reviewed by the CLO and communicated to the Board of Trustees of the affected Fund(s). Interpretations of this Policy shall be made from time to time by the CLO, as needed, and questions regarding the application of this Policy to a specific set of facts are escalated to the CLO.

 

V.

Authority

Section 406 of the Sarbanes-Oxley Act.

 

VI.

Monitoring

Adherence to this policy is monitored by the CLO.

 

VII.

Related Policies

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and their investment adviser’s codes of ethics under Rule 17j-1 under the Investment Company Act and any other codes or policies or procedures adopted by the Funds or their investment adviser or other service providers are separate requirements and are not part of this Code.

 

VIII.

Amendment

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent trustees.

 

IX.

Recordkeeping

All required books, records and other documentation shall be retained in accordance with MFS’ related record retention policy.

Additional procedures may need to be implemented by departments to properly comply with this policy.


Exhibit A

As of January 1, 2017

Persons Covered by this Code of Ethics

Funds’ Principal Executive Officer: David L. DiLorenzo

Funds’ Principal Financial Officer: James O. Yost

EX-99.CERT 3 d295010dex99cert.htm SECTION 302 CERTIFICATIONS SECTION 302 CERTIFICATIONS

EX-99.302CERT

MFS INTERMEDIATE HIGH INCOME FUND

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, James O. Yost, certify that:

 

1.

I have reviewed this report on Form N-CSR of MFS Intermediate High Income Fund;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.

The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 14, 2022     /S/ JAMES O. YOST
   

James O. Yost

Treasurer (Principal Financial Officer and

Accounting Officer)


EX-99.302CERT

MFS INTERMEDIATE HIGH INCOME FUND

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, David L. DiLorenzo, certify that:

 

1.

I have reviewed this report on Form N-CSR of MFS Intermediate High Income Fund;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.

The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 14, 2022     /S/ DAVID L. DILORENZO
   

David L. DiLorenzo

President (Principal Executive Officer)

EX-99.906CERT 4 d295010dex99906cert.htm SECTION 906 CERTIFICATIONS SECTION 906 CERTIFICATIONS

EX-99.906CERT

MFS INTERMEDIATE HIGH INCOME FUND

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

I, James O. Yost, certify that, to my knowledge:

 

1.

The Form N-CSR (the “Report”) of MFS Intermediate High Income Fund (the “Registrant”) fully complies for the period covered by the Report with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Date: January 14, 2022     /S/ JAMES O. YOST
   

James O. Yost

Treasurer (Principal Financial Officer and

Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.


EX-99.906CERT

MFS INTERMEDIATE HIGH INCOME FUND

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

I, David L. DiLorenzo, certify that, to my knowledge:

 

1.

The Form N-CSR (the “Report”) of MFS Intermediate High Income Fund (the “Registrant”) fully complies for the period covered by the Report with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Date: January 14, 2022     /S/ DAVID L. DILORENZO
   

David L. DiLorenzo

President (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.30E-3 NOTICE 5 d295010dex9930e3notice.htm 30E-3 NOTICE 30e-3 NOTICE

EX-99.30e-3Notice

 

LOGO   

An Important

Report to

Shareholders is

Now Available

Online and In Print

by Request

 

 

MFS Intermediate High Income Fund

 

Thank you for being a shareholder. You are encouraged to access and review this important report containing information about the fund, including portfolio holdings and financial statements.

 

The report is available at:

closedendfunds.mfs.com

 

This report is available by mail or email upon request free of charge. Reports for the prior reporting period and the fund’s portfolio holdings for its most recent first and third fiscal quarters are also available online and in print by request.

 

Current and future report delivery requests can be submitted at any time using the options in the right panel.

 

Why am I receiving this Notice?

 

The Securities and Exchange Commission adopted new rule 30e-3, which, among other things, allows mutual fund companies to deliver shareholder reports by making such reports accessible at a website address. You still may elect to receive a paper copy of the current report and/or any future reports by following the instructions on the panel on the right-hand side.

   LOGO


Please contact us with any questions:

 

LOGO

In accordance with Section 23(c) of the Investment Company Act of 1940, the fund hereby gives notice that it may from time to time repurchase shares of the fund in the open market at the option of the Board of Trustees and on such terms as the Trustees shall determine.

EX-99.PROXYPOL 6 d295010dex99proxypol.htm MFS PROXY VOTING POLICIES AND PROCEDURES MFS PROXY VOTING POLICIES AND PROCEDURES

EX-99.PROXYPOL

MASSACHUSETTS FINANCIAL SERVICES COMPANY

PROXY VOTING POLICIES AND PROCEDURES

February 1, 2021

Massachusetts Financial Services Company, MFS Institutional Advisors, Inc., MFS International (UK) Limited, MFS Heritage Trust Company, MFS Investment Management (Canada) Limited, MFS Investment Management Company (Lux) S.à r.l., MFS International Singapore Pte. Ltd., MFS Investment Management K.K., MFS International Australia Pty. Ltd.; and MFS’ other subsidiaries that perform discretionary investment management activities (collectively, “MFS”) have adopted proxy voting policies and procedures, as set forth below (“MFS Proxy Voting Policies and Procedures”), with respect to securities owned by the clients for which MFS serves as investment adviser and has the power to vote proxies, including the pooled investment vehicles sponsored by MFS (the “MFS Funds”). References to “clients” in these policies and procedures include the MFS Funds and other clients of MFS, such as funds organized offshore, sub-advised funds and separate account clients, to the extent these clients have delegated to MFS the responsibility to vote proxies on their behalf under the MFS Proxy Voting Policies and Procedures.

The MFS Proxy Voting Policies and Procedures include:

A. Voting Guidelines;

B. Administrative Procedures;

C. Records Retention; and

D. Reports.

 

A.

VOTING GUIDELINES

 

  1.

General Policy; Potential Conflicts of Interest

MFS’ policy is that proxy voting decisions are made in what MFS believes to be the best long-term economic interests of MFS’ clients, and not in the interests of any other party or in MFS’ corporate interests, including interests such as the distribution of MFS Fund shares and institutional client relationships.

MFS reviews corporate governance issues and proxy voting matters that are presented for shareholder vote by either management or shareholders of public companies. Based on the overall principle that all votes cast by MFS on behalf of its clients must be in what MFS believes to be the best long-term economic interests of such clients, MFS has adopted proxy voting guidelines, set forth below, that govern how MFS generally will vote on specific matters presented for shareholder vote.


