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 811-03327
MFS SERIES TRUST XIII
(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: February 28*
Date of reporting period: February 28, 2022
| * | This Form N-CSR pertains to the following series of the Registrant: MFS Diversified Income Fund, MFS Government Securities Fund and MFS New Discovery Value Fund. The remaining series of the Registrant has a fiscal year end other than February 28. |
| ITEM 1. | REPORTS TO STOCKHOLDERS. |
1(a):
Annual Report
February 28, 2022
MFS® Diversified
Income Fund
MFS® Diversified
Income Fund
| 1 |
| 2 |
| 5 |
| 7 |
| 11 |
| 13 |
| 47 |
| 49 |
| 51 |
| 52 |
| 60 |
| 79 |
| 81 |
| 85 |
| 85 |
| 85 |
| 85 |
| 85 |
| 87 |
The report is prepared for the general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
LETTER FROM THE CHAIR AND CEO
Dear Shareholders:
As a result of Russia’s invasion of Ukraine, the danger of wider geopolitical conflict has risen to a level not seen in decades, and this comes as sanctions aimed at countering Russia’s actions are exacerbating already mounting inflation. Consequently, at a time when global growth faces multiple headwinds, central banks have been presented with the challenge of reining in rising prices without tipping economies into recession. The US Federal Reserve recently raised rates for the first time since 2018 and indicated that it is likely to tighten policy much more over the coming year. Meanwhile, the unsettled geopolitical backdrop and prospect of tighter financial conditions has led to increased volatility.
There are, however, encouraging signs for the markets. The Omicron wave of the coronavirus is receding outside Asia, unemployment is low, and there are signs that some global supply chain bottlenecks are beginning to ease, though events in Ukraine could hamper these advances. Additionally, easier Chinese monetary policy and the record pace of corporate stock buybacks are supportive elements, albeit amid an otherwise turbulent investment environment.
It is important to have a deep understanding of company fundamentals during times of market transition, 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 try 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
Chair and Chief Executive Officer
MFS Investment Management
April 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.
Portfolio structure (i)
Top ten holdings (i)
| Prologis, Inc., REIT | 1.9% |
| Equinix, Inc., REIT | 1.2% |
| Extra Space Storage, Inc., REIT | 1.0% |
| Roche Holding AG | 1.0% |
| U.S. Treasury Note 2 yr Future - JUN 2022 | 0.9% |
| Merck & Co., Inc. | 0.9% |
| Johnson & Johnson | 0.9% |
| Simon Property Group, Inc., REIT | 0.9% |
| AvalonBay Communities, Inc., REIT | 0.8% |
| U.S. Treasury Ultra Bond Future - JUN 2022 | (1.5)% |
GICS equity sectors (g)(i)
| Real Estate | 16.9% |
| Health Care | 4.9% |
| Consumer Staples | 4.3% |
| Financials | 3.7% |
| Information Technology | 2.9% |
| Materials | 1.6% |
| Communication Services | 1.4% |
| Industrials | 1.4% |
| Utilities | 1.2% |
| Consumer Discretionary | 0.8% |
| Energy | 0.7% |
| ETFs | 0.2% |
| Convertible Debt | 0.2% |
Fixed income sectors (i)
| High Yield Corporates | 22.8% |
| Emerging Markets Bonds | 17.3% |
| Investment Grade Corporates | 9.4% |
| Mortgage-Backed Securities | 3.6% |
| U.S. Treasury Securities | 3.4% |
| Commercial Mortgage-Backed Securities | 0.3% |
| Collateralized Debt Obligations | 0.3% |
| Municipal Bonds | 0.2% |
| Non-U.S. Government Bonds | 0.2% |
| U.S. Government Agencies (o) | 0.0% |
| Asset-Backed Securities (o) | 0.0% |
Portfolio Composition - continued
Composition including fixed income credit quality (a)(i)
| AAA | 0.6% |
| AA | 1.3% |
| A | 3.8% |
| BBB | 9.9% |
| BB | 18.0% |
| B | 13.2% |
| CCC | 3.5% |
| C (o) | 0.0% |
| U.S. Government | 3.2% |
| Federal Agencies | 3.6% |
| Not Rated | 0.4% |
| Non-Fixed Income | 40.2% |
| Cash & Cash Equivalents | 2.5% |
| Other | (0.2)% |
Issuer country weightings (i)(x)
| United States | 64.5% |
| United Kingdom | 2.9% |
| Canada | 2.5% |
| Switzerland | 2.2% |
| China | 1.7% |
| Japan | 1.7% |
| Mexico | 1.5% |
| Brasil | 1.3% |
| India | 1.0% |
| Other Countries | 20.7% |
| (a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. |
Not Rated includes fixed income securities and fixed income derivatives that have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and/or commodity-linked derivatives. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.
| (g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry classification methodology for equity securities and non-equity securities that are unclassified by GICS. |
| (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. |
Portfolio Composition - continued
| (x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents and Other. |
Where the fund holds convertible bonds, they are treated as part of the equity portion of the portfolio.
The fund invests a portion of its assets in the MFS High Yield Pooled Portfolio. Percentages include the indirect exposure to the underlying holdings, including investments in money market funds and Other, of the MFS High Yield Pooled Portfolio and not the direct exposure from investing in the MFS High Yield Pooled Portfolio itself.