As a general matter, MFS votes consistently on similar proxy proposals across all shareholder meetings. However, some proxy proposals, such as certain excessive executive compensation, environmental, social and governance matters, are analyzed on a case-by-case basis in light of all the relevant facts and circumstances of the proposal. Therefore, MFS may vote similar proposals differently at different shareholder meetings based on the specific facts and circumstances of the issuer or the terms of the proposal. In addition, MFS also reserves the right to override the guidelines with respect to a particular proxy proposal when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients.

While MFS generally votes consistently on the same matter when securities of an issuer are held by multiple client portfolios, MFS may vote differently on the matter for different client portfolios under certain circumstances. One reason why MFS may vote differently is if MFS has received explicit voting instructions to vote differently from a client for its own account. Likewise, MFS may vote differently if the portfolio management team responsible for a particular client account believes that a different voting instruction is in the best long-term economic interest of such account.

From time to time, MFS may receive comments on the MFS Proxy Voting Policies and Procedures from its clients. These comments are carefully considered by MFS when it reviews these MFS Proxy Voting Policies and Procedures and revises them as appropriate, in MFS’ sole judgment.

These policies and procedures are intended to address any potential material conflicts of interest on the part of MFS or its subsidiaries that are likely to arise in connection with the voting of proxies on behalf of MFS’ clients. If such potential material conflicts of interest do arise, MFS will analyze, document and report on such potential material conflicts of interest (see Sections B.2 and D below), and shall ultimately vote the relevant proxies in what MFS believes to be the best long-term economic interests of its clients. The MFS Proxy Voting Committee is responsible for monitoring and reporting with respect to such potential material conflicts of interest.

MFS is also a signatory to the Principles for Responsible Investment. In developing these guidelines, MFS considered environmental, social and corporate governance issues in light of MFS’ fiduciary obligation to vote proxies in the best long-term economic interest of its clients.

 

  2.

MFS’ Policy on Specific Issues

Election of Directors at U.S. Issuers

MFS believes that good governance should be based on a board with at least a simple majority of directors who are “independent” of management, and whose key committees (e.g., compensation, nominating, and audit committees) consist entirely of “independent” directors. While MFS generally supports the board’s nominees in

 

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uncontested or non-contentious elections, we will not support a nominee to a board of a U.S. issuer (or issuer listed on a U.S. exchange) if, as a result of such nominee being elected to the board, the board would consist of a simple majority of members who are not “independent” or, alternatively, the compensation, nominating (including instances in which the full board serves as the compensation or nominating committee) or audit committees would include members who are not “independent.” Likewise, we will evaluate nominees for a board of a U.S. issuer with a lead independent director whose overall tenure on the board exceeds twenty (20) years on a case-by-case basis.

MFS will also not support a nominee to a board if we can determine that he or she attended less than 75% of the board and/or relevant committee meetings in the previous year without a valid reason stated in the proxy materials or other company communications. In addition, MFS may not support some or all nominees standing for re-election to a board if we can determine: (1) the board or its compensation committee has re-priced or exchanged underwater stock options since the last annual meeting of shareholders and without shareholder approval; (2) the board or relevant committee has not taken adequately responsive action to an issue that received majority support or opposition from shareholders; (3) the board has implemented a poison pill without shareholder approval since the last annual meeting and such poison pill is not on the subsequent shareholder meeting’s agenda, (including those related to net-operating loss carry-forwards); (4) the board or relevant committee has failed to adequately oversee risk by allowing the hedging and/or significant pledging of company shares by executives; or (5) there are governance concerns with a director or issuer.

MFS also believes that a well-balanced board with diverse perspectives is a foundation for sound corporate governance. MFS will generally vote against the chair of the nominating and governance committee or equivalent position at any U.S. company whose board is comprised of less than 15% female directors. MFS may consider, among other factors, whether the company is transitioning towards increased board gender diversity in determining MFS’ final voting decision. Because we believe that a board with diverse perspectives is a foundation for good governance, we may increase the minimum percentage of gender diverse directors on company boards and/or expand our policy to consider factors beyond gender to enhance diverse perspectives of the board, including race, ethnicity or geographical location.

MFS believes that the size of the board can have an effect on the board’s ability to function efficiently. While MFS evaluates board size on a case-by-case basis, we will typically vote against the chair of the nominating and governance committee in instances where the size of the board is greater than sixteen (16) members.

For a director who is not a CEO of a public company, MFS will vote against a nominee who serves on more than four (4) public company boards in total. For a director who is also a CEO of a public company, MFS will vote against a nominee who serves on more than two (2) public company boards in total. MFS may consider exceptions to this policy if: (i) the company has disclosed the director’s plans to step down from the number of public company boards exceeding four (4) or two (2), as applicable, within a reasonable

 

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time; or (ii) the director exceeds the permitted number of public company board seats solely due to either his/her board service on an affiliated company (e.g., a subsidiary), or service on more than one investment company within the same investment company complex (as defined by applicable law). With respect to a director who serves as a CEO of a public company, MFS will support his or her re-election to the board of the company for which he or she serves as CEO.

MFS may not support certain board nominees of U.S. issuers under certain circumstances where MFS deems compensation to be egregious due to pay-for-performance issues and/or poor pay practices. Please see the section below titled “MFS’ Policy on Specific Issues - Advisory Votes on Executive Compensation” for further details.

MFS evaluates a contested or contentious election of directors on a case-by-case basis considering the long-term financial performance of the company relative to its industry, management’s track record, the qualifications of all nominees, and an evaluation of what each side is offering shareholders.

Majority Voting and Director Elections

MFS votes for reasonably crafted proposals calling for directors to be elected with an affirmative majority of votes cast and/or the elimination of the plurality standard for electing directors (including binding resolutions requesting that the board amend the company’s bylaws), provided the proposal includes a carve-out for a plurality voting standard when there are more director nominees than board seats (e.g., contested elections) (“Majority Vote Proposals”).

Classified Boards

MFS generally supports proposals to declassify a board (i.e., a board in which only one-third of board members is elected each year) for all issuers other than for certain closed-end investment companies. MFS generally opposes proposals to classify a board for issuers other than for certain closed-end investment companies.

Proxy Access

MFS believes that the ability of qualifying shareholders to nominate a certain number of directors on the company’s proxy statement (“Proxy Access”) may have corporate governance benefits. However, such potential benefits must be balanced by its potential misuse by shareholders. Therefore, we support Proxy Access proposals at U.S. issuers that establish an ownership criteria of 3% of the company held continuously for a period of 3 years. In our view, such qualifying shareholders should have the ability to nominate at least 2 directors. Companies should be mindful of imposing any undue impediments within its bylaws that may render Proxy Access impractical, including re-submission thresholds for director nominees via Proxy Access.

 

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MFS analyzes all other proposals seeking Proxy Access on a case-by-case basis. In its analysis, MFS will consider the proposed ownership criteria for qualifying shareholders (such as ownership threshold and holding period) as well as the proponent’s rationale for seeking Proxy Access.

Stock Plans

MFS opposes stock option programs and restricted stock plans that provide unduly generous compensation for officers, directors or employees, or that could result in excessive dilution to other shareholders. As a general guideline, MFS votes against restricted stock, stock option, non-employee director, omnibus stock plans and any other stock plan if all such plans for a particular company involve potential dilution, in the aggregate, of more than 15%. However, MFS will also vote against stock plans that involve potential dilution, in aggregate, of more than 10% at U.S. issuers that are listed in the Standard and Poor’s 100 index as of December 31 of the previous year. In the cases where a stock plan amendment is seeking qualitative changes and not additional shares, MFS will vote its shares on a case-by-case basis.

MFS also opposes stock option programs that allow the board or the compensation committee to re-price underwater options or to automatically replenish shares without shareholder approval. MFS also votes against stock option programs for officers, employees or non-employee directors that do not require an investment by the optionee, that give “free rides” on the stock price, or that permit grants of stock options with an exercise price below fair market value on the date the options are granted. MFS will consider proposals to exchange existing options for newly issued options, restricted stock or cash on a case-by-case basis, taking into account certain factors, including, but not limited to, whether there is a reasonable value-for-value exchange and whether senior executives are excluded from participating in the exchange.

MFS supports the use of a broad-based employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value and do not result in excessive dilution.

Shareholder Proposals on Executive Compensation

MFS believes that competitive compensation packages are necessary to attract, motivate and retain executives. However, MFS also recognizes that certain executive compensation practices can be “excessive” and not in the best, long-term economic interest of a company’s shareholders. We believe that the election of an issuer’s board of directors (as outlined above), votes on stock plans (as outlined above) and advisory votes on pay (as outlined below) are typically the most effective mechanisms to express our view on a company’s compensation practices.

 

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MFS generally opposes shareholder proposals that seek to set rigid restrictions on executive compensation as MFS believes that compensation committees should retain some flexibility to determine the appropriate pay package for executives. Although we support linking executive stock option grants to a company’s performance, MFS also opposes shareholder proposals that mandate a link of performance-based pay to a specific metric. MFS generally supports reasonably crafted shareholder proposals that (i) require the issuer to adopt a policy to recover the portion of performance-based bonuses and awards paid to senior executives that were not earned based upon a significant negative restatement of earnings unless the company already has adopted a satisfactory policy on the matter, (ii) expressly prohibit the backdating of stock options, and (iii) prohibit the acceleration of vesting of equity awards upon a broad definition of a “change-in-control” (e.g., single or modified single-trigger).

Advisory Votes on Executive Compensation

MFS will analyze advisory votes on executive compensation on a case-by-case basis. MFS will vote against an issuer’s executive compensation practices if MFS determines that such practices are excessive or include incentive metrics or structures that are poorly aligned with the best, long-term economic interest of a company’s shareholders. MFS will vote in favor of executive compensation practices if MFS has not determined that these practices are excessive or that the practices include incentive metrics or structures that are poorly aligned with the best, long-term economic interest of a company’s shareholders. Examples of excessive executive compensation practices or poorly aligned incentives may include, but are not limited to, a pay-for-performance disconnect, a set of incentive metrics or a compensation plan structure that MFS believes may lead to a future pay-for-performance disconnect, employment contract terms such as guaranteed bonus provisions, unwarranted pension payouts, backdated stock options, overly generous hiring bonuses for chief executive officers, significant perquisites, or the potential reimbursement of excise taxes to an executive in regards to a severance package. In cases where MFS (i) votes against consecutive advisory pay votes, or (ii) determines that a particularly egregious excessive executive compensation practice has occurred, then MFS may also vote against certain or all board nominees. MFS may also vote against certain or all board nominees if an advisory pay vote for a U.S. issuer is not on the agenda, or the company has not implemented the advisory vote frequency supported by a plurality/majority of shareholders.

MFS generally supports proposals to include an advisory shareholder vote on an issuer’s executive compensation practices on an annual basis.

“Golden Parachutes”

From time to time, MFS may evaluate a separate, advisory vote on severance packages or “golden parachutes” to certain executives at the same time as a vote on a proposed merger or acquisition. MFS will support an advisory vote on a severance package on a case-by-case basis, and MFS may vote against the severance package regardless of whether MFS supports the proposed merger or acquisition.

 

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Shareholders of companies may also submit proxy proposals that would require shareholder approval of severance packages for executive officers that exceed certain predetermined thresholds. MFS votes in favor of such shareholder proposals when they would require shareholder approval of any severance package for an executive officer that exceeds a certain multiple of such officer’s annual compensation that is not determined in MFS’ judgment to be excessive.

Anti-Takeover Measures

In general, MFS votes against any measure that inhibits capital appreciation in a stock, including proposals that protect management from action by shareholders. These types of proposals take many forms, ranging from “poison pills” and “shark repellents” to super-majority requirements.

While MFS may consider the adoption of a prospective “poison pill” or the continuation of an existing “poison pill” on a case-by-case basis, MFS generally votes against such anti-takeover devices. MFS generally votes for proposals to rescind existing “poison pills” and proposals that would require shareholder approval to adopt prospective “poison pills.” MFS will also consider, on a case-by-case basis, proposals designed to prevent tenders which are disadvantageous to shareholders such as tenders at below market prices and tenders for substantially less than all shares of an issuer.

MFS will consider any poison pills designed to protect a company’s net-operating loss carryforwards on a case-by-case basis, weighing the accounting and tax benefits of such a pill against the risk of deterring future acquisition candidates.

Proxy Contests

From time to time, a shareholder may express alternative points of view in terms of a company’s strategy, capital allocation, or other issues. Such shareholder may also propose a slate of director nominees different than the slate of director nominees proposed by the company (a “Proxy Contest”). MFS will analyze Proxy Contests on a case-by-case basis, taking into consideration the track record and current recommended initiatives of both company management and the dissident shareholder(s). Like all of our proxy votes, MFS will support the slate of director nominees that we believe is in the best, long-term economic interest of our clients.