Cash & Cash Equivalents includes any direct exposure to cash, direct and indirect exposure to investments in money market funds, cash equivalents, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s direct cash position and other assets and liabilities.
Other includes the direct and indirect equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of February 28, 2022.
The portfolio is actively managed and current holdings may be different.
Management Review
Summary of Results
The MFS Diversified Income Fund (fund) includes investments in lower quality debt instruments, U.S. government securities, emerging market debt instruments, dividend-paying equity securities, and real estate-related instruments.
For the twelve months ended February 28, 2022, Class A shares of the fund provided a total return of 3.22%, at net asset value. This compares with a return of 16.39% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index. The fund’s other benchmark, the MFS Diversified Income Fund Blended Index - Current (Blended Index) generated a return of 4.76% over the reporting period. The Blended Index reflects the blended returns of various equity and fixed income market indices, with percentage allocations to each index designed to resemble the allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary. Effective June 15, 2021, the Blended Index replaced the MFS Diversified Income Fund Blended Index – Prior to reflect the addition of an investment grade bond component. The MFS Diversified Income Fund Blended Index – Prior generated a return of 5.25% over the reporting period.
Market Environment
At the end of the period, just as the Omicron wave of the pandemic appeared to be receding in much of the world, markets experienced a geopolitical shock as Russia launched a full-scale invasion of neighboring Ukraine. Given Europe's heavy reliance on imported oil and gas from Russia, European markets were among the hardest hit. Energy prices spiked in the wake of the invasion, adding to already multi-decade high levels of inflation, and non-energy commodities rose sharply as well. Both the equity and fixed income markets experienced significant upticks in volatility.
The ripple effects from the Russian invasion further complicated the mission central banks must undertake to rein in surging inflation. Energy shocks have historically resulted in global growth slowdowns, if not pullbacks, so policymakers will find themselves in the difficult position of trying to restrain inflation without tipping economies into recession. As a result of potential growth challenges, expectations for aggressive monetary policy tightening from developed market central banks have moderated. While the Fed is expected to raise interest rates multiple times in 2022, the rate path is expected to be less aggressive than prior to the invasion. Anticipation of tighter policy from the European Central Bank has moderated considerably with no move expected until late this year.
Against an environment of rising labor and raw materials prices, higher interest rates and waning fiscal and monetary stimulus, investor anxiety increased over the potential that corporate profit margins may be past peak for this cycle. That said, tentative signs that some supply chain bottlenecks may be easing, low levels of unemployment across developed markets and loosening of coronavirus restrictions are supportive factors for the macroeconomic backdrop.
Management Review - continued
Factors Affecting Performance
During the reporting period, a combination of the fund’s overweight allocation and bond selection in the emerging markets debt segment were primary detractors from performance relative to the Blended Index. The fund's underweight allocation to real estate investment trusts (REITS) and its overweight position in high yield corporate debt further held back relative results.
Conversely, security selection within both the global equity and REITs segments of the fund contributed to relative performance. An underweight position in U.S. government debt also supported the fund’s relative returns.
Respectfully,
Portfolio Manager(s)
Robert Almeida, Neeraj Arora, David Cole, Rick Gable, Alexander Mackey, Henry Peabody, Matt Ryan, Jonathan Sage, Geoffrey Schechter, and Michael Skatrud
Note to Shareholders: Effective June 15, 2021, the following changes occurred: (i) the fund changed its investment policies and strategies to allocate a portion of its assets to investment grade quality debt instruments and (ii) MFS Diversified Income Blended Index - Current replaced the MFS Diversified Income Blended Index - Prior as the fund's other benchmark. Please see the fund’s prospectus for details.
The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
Performance Summary THROUGH 2/28/22
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
Performance Summary - continued
Total Returns through 2/28/22
Average annual without sales charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) |
| A | 5/26/06 | 3.22% | 4.78% | 5.80% | N/A |
| C | 5/26/06 | 2.44% | 4.00% | 5.03% | N/A |
| I | 5/26/06 | 3.47% | 5.04% | 6.07% | N/A |
| R1 | 7/01/08 | 2.44% | 4.02% | 5.02% | N/A |
| R2 | 7/01/08 | 2.96% | 4.52% | 5.55% | N/A |
| R3 | 7/01/08 | 3.21% | 4.79% | 5.81% | N/A |
| R4 | 7/01/08 | 3.47% | 5.04% | 6.07% | N/A |
| R6 | 7/02/12 | 3.57% | 5.14% | N/A | 6.14% |
Comparative benchmark(s)
| | | | | |
| Standard & Poor’s 500 Stock Index (f) | 16.39% | 15.17% | 14.59% | N/A |
| MFS Diversified Income Fund Blended Index - Current (f)(w) | 4.76% | 5.08% | 5.72% | N/A |
| MFS Diversified Income Fund Blended Index - Prior (f)(w) | 5.25% | 5.18% | 5.77% | N/A |
| Bloomberg U.S. Corporate High-Yield 2% Issuer Capped Index (f) | 0.64% | 4.87% | 5.85% | N/A |
| Bloomberg U.S. Credit Bond Index (f) | (3.25)% | 3.67% | 3.62% | N/A |
| Bloomberg U.S. Government/Mortgage Index (f) | (2.43)% | 2.22% | 1.95% | N/A |
| JPMorgan Emerging Markets Bond Index Global (f) | (6.10)% | 1.97% | 3.57% | N/A |
| MSCI All Country World High Dividend Yield Index (net div) (f) | 10.84% | 8.24% | 7.47% | N/A |
| MSCI US REIT Index (f) | 22.60% | 6.49% | 8.29% | N/A |
Average annual with sales charge
| | | | | |
A
With Initial Sales Charge (4.25%) | (1.17)% | 3.87% | 5.34% | N/A |
C
With CDSC (1% for 12 months) (v) | 1.46% | 4.00% | 5.03% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (t) | For the period from the class inception date through the stated period end (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
| (v) | Assuming redemption at the end of the applicable period. |
Performance Summary - continued
| (w) | The MFS Diversified Income Fund Blended Index (a custom index) was comprised of the following at the beginning and at the end of the reporting period (change effective as of June 15, 2021): |
| | 2/28/22 | 2/28/21 |
| Bloomberg U.S. Corporate High-Yield 2% Issuer Capped Index | 25% | 25% |
| Bloomberg U.S. Credit Bond Index | 15% | N/A |
| Bloomberg U.S. Government/Mortgage Index | 10% | 20% |
| JPMorgan Emerging Markets Bond Index Global | 15% | 15% |
| MSCI All Country World High Dividend Yield Index (net div) | 20% | 20% |
| MSCI US REIT Index (net div) | 15% | 20% |
Benchmark Definition(s)
Bloomberg U.S. Corporate High-Yield 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%.
Bloomberg U.S. Credit Bond Index(a) – a market capitalization-weighted index that measures the performance of publicly issued, SEC-registered, U.S. corporate and specified foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements.
Bloomberg U.S. Government/Mortgage Index(a) – measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
JPMorgan Emerging Markets Bond Index Global – measures the performance of U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.
MSCI All Country World High Dividend Yield Index(e) (net div) – is designed to reflect the performance of developed and emerging markets equities with higher-than-average dividend income and quality characteristics.
MSCI US REIT Index(e) (net div) – a market capitalization-weighted index that is designed to measure equity market performance for real estate investment trusts (REITs) that generate a majority of their revenue and income from real estate rental and leasing operations.
Standard & Poor's 500 Stock Index(g) – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
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. |
| (e) | Morgan Stanley Capital International (“MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. |