Reincorporation and Reorganization Proposals

When presented with a proposal to reincorporate a company under the laws of a different state, or to effect some other type of corporate reorganization, MFS considers the underlying purpose and ultimate effect of such a proposal in determining whether or not to support such a measure. MFS generally votes with management in regards to these types of proposals, however, if MFS believes the proposal is not in the best long-term economic interests of its clients, then MFS may vote against management (e.g., the intent or effect would be to create additional inappropriate impediments to possible acquisitions or takeovers).

 

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Issuance of Stock

There are many legitimate reasons for the issuance of stock. Nevertheless, as noted above under “Stock Plans,” when a stock option plan (either individually or when aggregated with other plans of the same company) would substantially dilute the existing equity (e.g., by approximately 10-15% as described above), MFS generally votes against the plan. In addition, MFS typically votes against proposals where management is asking for authorization to issue common or preferred stock with no reason stated (a “blank check”) because the unexplained authorization could work as a potential anti-takeover device. MFS may also vote against the authorization or issuance of common or preferred stock if MFS determines that the requested authorization is excessive or not warranted.

Repurchase Programs

MFS supports proposals to institute share repurchase plans in which all shareholders have the opportunity to participate on an equal basis. Such plans may include a company acquiring its own shares on the open market, or a company making a tender offer to its own shareholders.

Cumulative Voting

MFS opposes proposals that seek to introduce cumulative voting and for proposals that seek to eliminate cumulative voting. In either case, MFS will consider whether cumulative voting is likely to enhance the interests of MFS’ clients as minority shareholders.

Written Consent and Special Meetings

The right to call a special meeting or act by written consent can be a powerful tool for shareholders. As such, MFS supports proposals requesting the right for shareholders who hold at least 10% of the issuer’s outstanding stock to call a special meeting. MFS also supports proposals requesting the right for shareholders to act by written consent.

Independent Auditors

MFS believes that the appointment of auditors for U.S. issuers is best left to the board of directors of the company and therefore supports the ratification of the board’s selection of an auditor for the company. Some shareholder groups have submitted proposals to limit the non-audit activities of a company’s audit firm or prohibit any non-audit services by a company’s auditors to that company. MFS opposes proposals recommending the prohibition or limitation of the performance of non-audit services by an auditor, and proposals recommending the removal of a company’s auditor due to the performance of non-audit work for the company by its auditor. MFS believes that the board, or its audit committee, should have the discretion to hire the company’s auditor for specific pieces of non-audit work in the limited situations permitted under current law.

 

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Other Business

MFS generally votes against “other business” proposals as the content of any such matter is not known at the time of our vote.

Adjourn Shareholder Meeting

MFS generally supports proposals to adjourn a shareholder meeting if we support the other ballot items on the meeting’s agenda. MFS generally votes against proposals to adjourn a meeting if we do not support the other ballot items on the meeting’s agenda.

Environmental, Social and Governance (“ESG”) Issues

MFS believes that a company’s ESG practices may have an impact on the company’s long-term economic financial performance and will generally support proposals relating to ESG issues that MFS believes are in the best long-term economic interest of the company’s shareholders. For those ESG proposals for which a specific policy has not been adopted, MFS considers such ESG proposals on a case-by-case basis. As a result, it may vote similar proposals differently at various shareholder meetings based on the specific facts and circumstances of such proposal.

MFS generally supports proposals that seek to remove governance structures that insulate management from shareholders (i.e., anti-takeover measures) or that seek to enhance shareholder rights. Many of these governance-related issues, including compensation issues, are outlined within the context of the above guidelines. In addition, MFS typically supports proposals that require an issuer to reimburse successful dissident shareholders (who are not seeking control of the company) for reasonable expenses that such dissident incurred in soliciting an alternative slate of director candidates. MFS also generally supports reasonably crafted shareholder proposals requesting increased disclosure around the company’s use of collateral in derivatives trading.

MFS typically supports proposals for an independent board chairperson if there is not an appropriate and effective counter-balancing leadership structure in place (e.g., a strong, independent lead director with an appropriate level of powers and duties). Where there is a strong, independent lead director, we will evaluate such proposals on a case-by-case basis. For any governance-related proposal for which an explicit guideline is not provided above, MFS will consider such proposals on a case-by-case basis and will support such proposals if MFS believes that it is in the best long-term economic interest of the company’s shareholders.

MFS generally supports proposals that request disclosure on the impact of environmental issues on the company’s operations, sales, and capital investments. However, MFS may not support such proposals based on the facts and circumstances surrounding a specific proposal, including, but not limited to, whether (i) the proposal is unduly costly, restrictive, or burdensome, (ii) the company already provides publicly-available information that is sufficient to enable shareholders to evaluate the potential

 

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opportunities and risks that environmental matters pose to the company’s operations, sales and capital investments, or (iii) the proposal seeks a level of disclosure that exceeds that provided by the company’s industry peers. MFS will analyze all other environmental proposals on a case-by-case basis and will support such proposals if MFS believes such proposal is in the best long-term economic interest of the company’s shareholders.

MFS will analyze social proposals on a case-by-case basis. MFS will support such proposals if MFS believes that such proposal is in the best long-term economic interest of the company’s shareholders. Generally, MFS will support shareholder proposals that (i) seek to amend a company’s equal employment opportunity policy to prohibit discrimination based on sexual orientation and gender identity; and (ii) request additional disclosure regarding a company’s political contributions (including trade organizations and lobbying activity) (unless the company already provides publicly-available information that is sufficient to enable shareholders to evaluate the potential opportunities and risks that such contributions pose to the company’s operations, sales and capital investments).

The laws of various states or countries may regulate how the interests of certain clients subject to those laws (e.g., state pension plans) are voted with respect to social issues. Thus, it may be necessary to cast ballots differently for certain clients than MFS might normally do for other clients.

Global Issuers (ex-U.S.)

MFS generally supports the election of a director nominee standing for re-election in uncontested or non-contentious elections unless it can be determined that (1) he or she failed to attend at least 75% of the board and/or relevant committee meetings in the previous year without a valid reason given in the proxy materials; (2) since the last annual meeting of shareholders and without shareholder approval, the board or its compensation committee has re-priced underwater stock options; (3) since the last annual meeting, the board has either implemented a poison pill without shareholder approval or has not taken responsive action to a majority shareholder approved resolution recommending that the “poison pill” be rescinded; (4) since the last annual meeting, the board has not taken adequately responsive action to an issue that received majority support or opposition from shareholders; or (5) there are performance and/or governance concerns with a director or issuer. In such circumstances, we may vote against director nominee(s).