| (g) | “Standard & Poor's®” and “S&P®” are registered trademarks of Standard & Poor's Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS's product(s) is not sponsored, endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s). |
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund's share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
Expense Table
Fund expenses borne by the shareholders during the period,
September 1, 2021 through February 28, 2022
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the MFS High Yield Pooled Portfolio, an underlying MFS Pooled Portfolio in which the fund invests. MFS Pooled Portfolios are mutual funds advised by MFS that do not pay management fees to MFS but do incur investment and operating costs. If these transactional and indirect costs were included, your costs would have been higher.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2021 through February 28, 2022.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Table - continued
Share
Class | | Annualized
Expense
Ratio | Beginning
Account Value
9/01/21 | Ending
Account Value
2/28/22 | Expenses
Paid During
Period (p)
9/01/21-2/28/22 |
| A | Actual | 0.99% | $1,000.00 | $958.88 | $4.81 |
| Hypothetical (h) | 0.99% | $1,000.00 | $1,019.89 | $4.96 |
| C | Actual | 1.74% | $1,000.00 | $955.93 | $8.44 |
| Hypothetical (h) | 1.74% | $1,000.00 | $1,016.17 | $8.70 |
| I | Actual | 0.74% | $1,000.00 | $960.10 | $3.60 |
| Hypothetical (h) | 0.74% | $1,000.00 | $1,021.12 | $3.71 |
| R1 | Actual | 1.74% | $1,000.00 | $955.21 | $8.44 |
| Hypothetical (h) | 1.74% | $1,000.00 | $1,016.17 | $8.70 |
| R2 | Actual | 1.24% | $1,000.00 | $957.67 | $6.02 |
| Hypothetical (h) | 1.24% | $1,000.00 | $1,018.65 | $6.21 |
| R3 | Actual | 0.99% | $1,000.00 | $958.93 | $4.81 |
| Hypothetical (h) | 0.99% | $1,000.00 | $1,019.89 | $4.96 |
| R4 | Actual | 0.74% | $1,000.00 | $960.14 | $3.60 |
| Hypothetical (h) | 0.74% | $1,000.00 | $1,021.12 | $3.71 |
| R6 | Actual | 0.63% | $1,000.00 | $960.58 | $3.06 |
| Hypothetical (h) | 0.63% | $1,000.00 | $1,021.67 | $3.16 |
| (h) | 5% class return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
Portfolio of Investments
2/28/22
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – 39.5% |
| Aerospace & Defense – 0.2% | |
| General Dynamics Corp. | | 28,794 | $ 6,750,753 |
| Alcoholic Beverages – 0.1% | |
| Kirin Holdings Co. Ltd. | | 183,200 | $ 3,044,106 |
| Apparel Manufacturers – 0.1% | |
| Compagnie Financiere Richemont S.A. | | 17,609 | $ 2,402,013 |
| Automotive – 0.4% | |
| Ford Otomotiv Sanayi S.A. | | 118,587 | $ 2,310,006 |
| Magna International, Inc. (l) | | 58,726 | 4,363,098 |
| Toyota Motor Corp. | | 311,300 | 5,662,698 |
| | | | | $12,335,802 |
| Biotechnology – 0.1% | |
| Biogen, Inc. (a) | | 11,668 | $ 2,462,065 |
| Gilead Sciences, Inc. | | 27,210 | 1,643,484 |
| | | | | $4,105,549 |
| Business Services – 0.1% | |
| Amdocs Ltd. | | 65,559 | $ 5,159,493 |
| Computer Software – 0.4% | |
| Microsoft Corp. | | 49,838 | $ 14,891,096 |
| Computer Software - Systems – 1.0% | |
| Asustek Computer, Inc. | | 143,000 | $ 1,894,935 |
| Hitachi Ltd. | | 179,800 | 8,867,755 |
| Hon Hai Precision Industry Co. Ltd. | | 2,584,000 | 9,517,495 |
| Lenovo Group Ltd. | | 3,700,000 | 4,140,325 |
| Samsung Electronics Co. Ltd. | | 153,747 | 9,276,176 |
| | | | | $33,696,686 |
| Construction – 2.4% | |
| American Homes 4 Rent, “A”, REIT | | 597,022 | $ 22,692,806 |
| AvalonBay Communities, Inc., REIT | | 119,148 | 28,427,521 |
| ICA Tenedora S.A. de C.V. (a)(u) | | 560,019 | 464,837 |
| Mid-America Apartment Communities, Inc., REIT | | 127,992 | 26,188,443 |
| Otis Worldwide Corp. | | 48,386 | 3,790,076 |
| | | | | $81,563,683 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Consumer Products – 1.0% | |
| Colgate-Palmolive Co. | | 187,892 | $ 14,458,290 |
| Kimberly-Clark Corp. | | 145,975 | 18,998,646 |
| | | | | $33,456,936 |
| Electrical Equipment – 0.2% | |
| Schneider Electric SE | | 43,544 | $ 6,824,578 |
| Electronics – 1.3% | |
| Intel Corp. | | 40,327 | $ 1,923,598 |
| Taiwan Semiconductor Manufacturing Co. Ltd., ADR | | 142,177 | 15,214,361 |
| Texas Instruments, Inc. | | 152,300 | 25,889,477 |
| | | | | $43,027,436 |
| Energy - Integrated – 0.5% | |
| China Petroleum & Chemical Corp. | | 29,908,000 | $ 14,821,223 |
| LUKOIL PJSC, ADR | | 17,902 | 336,737 |
| Suncor Energy, Inc. (l) | | 100,233 | 3,065,113 |
| | | | | $18,223,073 |
| Food & Beverages – 1.9% | |
| Archer Daniels Midland Co. | | 76,864 | $ 6,029,981 |
| Coca-Cola FEMSA S.A.B. de C.V. | | 43,052 | 2,370,443 |
| General Mills, Inc. | | 343,832 | 23,184,592 |
| J.M. Smucker Co. | | 163,176 | 21,987,966 |
| JBS S.A. | | 345,714 | 2,408,462 |
| Nestle S.A. | | 49,708 | 6,492,230 |
| | | | | $62,473,674 |
| Food & Drug Stores – 0.4% | |
| Albertsons Cos., Inc., “A” | | 166,688 | $ 4,858,955 |
| Tesco PLC | | 2,569,286 | 9,986,805 |
| | | | | $14,845,760 |
| Forest & Paper Products – 0.9% | |
| Rayonier, Inc., REIT | | 371,454 | $ 14,746,724 |
| Weyerhaeuser Co., REIT | | 395,430 | 15,374,318 |
| | | | | $30,121,042 |
| Gaming & Lodging – 0.2% | |
| International Game Technology PLC | | 155,586 | $ 4,764,043 |
| Tabcorp Holdings Ltd. | | 421,513 | 1,527,663 |
| | | | | $6,291,706 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| General Merchandise – 0.2% | |
| BIM Birlesik Magazalar A.S. | | 569,323 | $ 3,006,991 |
| Wal-Mart de Mexico S.A.B. de C.V. | | 778,211 | 2,959,945 |
| | | | | $5,966,936 |
| Insurance – 1.7% | |
| China Pacific Insurance Co. Ltd. | | 661,400 | $ 1,840,843 |
| Equitable Holdings, Inc. | | 226,987 | 7,413,396 |
| Everest Re Group Ltd. | | 13,987 | 4,171,203 |
| Hartford Financial Services Group, Inc. | | 94,315 | 6,553,006 |
| Manulife Financial Corp. | | 1,047,504 | 21,222,803 |
| MetLife, Inc. | | 104,184 | 7,037,629 |
| Samsung Fire & Marine Insurance Co. Ltd. | | 48,404 | 7,735,454 |
| | | | | $55,974,334 |
| Internet – 0.1% | |
| Gartner, Inc. (a) | | 7,384 | $ 2,070,621 |
| Leisure & Toys – 0.3% | |
| Brunswick Corp. | | 50,604 | $ 4,833,694 |
| DeNA Co. Ltd. | | 84,400 | 1,299,318 |
| Nintendo Co. Ltd. | | 5,500 | 2,780,566 |
| Polaris, Inc. | | 11,729 | 1,425,191 |
| | | | | $10,338,769 |
| Machinery & Tools – 0.5% | |
| Eaton Corp. PLC | | 96,806 | $ 14,936,198 |
| GEA Group AG | | 51,734 | 2,266,323 |
| | | | | $17,202,521 |
| Major Banks – 1.7% | |
| BNP Paribas | | 96,704 | $ 5,693,626 |
| China Construction Bank Corp. | | 9,091,000 | 6,817,145 |
| DBS Group Holdings Ltd. | | 915,000 | 22,965,215 |
| Erste Group Bank AG | | 105,973 | 3,801,123 |
| UBS AG | | 926,475 | 17,057,606 |
| | | | | $56,334,715 |
| Medical & Health Technology & Services – 2.0% | |
| Encompass Health Corp. | | 215,260 | $ 14,211,465 |
| McKesson Corp. | | 59,977 | 16,491,276 |
| Medical Properties Trust, Inc., REIT | | 424,655 | 8,637,483 |
| Sonic Healthcare Ltd. | | 65,740 | 1,690,325 |
| Welltower, Inc., REIT | | 305,221 | 25,421,857 |
| | | | | $66,452,406 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Metals & Mining – 1.5% | |
| Fortescue Metals Group Ltd. | | 424,397 | $ 5,621,099 |
| Glencore PLC | | 587,854 | 3,486,822 |
| POSCO | | 14,433 | 3,469,513 |
| Rio Tinto PLC | | 350,029 | 27,192,446 |
| Vale S.A. | | 630,900 | 11,301,018 |
| | | | | $51,070,898 |
| Natural Gas - Distribution – 0.1% | |
| UGI Corp. | | 102,399 | $ 3,936,218 |
| Natural Gas - Pipeline – 0.2% | |
| Equitrans Midstream Corp. | | 351,526 | $ 2,253,282 |
| Pembina Pipeline Corp. (l) | | 109,411 | 3,720,405 |
| | | | | $5,973,687 |
| Network & Telecom – 1.2% | |
| Equinix, Inc., REIT | | 56,561 | $ 40,143,039 |
| Other Banks & Diversified Financials – 0.3% | |
| Hana Financial Group, Inc. | | 57,998 | $ 2,349,152 |
| Sberbank of Russia PJSC, ADR | | 434,601 | 458,721 |
| SLM Corp. | | 323,307 | 6,369,148 |
| Tisco Financial Group PCL | | 985,300 | 2,947,607 |
| | | | | $12,124,628 |