Because MFS believes that a well-balanced board with diverse perspectives is a foundation for sound corporate governance, MFS will generally vote against the chair of the nominating and governance committee or equivalent position at any Canadian, European or Australian company whose board is comprised of less than 15% female directors. MFS may consider, among other factors, whether the company is transitioning towards increased board gender diversity in determining MFS’ final voting decision. While MFS’ guideline currently pertains to Canadian, European and Australian companies (as well as U.S. companies), we generally believe greater female representation on boards is needed globally. As a result, we may expand our policy to other markets to reinforce this

 

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expectation. Because we believe that a board with diverse perspectives is a foundation for good governance, we may increase the minimum percentage of gender diverse directors on company boards and/or expand our policy to consider factors beyond gender to enhance diverse perspectives of the board including race, ethnicity or geographical location.

Also, certain markets have adopted best practice guidelines relating to corporate governance matters (e.g., the United Kingdom’s and Japan Corporate Governance Codes). Many of these guidelines operate on a “comply or explain” basis. As such, MFS will evaluate any explanations by companies relating to their compliance with a particular corporate governance guideline on a case-by-case basis and may vote against the board nominees or other relevant ballot item if such explanation is not satisfactory. While we incorporate market best practice guidelines and local corporate governance codes into our decision making for certain issuers, we may apply additional standards than those promulgated in a local market if we believe such approach will advance market best practices. Specifically, in the Japanese market we will generally vote against certain director nominees where the board is not comprised of at least one-third independent directors as determined by MFS in its sole discretion. In some circumstances, MFS may submit a vote to abstain from certain director nominees or the relevant ballot items if we have concerns with the nominee or ballot item, but do not believe these concerns rise to the level where a vote against is warranted.

MFS generally supports the election of auditors, but may determine to vote against the election of a statutory auditor in certain markets if MFS reasonably believes that the statutory auditor is not truly independent.

Some markets have also adopted mandatory requirements for all companies to hold shareholder votes on executive compensation. MFS will vote against such proposals if MFS determines that a company’s executive compensation practices are excessive, considering such factors as the specific market’s best practices that seek to maintain appropriate pay-for-performance alignment and to create long-term shareholder value. We may alternatively submit an abstention vote on such proposals in circumstances where our executive compensation concerns are not as severe.

Many other items on proxies involve repetitive, non-controversial matters that are mandated by local law. Accordingly, the items that are generally deemed routine and which do not require the exercise of judgment under these guidelines (and therefore voted with management) for issuers include, but are not limited to, the following: (i) receiving financial statements or other reports from the board; (ii) approval of declarations of dividends; (iii) appointment of shareholders to sign board meeting minutes; (iv) discharge of management and supervisory boards; and (v) approval of share repurchase programs (absent any anti-takeover or other concerns). MFS will evaluate all other items on proxies for companies in the context of the guidelines described above, but will generally vote against an item if there is not sufficient information disclosed in order to make an informed voting decision. For any ballot item where MFS wishes to express a more moderate level of concern than a vote of against, we will cast a vote to abstain.

 

- 11 -


In accordance with local law or business practices, some companies or custodians prevent the sale of shares that have been voted for a certain period beginning prior to the shareholder meeting and ending on the day following the meeting (“share blocking”). Depending on the country in which a company is domiciled, the blocking period may begin a stated number of days prior or subsequent to the meeting (e.g., one, three or five days) or on a date established by the company. While practices vary, in many countries the block period can be continued for a longer period if the shareholder meeting is adjourned and postponed to a later date. Similarly, practices vary widely as to the ability of a shareholder to have the “block” restriction lifted early (e.g., in some countries shares generally can be “unblocked” up to two days prior to the meeting whereas in other countries the removal of the block appears to be discretionary with the issuer’s transfer agent). Due to these restrictions, MFS must balance the benefits to its clients of voting proxies against the potentially serious portfolio management consequences of a reduced flexibility to sell the underlying shares at the most advantageous time. For companies in countries with share blocking periods or in markets where some custodians may block shares, the disadvantage of being unable to sell the stock regardless of changing conditions generally outweighs the advantages of voting at the shareholder meeting for routine items. Accordingly, MFS will not vote those proxies in the absence of an unusual, significant vote that outweighs the disadvantage of being unable to sell the stock.

From time to time, governments may impose economic sanctions which may prohibit us from transacting business with certain companies or individuals. These sanctions may also prohibit the voting of proxies at certain companies or on certain individuals. In such instances, MFS will not vote at certain companies or on certain individuals if it determines that doing so is in violation of the sanctions.

In limited circumstances, other market specific impediments to voting shares may limit our ability to cast votes, including, but not limited to, late delivery of proxy materials, untimely vote cut-off dates, power of attorney and share re-registration requirements, or any other unusual voting requirements. In these limited instances, MFS votes securities on a best efforts basis in the context of the guidelines described above.

Mergers, Acquisitions & Other Special Transactions

MFS considers proposals with respect to mergers, acquisitions, sale of company assets, share and debt issuances and other transactions that have the potential to affect ownership interests on a case-by-case basis.

 

B.

ADMINISTRATIVE PROCEDURES

 

  1.

MFS Proxy Voting Committee

The administration of these MFS Proxy Voting Policies and Procedures is overseen by the MFS Proxy Voting Committee, which includes senior personnel from the MFS Legal and Global Investment and Client Support Departments as well as members of the investment team. The Proxy Voting Committee does not include individuals whose primary duties relate to client relationship management, marketing, or sales. The MFS Proxy Voting Committee:

 

- 12 -


  a.

Reviews these MFS Proxy Voting Policies and Procedures at least annually and recommends any amendments considered to be necessary or advisable;

 

  b.

Determines whether any potential material conflict of interest exists with respect to instances in which MFS (i) seeks to override these MFS Proxy Voting Policies and Procedures; (ii) votes on ballot items not governed by these MFS Proxy Voting Policies and Procedures; (iii) evaluates an excessive executive compensation issue in relation to the election of directors; or (iv) requests a vote recommendation from an MFS portfolio manager or investment analyst (e.g., mergers and acquisitions);

 

  c.

Considers special proxy issues as they may arise from time to time; and

 

  d.

Determines engagement priorities and strategies with respect to MFS’ proxy voting activities

 

  2.