| Pharmaceuticals – 3.8% | |
| Bayer AG | | 193,147 | $ 11,155,319 |
| Johnson & Johnson | | 184,748 | 30,403,978 |
| Merck & Co., Inc. | | 402,511 | 30,824,292 |
| Novartis AG | | 120,552 | 10,560,623 |
| Organon & Co. | | 180,444 | 6,735,975 |
| Pfizer, Inc. | | 86,466 | 4,058,714 |
| Roche Holding AG | | 86,990 | 33,184,442 |
| | | | | $126,923,343 |
| Precious Metals & Minerals – 0.0% | |
| Petra Diamonds Ltd. (a) | | 735,846 | $ 1,026,623 |
| Railroad & Shipping – 0.1% | |
| Nippon Yusen Kabushiki Kaisha | | 25,000 | $ 2,329,968 |
| Real Estate – 10.8% | |
| Alexandria Real Estate Equities, Inc., REIT | | 106,391 | $ 20,150,455 |
| Boston Properties, Inc., REIT | | 126,140 | 15,428,183 |
| Brixmor Property Group, Inc., REIT | | 892,989 | 22,431,884 |
| Douglas Emmett, Inc., REIT | | 262,453 | 8,319,760 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Real Estate – continued | |
| Equity Lifestyle Properties, Inc., REIT | | 319,951 | $ 23,874,744 |
| Extra Space Storage, Inc., REIT | | 179,750 | 33,819,963 |
| Host Hotels & Resorts, Inc., REIT (a) | | 1,060,615 | 19,377,436 |
| National Retail Properties, Inc., REIT | | 380,677 | 16,220,647 |
| National Storage Affiliates Trust, REIT | | 28,044 | 1,634,124 |
| Phillips Edison & Co., REIT | | 491,912 | 15,898,596 |
| Prologis, Inc., REIT | | 447,828 | 65,315,714 |
| Simon Property Group, Inc., REIT | | 220,747 | 30,365,957 |
| STAG Industrial, Inc., REIT | | 428,873 | 16,708,892 |
| STORE Capital Corp., REIT | | 327,860 | 10,071,859 |
| Sun Communities, Inc., REIT | | 137,907 | 24,961,167 |
| Urban Edge Properties, REIT | | 937,400 | 17,079,428 |
| VICI Properties, Inc., REIT | | 734,038 | 20,523,702 |
| | | | | $362,182,511 |
| Telecommunications - Wireless – 1.7% | |
| American Tower Corp., REIT | | 61,266 | $ 13,899,417 |
| KDDI Corp. | | 657,900 | 21,522,586 |
| SBA Communications Corp., REIT | | 33,394 | 10,131,406 |
| Vodafone Group PLC | | 6,319,124 | 11,142,307 |
| | | | | $56,695,716 |
| Telephone Services – 0.3% | |
| Hellenic Telecommunications Organization S.A. | | 340,141 | $ 6,788,619 |
| PT Telekom Indonesia | | 10,973,700 | 3,308,431 |
| | | | | $10,097,050 |
| Tobacco – 0.7% | |
| British American Tobacco PLC | | 389,221 | $ 17,029,595 |
| Japan Tobacco, Inc. | | 356,200 | 6,581,855 |
| | | | | $23,611,450 |
| Utilities - Electric Power – 1.1% | |
| American Electric Power Co., Inc. | | 34,950 | $ 3,168,218 |
| CLP Holdings Ltd. | | 317,000 | 3,226,953 |
| Constellation Energy | | 61,875 | 2,845,013 |
| E.ON SE | | 602,104 | 8,180,972 |
| ENGIE Energía Brasil S.A. | | 214,300 | 1,658,509 |
| Exelon Corp. | | 185,624 | 7,900,157 |
| Iberdrola S.A. | | 390,525 | 4,457,579 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Utilities - Electric Power – continued | |
| Transmissora Alianca de Energia Eletrica S.A., IEU | | 744,164 | $ 5,695,671 |
| | | | | $37,133,072 |
| Total Common Stocks (Identified Cost, $1,007,009,690) | | $ 1,326,801,891 |
| Bonds – 33.5% |
| Aerospace & Defense – 0.2% |
| Boeing Co., 5.15%, 5/01/2030 | | $ | 1,797,000 | $ 1,984,865 |
| Boeing Co., 3.75%, 2/01/2050 | | | 518,000 | 481,336 |
| Boeing Co., 5.805%, 5/01/2050 | | | 787,000 | 934,963 |
| DAE Sukuk DIFC Ltd., 3.75%, 2/15/2026 (n) | | | 1,258,000 | 1,250,326 |
| Raytheon Technologies Corp., 1.9%, 9/01/2031 | | | 486,000 | 442,606 |
| Raytheon Technologies Corp., 2.375%, 3/15/2032 | | | 1,796,000 | 1,704,825 |
| Raytheon Technologies Corp., 3.03%, 3/15/2052 | | | 727,000 | 651,557 |
| | | | | $7,450,478 |
| Airlines – 0.0% |
| Azul Investments LLP, 7.25%, 6/15/2026 (n) | | $ | 1,050,000 | $ 941,073 |
| Apparel Manufacturers – 0.1% |
| Tapestry, Inc., 4.125%, 7/15/2027 | | $ | 150,000 | $ 156,806 |
| Tapestry, Inc., 3.05%, 3/15/2032 | | | 1,561,000 | 1,485,113 |
| | | | | $1,641,919 |
| Asset-Backed & Securitized – 0.7% |
| 3650R Commercial Mortgage Trust, 2021-PF1, “XA”, 1.037%, 11/15/2054 (i) | | $ | 6,551,388 | $ 462,187 |