Potential Conflicts of Interest

The MFS Proxy Voting Committee is responsible for monitoring potential material conflicts of interest on the part of MFS or its subsidiaries that could arise in connection with the voting of proxies on behalf of MFS’ clients. Due to the client focus of our investment management business, we believe that the potential for actual material conflict of interest issues is small. Nonetheless, we have developed precautions to assure that all proxy votes are cast in the best long-term economic interest of shareholders.1 Other MFS internal policies require all MFS employees to avoid actual and potential conflicts of interests between personal activities and MFS’ client activities. If an employee (including investment professionals) identifies an actual or potential conflict of interest with respect to any voting decision (including the ownership of securities in their individual portfolio), then that employee must recuse himself/herself from participating in the voting process. Any significant attempt by an employee of MFS or its subsidiaries to unduly influence MFS’ voting on a particular proxy matter should also be reported to the MFS Proxy Voting Committee.

In cases where proxies are voted in accordance with these MFS Proxy Voting Policies and Procedures, no material conflict of interest will be deemed to exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting Policies and Procedures, (ii) matters presented for vote are not governed by these MFS Proxy Voting Policies and Procedures, (iii) MFS evaluates a potentially excessive executive compensation issue in relation to the election of directors or advisory pay or severance package vote, or (iv) a vote recommendation is requested from an MFS portfolio manager or investment analyst (e.g., mergers and acquisitions); (collectively, “Non-Standard Votes”); the MFS Proxy Voting Committee will follow these procedures:

 

  a.

Compare the name of the issuer of such proxy against a list of significant current (i) distributors of MFS Fund shares, and (ii) MFS institutional clients (the “MFS Significant Distributor and Client List”);

 

1 

For clarification purposes, note that MFS votes in what we believe to be the best, long-term economic interest of our clients entitled to vote at the shareholder meeting, regardless of whether other MFS clients hold “short” positions in the same issuer.

 

- 13 -


  b.

If the name of the issuer does not appear on the MFS Significant Distributor and Client List, then no material conflict of interest will be deemed to exist, and the proxy will be voted as otherwise determined by the MFS Proxy Voting Committee;

 

  c.

If the name of the issuer appears on the MFS Significant Distributor and Client List, then the MFS Proxy Voting Committee will be apprised of that fact and each member of the MFS Proxy Voting Committee (with the participation of MFS’ Conflicts Officer) will carefully evaluate the proposed vote in order to ensure that the proxy ultimately is voted in what MFS believes to be the best long-term economic interests of MFS’ clients, and not in MFS’ corporate interests; and

 

  d.

For all potential material conflicts of interest identified under clause (c) above, the MFS Proxy Voting Committee will document: the name of the issuer, the issuer’s relationship to MFS, the analysis of the matters submitted for proxy vote, the votes as to be cast and the reasons why the MFS Proxy Voting Committee determined that the votes were cast in the best long-term economic interests of MFS’ clients, and not in MFS’ corporate interests. A copy of the foregoing documentation will be provided to MFS’ Conflicts Officer.

The members of the MFS Proxy Voting Committee are responsible for creating and maintaining the MFS Significant Distributor and Client List, in consultation with MFS’ distribution and institutional business units. The MFS Significant Distributor and Client List will be reviewed and updated periodically, as appropriate.

For instances where MFS is evaluating a director nominee who also serves as a director/trustee of the MFS Funds, then the MFS Proxy Voting Committee will adhere to the procedures described in section (d) above regardless of whether the portfolio company appears on our Significant Distributor and Client List.

If an MFS client has the right to vote on a matter submitted to shareholders by Sun Life Financial, Inc. or any of its affiliates (collectively “Sun Life”), MFS will cast a vote on behalf of such MFS client as such client instructs or in the event that a client instruction is unavailable pursuant to the recommendations of Institutional Shareholder Services, Inc.’s (“ISS”) benchmark policy, or as required by law. Likewise, if an MFS client has the right to vote on a matter submitted to shareholders by a public company for which an MFS Fund director/trustee serves as an executive officer, MFS will cast a vote on behalf of such MFS client as such client instructs or in the event that client instruction is unavailable pursuant to the recommendations of ISS or as required by law.

 

- 14 -


Except as described in the MFS Fund’s Prospectus, from time to time, certain MFS Funds (the “top tier fund”) may own shares of other MFS Funds (the “underlying fund”). If an underlying fund submits a matter to a shareholder vote, the top tier fund will generally vote its shares in the same proportion as the other shareholders of the underlying fund. If there are no other shareholders in the underlying fund, the top tier fund will vote in what MFS believes to be in the top tier fund’s best long-term economic interest. If an MFS client has the right to vote on a matter submitted to shareholders by a pooled investment vehicle advised by MFS (excluding those vehicles for which MFS’ role is primarily portfolio management and is overseen by another investment adviser), MFS will cast a vote on behalf of such MFS client in the same proportion as the other shareholders of the pooled investment vehicle.

 

  3.

Gathering Proxies

Most proxies received by MFS and its clients originate at Broadridge Financial Solutions, Inc. (“Broadridge”). Broadridge and other service providers, on behalf of custodians, send proxy related material to the record holders of the shares beneficially owned by MFS’ clients, usually to the client’s proxy voting administrator or, less commonly, to the client itself. This material will include proxy ballots reflecting the shareholdings of Funds and of clients on the record dates for such shareholder meetings, as well as proxy materials with the issuer’s explanation of the items to be voted upon.

MFS, on behalf of itself and certain of its clients (including the MFS Funds) has entered into an agreement with an independent proxy administration firm pursuant to which the proxy administration firm performs various proxy vote related administrative services such as vote processing and recordkeeping functions. Except as noted below, the proxy administration firm for MFS and its clients, including the MFS Funds, is ISS. The proxy administration firm for MFS Development Funds, LLC is Glass, Lewis & Co., Inc. (“Glass Lewis”; Glass Lewis and ISS are each hereinafter referred to as the “Proxy Administrator”).

The Proxy Administrator receives proxy statements and proxy ballots directly or indirectly from various custodians, logs these materials into its database and matches upcoming meetings with MFS Fund and client portfolio holdings, which are input into the Proxy Administrator’s system by an MFS holdings data-feed. Through the use of the Proxy Administrator system, ballots and proxy material summaries for all upcoming shareholders’ meetings are available on-line to certain MFS employees and members of the MFS Proxy Voting Committee.