| ACREC 2021-FL1 Ltd., “A”, FLR, 1.287% (LIBOR - 1mo. + 1.15%), 10/16/2036 (n) | | | 1,091,500 | 1,085,121 |
| Arbor Realty Trust, Inc., CLO, 2021-FL1, “B”, FLR, 1.691% (LIBOR - 1mo. + 1.5%), 12/15/2035 (n) | | | 998,500 | 988,499 |
| AREIT 2022-CRE6 Trust, “AS”, FLR, 1.698% (SOFR - 30 day + 1.65%), 11/17/2024 (n) | | | 946,500 | 943,017 |
| BBCMS Mortgage Trust, 2021-C9, “XA”, 1.637%, 2/15/2054 (i) | | | 3,557,486 | 401,930 |
| Benchmark 2021-B24 Mortgage Trust, “XA”, 1.154%, 3/15/2054 (i) | | | 6,697,194 | 524,392 |
| Benchmark 2021-B26 Mortgage Trust, “XA”, 0.999%, 6/15/2054 (i) | | | 6,509,078 | 402,842 |
| Benchmark 2021-B27 Mortgage Trust, “XA”, 1.271%, 7/15/2054 (i) | | | 7,617,741 | 684,663 |
| Capital Automotive, 2020-1A, “A4”, REIT, 3.19%, 2/15/2050 (n) | | | 514,990 | 513,078 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Asset-Backed & Securitized – continued |
| Citigroup Commercial Mortgage Trust, 2019-XA, “C7”, 0.873%, 12/15/2072 (i)(n) | | $ | 9,457,797 | $ 528,804 |
| Commercial Mortgage Pass-Through Certificates, 2021-BN32, “XA”, 0.783%, 4/15/2054 (i) | | | 4,830,330 | 263,815 |
| GS Mortgage Securities Trust, 2015-GC32, “A2”, 3.062%, 7/10/2048 | | | 212,730 | 213,952 |
| KREF 2018-FT1 Ltd., “A”, FLR, 1.19% (LIBOR - 1mo. + 1.1%), 2/15/2039 (n) | | | 478,500 | 472,964 |
| KREF 2018-FT1 Ltd., “AS”, FLR, 1.42% (LIBOR - 1mo. + 1.3%), 2/15/2039 (n) | | | 526,000 | 514,175 |
| LoanCore 2021-CRE5 Ltd., “AS”, FLR, 1.941% (LIBOR - 1mo. + 1.75%), 7/15/2036 (n) | | | 750,000 | 746,943 |
| Madison Park Funding Ltd., 2014-13A, “BR2”, FLR, 1.748% (LIBOR - 3mo. + 1.5%), 4/19/2030 (n) | | | 2,390,920 | 2,378,822 |
| MF1 2020-FL4 Ltd., “A”, FLR, 1.885% (LIBOR - 1mo. + 1.7%), 11/15/2035 (n) | | | 1,592,000 | 1,593,431 |
| MF1 2021-FL5 Ltd., “AS”, FLR, 1.385% (LIBOR - 1mo. + 1.2%), 7/15/2036 (n) | | | 985,000 | 975,950 |
| MF1 2021-FL5 Ltd., “B”, FLR, 1.635% (LIBOR - 1mo. + 1.45%), 7/15/2036 (n) | | | 1,241,000 | 1,226,086 |
| Morgan Stanley Capital I Trust, 2018-H4, “XA”, 0.836%, 12/15/2051 (i) | | | 9,799,083 | 462,757 |
| Morgan Stanley Capital I Trust, 2021-L5, “XA”, 1.299%, 5/15/2054 (i) | | | 2,699,394 | 239,030 |
| Palmer Square Loan Funding 2020-1A Ltd., “A2”, FLR, 1.83% (LIBOR - 3mo. + 1.35%), 2/20/2028 (n) | | | 1,308,942 | 1,307,534 |
| PFP III 2021-7 Ltd., “AS”, FLR, 1.341% (LIBOR - 1mo. + 1.15%), 4/14/2038 (n) | | | 1,383,931 | 1,370,389 |
| PFP III 2021-8 Ltd., “A”, FLR, 1.126% (LIBOR - 1mo. + 1%), 8/09/2037 (n) | | | 963,000 | 954,451 |
| PFP III 2021-8 Ltd., “AS”, FLR, 1.376% (LIBOR - 1mo. + 1.25%), 8/09/2037 (n) | | | 1,010,000 | 1,001,493 |
| ReadyCap Commercial Mortgage Trust, 2021-FL5, “A”, FLR, 1.187% (LIBOR - 1mo. + 1%), 4/25/2038 (z) | | | 738,220 | 733,416 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.386% (LIBOR - 1mo. + 1.2%), 11/25/2036 (z) | | | 359,971 | 356,484 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 1.687% (LIBOR - 1mo. + 1.5%), 11/25/2036 (z) | | | 109,000 | 107,530 |
| Wells Fargo Commercial Mortgage Trust, 2018-C48, “XA”, 0.949%, 1/15/2052 (i)(n) | | | 5,591,121 | 308,897 |
| | | | | $21,762,652 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Automotive – 0.2% |
| Daimler Trucks Finance North America LLC, 2.5%, 12/14/2031 (n) | | $ | 807,000 | $ 760,895 |
| Hyundai Capital America, 2.375%, 10/15/2027 (n) | | | 597,000 | 574,972 |
| Hyundai Capital America, 1.8%, 1/10/2028 (n) | | | 852,000 | 788,634 |
| Hyundai Capital America, 6.375%, 4/08/2030 (n) | | | 2,715,000 | 3,231,855 |
| | | | | $5,356,356 |
| Broadcasting – 0.4% |
| Discovery Communications LLC, 3.625%, 5/15/2030 | | $ | 1,364,000 | $ 1,371,515 |
| Discovery Communications LLC, 4%, 9/15/2055 | | | 1,082,000 | 983,245 |
| Prosus N.V., 3.68%, 1/21/2030 (n) | | | 3,166,000 | 2,853,201 |
| Prosus N.V., 3.061%, 7/13/2031 (n) | | | 1,227,000 | 1,028,724 |
| Prosus N.V., 4.193%, 1/19/2032 (n) | | | 881,000 | 787,387 |