It is the responsibility of the Proxy Administrator and MFS to monitor the receipt of ballots. When proxy ballots and materials for clients are received by the Proxy Administrator, they are input into the Proxy Administrator’s on-line system. The Proxy Administrator then reconciles a list of all MFS accounts that hold shares of a company’s

 

- 15 -


stock and the number of shares held on the record date by these accounts with the Proxy Administrator’s list of any upcoming shareholder’s meeting of that company. If a proxy ballot has not been received, the Proxy Administrator contacts the custodian requesting the reason as to why a ballot has not been received.

 

  4.

Analyzing Proxies

Proxies are voted in accordance with these MFS Proxy Voting Policies and Procedures. The Proxy Administrator, at the prior direction of MFS, automatically votes all proxy matters that do not require the particular exercise of discretion or judgment with respect to these MFS Proxy Voting Policies and Procedures as determined by MFS. In these circumstances, if the Proxy Administrator, based on MFS’ prior direction, expects to vote against management with respect to a proxy matter and MFS becomes aware that the issuer has filed or will file additional soliciting materials sufficiently in advance of the deadline for casting a vote at the meeting, MFS will consider such information when casting its vote. With respect to proxy matters that require the particular exercise of discretion or judgment, the MFS Proxy Voting Committee or its representatives considers and votes on those proxy matters. In analyzing all proxy matters, MFS uses a variety of materials and information, including, but not limited to, the issuer’s proxy statement and other proxy solicitation materials (including supplemental materials), our own internal research and research and recommendations provided by other third parties (including research of the Proxy Administrator). As described herein, MFS may also determine that it is beneficial in analyzing a proxy voting matter for members of the Proxy Voting Committee or its representatives to engage with the company on such matter.    . MFS also uses its own internal research, the research of Proxy Administrators and/or other third party research tools and vendors to identify (i) circumstances in which a board may have approved an executive compensation plan that is excessive or poorly aligned with the portfolio company’s business or its shareholders, (ii) environmental and social proposals that warrant further consideration or (iii) circumstances in which a non-U.S. company is not in compliance with local governance or compensation best practices. In those situations where the only MFS Fund that is eligible to vote at a shareholder meeting has Glass Lewis as its Proxy Administrator, then we will utilize our own internal research and research from Glass Lewis to identify such issues. MFS analyzes such issues independently and does not necessarily vote with the ISS or Glass Lewis recommendations on these issues. Representatives of the MFS Proxy Voting Committee review, as appropriate, votes cast to ensure conformity with these MFS Proxy Voting Policies and Procedures.

For certain types of votes (e.g., mergers and acquisitions, proxy contests and capitalization matters), the MFS Proxy Voting Committee or its representatives will seek a recommendation from the MFS investment analyst and/or portfolio managers.2 For certain other votes that require a case-by-case analysis per the MFS Proxy Policies (e.g., potentially excessive executive compensation issues, or certain shareholder proposals), the MFS Proxy Voting Committee or its representatives will likewise consult with MFS investment analysts and/or portfolio managers.2 However, the MFS Proxy Voting Committee will ultimately responsible for the manner in which all proxies are voted.

 

2 

From time to time, due to travel schedules and other commitments, an appropriate portfolio manager or research analyst may not be available to provide a vote recommendation. If such a recommendation cannot be obtained within a reasonable time prior to the cut-off date of the shareholder meeting, the MFS Proxy Voting Committee may determine to abstain from voting.

 

- 16 -


As noted above, MFS reserves the right to override the guidelines when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients. Any such override of the guidelines shall be analyzed, documented and reported in accordance with the procedures set forth in these policies.

 

  5.

Voting Proxies

In accordance with its contract with MFS, the Proxy Administrator also generates a variety of reports for the MFS Proxy Voting Committee, and makes available on-line various other types of information so that the MFS Proxy Voting Committee or its representatives may review and monitor the votes cast by the Proxy Administrator on behalf of MFS’ clients.

For those markets that utilize a “record date” to determine which shareholders are eligible to vote, MFS generally will vote all eligible shares pursuant to these guidelines regardless of whether all (or a portion of) the shares held by our clients have been sold prior to the meeting date.

 

  6.

Securities Lending

From time to time, the MFS Funds or other pooled investment vehicles sponsored by MFS may participate in a securities lending program. In the event MFS or its agent receives timely notice of a shareholder meeting for a U.S. security, MFS and its agent will attempt to recall any securities on loan before the meeting’s record date so that MFS will be entitled to vote these shares. However, there may be instances in which MFS is unable to timely recall securities on loan for a U.S. security, in which cases MFS will not be able to vote these shares. MFS will report to the appropriate board of the MFS Funds those instances in which MFS is not able to timely recall the loaned securities. MFS generally does not recall non-U.S. securities on loan because there may be insufficient advance notice of proxy materials, record dates, or vote cut-off dates to allow MFS to timely recall the shares in certain markets on an automated basis. As a result, non-U.S. securities that are on loan will not generally be voted. If MFS receives timely notice of what MFS determines to be an unusual, significant vote for a non-U.S. security whereas MFS shares are on loan, and determines that voting is in the best long-term economic interest of shareholders, then MFS will attempt to timely recall the loaned shares.

 

- 17 -


  7.

Engagement

The MFS Proxy Voting Policies and Procedures are available on www.mfs.com and may be accessed by both MFS’ clients and the companies in which MFS’ clients invest. From time to time, MFS may determine that it is appropriate and beneficial to engage in a dialogue or written communication with a company or other shareholders regarding certain matters on the company’s proxy statement that are of concern to shareholders, including environmental, social and governance matters. A company or shareholder may also seek to engage with members of the MFS Proxy Voting Committee or proxy voting team in advance of the company’s formal proxy solicitation to review issues more generally or gauge support for certain contemplated proposals. The MFS Proxy Voting Committee establish proxy voting engagement goals and priorities for the year. For further information on requesting engagement with MFS on proxy voting issues or information about MFS’ engagement priorities, please visit www.mfs.com and refer to our most recent proxy season preview and engagement priorities report.

 

C.

RECORDS RETENTION

MFS will retain copies of these MFS Proxy Voting Policies and Procedures in effect from time to time and will retain all proxy voting reports submitted to the Board of Trustees of the MFS Funds for the period required by applicable law. Proxy solicitation materials, including electronic versions of the proxy ballots completed by representatives of the MFS Proxy Voting Committee, together with their respective notes and comments, are maintained in an electronic format by the Proxy Administrator and are accessible on-line by the MFS Proxy Voting Committee. All proxy voting materials and supporting documentation, including records generated by the Proxy Administrator’s system as to proxies processed, including the dates when proxy ballots were received and submitted, and the votes on each company’s proxy issues, are retained as required by applicable law.

 

D.

REPORTS

U.S. Registered MFS Funds

MFS publicly discloses the proxy voting records of the U.S. registered MFS Funds on a quarterly basis. MFS will also report the results of its voting to the Board of Trustees of the U.S. registered MFS Funds. These reports will include: (i) a summary of how votes were cast (including advisory votes on pay and “golden parachutes”); (ii) a summary of votes against management’s recommendation; (iii) a review of situations where MFS did not vote in accordance with the guidelines and the rationale therefore; (iv) a review of the procedures used by MFS to identify material conflicts of interest and any matters identified as a material conflict of interest; (v) a review of these policies and the guidelines; (vi) a review of our proxy engagement activity; (vii) a report and impact assessment of instances in which the recall of loaned securities of a U.S. issuer was unsuccessful; and (viii) as necessary or appropriate, any proposed modifications thereto to reflect new developments in corporate governance and other issues. Based on these reviews, the Trustees of the U.S. registered MFS Funds will consider possible modifications to these policies to the extent necessary or advisable.

 

- 18 -


Other MFS Clients

MFS may publicly disclose the proxy voting records of certain other clients (including certain MFS Funds) or the votes it casts with respect to certain matters as required by law. A report can also be printed by MFS for each client who has requested that MFS furnish a record of votes cast. The report specifies the proxy issues which have been voted for the client during the year and the position taken with respect to each issue and, upon request, may identify situations where MFS did not vote in accordance with the MFS Proxy Voting Policies and Procedures.

Firm-wide Voting Records

MFS also publicly discloses its firm-wide proxy voting records.

Except as described above, MFS generally will not divulge actual voting practices to any party other than the client or its representatives because we consider that information to be confidential and proprietary to the client. However, as noted above, MFS may determine that it is appropriate and beneficial to engage in a dialogue with a company regarding certain matters. During such dialogue with the company, MFS may disclose the vote it intends to cast in order to potentially effect positive change at a company in regards to environmental, social or governance issues.

 

- 19 -

EX-99.(19)(A)(1) 7 d295010dex9919a1.htm NOTICE TO SHAREHOLDERS - SOURCE OF DISTRIBUTION NOTICE TO SHAREHOLDERS - SOURCE OF DISTRIBUTION

EX-99.19a-1


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    June-2021   
Distribution amount per share    $0.01933   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

    

Current
distribution

    

% Breakdown of
current distribution

    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01179        61   $ 0.08457        62

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00754        39     0.05184        38
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01933        100   $ 0.13641        100

 

Average annual total return (in relation to NAV) for the five years ended 5-31-2021

     7.85
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 5-31-2021

     9.55
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 5-31-2021

     3.03
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 5-31-2021

     5.61
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-0621


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    July-2021   
Distribution amount per share    $0.01934   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

     Current
distribution
     % Breakdown of
current distribution
    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01141        59   $ 0.09501        61

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00793        41     0.06074        39
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01934        100   $ 0.15575        100

 

Average annual total return (in relation to NAV) for the five years ended 6-30-2021

     7.89
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 6-30-2021

     9.47
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 6-30-2021

     4.51
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 6-30-2021

     6.36
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-0721


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    August-2021   
Distribution amount per share    $0.01937   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

     Current
distribution
     % Breakdown of
current distribution
    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01104        57   $ 0.10682        61

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00833        43     0.06830        39
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01937        100   $ 0.17512        100

 

Average annual total return (in relation to NAV) for the five years ended 7-31-2021

     7.29
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 7-31-2021

     9.53
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 7-31-2021

     4.72
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 7-31-2021

     7.18
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-0821


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    September-2021   
Distribution amount per share    $0.01920   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

     Current
distribution
     % Breakdown of
current distribution
    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01094        57   $ 0.11659        60

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00826        43     0.07773        40
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01920        100   $ 0.19432        100

 

Average annual total return (in relation to NAV) for the five years ended 8-31-2021

     6.87
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 8-31-2021

     9.44
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 8-31-2021

     5.42
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 8-31-2021

     7.96
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-0921


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    October-2021   
Distribution amount per share    $0.01926   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

     Current
distribution
     % Breakdown of
current distribution
    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01156        60   $ 0.12815        60

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00770        40     0.08543        40
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01926        100   $ 0.21358        100

 

Average annual total return (in relation to NAV) for the five years ended 9-30-2021

     6.64
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 9-30-2021

     9.59
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 9-30-2021

     4.82
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 9-30-2021

     8.86
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-1021


LOGO

MFS® Intermediate High Income Fund

P.O. Box 505005

Louisville, KY 40233-5005

Notice to shareholders — Source of distribution

 

Distribution period    November-2021   
Distribution amount per share    $0.01892   

The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the following sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital or other capital source. The fund’s fiscal year begins each December 1st. All amounts are expressed per common share.

 

     Current
distribution
     % Breakdown of
current distribution
    Total cumulative
distributions for the
fiscal year to date
     % Breakdown of the total
cumulative distributions for
the fiscal year to date
 

Net Investment Income

   $ 0.01135        60   $ 0.13950        60

Net Realized ST Cap Gains

     0.00000        0     0.00000        0

Net Realized LT Cap Gains

     0.00000        0     0.00000        0

Return of Capital or Other Capital Source

     0.00757        40     0.09300        40
  

 

 

    

 

 

   

 

 

    

 

 

 

Total (per common share)

   $ 0.01892        100   $ 0.23250        100

 

Average annual total return (in relation to NAV) for the five years ended 10-31-2021

     6.40
  

 

 

 

Annualized current distribution rate expressed as a percentage of month end NAV as of 10-31-2021

     9.54
  

 

 

 

Cumulative total return (in relation to NAV) for the fiscal year through 10-31-2021

     4.19
  

 

 

 

Cumulative fiscal year distributions as a percentage of NAV as of 10-31-2021

     9.77
  

 

 

 

You should not draw any conclusions about the fund’s investment performance from the amount of this distribution or from the terms of the fund’s managed distribution plan.

The fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital distribution does not necessarily reflect the fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax-reporting purposes. The actual amounts and sources of the amounts for tax-reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. If you have any questions regarding this information, please call our fund service department at 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time.

CIHSN-1121

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