| Prosus N.V., 4.027%, 8/03/2050 (n) | | | 1,149,000 | 905,299 |
| Prosus N.V., 3.832%, 2/08/2051 (n) | | | 1,747,000 | 1,320,684 |
| Walt Disney Co., 3.35%, 3/24/2025 | | | 1,455,000 | 1,507,880 |
| Walt Disney Co., 3.5%, 5/13/2040 | | | 2,155,000 | 2,146,760 |
| Walt Disney Co., 3.8%, 5/13/2060 | | | 1,364,000 | 1,406,938 |
| | | | | $14,311,633 |
| Brokerage & Asset Managers – 0.2% |
| Banco BTG Pactual S.A. (Cayman Islands Branch), 4.5%, 1/10/2025 | | $ | 1,548,000 | $ 1,549,935 |
| Brookfield Finance, Inc., 2.34%, 1/30/2032 | | | 2,751,000 | 2,535,089 |
| Charles Schwab Corp., 1.95%, 12/01/2031 | | | 1,178,000 | 1,085,342 |
| Intercontinental Exchange, Inc., 1.85%, 9/15/2032 | | | 2,974,000 | 2,650,676 |
| Intercontinental Exchange, Inc., 3%, 9/15/2060 | | | 591,000 | 500,467 |
| | | | | $8,321,509 |
| Building – 0.1% |
| CEMEX S.A.B. de C.V., 3.875%, 7/11/2031 (n) | | $ | 1,252,000 | $ 1,112,728 |
| GCC S.A.B de C.V., 3.614%, 4/20/2032 (n) | | | 1,646,000 | 1,584,275 |
| Vulcan Materials Co., 3.5%, 6/01/2030 | | | 1,246,000 | 1,288,211 |
| Vulcan Materials Co., 4.5%, 6/15/2047 | | | 739,000 | 811,518 |
| | | | | $4,796,732 |
| Business Services – 0.5% |
| Equifax, Inc., 3.1%, 5/15/2030 | | $ | 2,237,000 | $ 2,216,669 |
| Equifax, Inc., 2.35%, 9/15/2031 | | | 2,407,000 | 2,211,272 |
| Equinix, Inc., 2.5%, 5/15/2031 | | | 2,649,000 | 2,449,685 |
| Equinix, Inc., 3%, 7/15/2050 | | | 891,000 | 745,440 |
| Fiserv, Inc., 4.4%, 7/01/2049 | | | 682,000 | 726,959 |
| Mastercard, Inc., 3.85%, 3/26/2050 | | | 1,655,000 | 1,798,892 |
| Tencent Holdings Ltd., 2.39%, 6/03/2030 (n) | | | 3,235,000 | 3,006,415 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Business Services – continued |
| Visa, Inc., 2.05%, 4/15/2030 | | $ | 909,000 | $ 880,332 |
| Visa, Inc., 2.7%, 4/15/2040 | | | 1,818,000 | 1,709,407 |
| | | | | $15,745,071 |
| Cable TV – 0.2% |
| Cable Onda S.A., 4.5%, 1/30/2030 (n) | | $ | 1,842,000 | $ 1,748,380 |
| Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 6.384%, 10/23/2035 | | | 1,352,000 | 1,615,982 |
| Comcast Corp., 1.5%, 2/15/2031 | | | 1,744,000 | 1,550,263 |
| Comcast Corp., 3.75%, 4/01/2040 | | | 909,000 | 917,868 |
| United Group B.V., 4.625%, 8/15/2028 (n) | | EUR | 367,000 | 382,634 |
| VTR Comunicaciones S.p.A., 5.125%, 1/15/2028 (n) | | $ | 1,273,000 | 1,259,799 |
| | | | | $7,474,926 |
| Chemicals – 0.3% |
| Consolidated Energy Finance S.A., 5.625%, 10/15/2028 (n) | | $ | 1,795,000 | $ 1,659,118 |
| RPM International, Inc., 4.55%, 3/01/2029 | | | 217,000 | 235,892 |
| RPM International, Inc., 4.25%, 1/15/2048 | | | 110,000 | 117,932 |
| Sasol Financing (USA) LLC, 4.375%, 9/18/2026 | | | 1,552,000 | 1,515,528 |
| Sasol Financing (USA) LLC, 5.5%, 3/18/2031 | | | 3,083,000 | 2,953,514 |
| Sherwin-Williams Co., 4.5%, 6/01/2047 | | | 936,000 | 1,026,699 |
| Synthos S.A., 2.5%, 6/07/2028 (n) | | EUR | 1,249,000 | 1,239,973 |
| | | | | $8,748,656 |
| Computer Software – 0.1% |
| Microsoft Corp., 2.525%, 6/01/2050 | | $ | 3,182,000 | $ 2,823,515 |
| VeriSign, Inc., 4.75%, 7/15/2027 | | | 1,502,000 | 1,548,892 |
| | | | | $4,372,407 |
| Computer Software - Systems – 0.2% |
| Apple, Inc., 2.05%, 9/11/2026 | | $ | 3,416,000 | $ 3,406,879 |
| Apple, Inc., 1.7%, 8/05/2031 | | | 2,384,000 | 2,209,843 |
| Apple, Inc., 2.65%, 5/11/2050 | | | 2,850,000 | 2,528,582 |
| | | | | $8,145,304 |
| Conglomerates – 0.4% |
| Carrier Global Corp., 2.722%, 2/15/2030 | | $ | 1,409,000 | $ 1,370,264 |
| Carrier Global Corp., 3.377%, 4/05/2040 | | | 1,282,000 | 1,204,915 |
| Grupo KUO S.A.B. de C.V., 5.75%, 7/07/2027 (n) | | | 5,300,000 | 5,326,500 |
| Otis Worldwide Corp., 2.565%, 2/15/2030 | | | 2,127,000 | 2,056,116 |
| Westinghouse Air Brake Technologies Corp., 4.95%, 9/15/2028 | | | 1,927,000 | 2,094,812 |
| | | | | $12,052,607 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Construction – 0.0% |
| Seazen Group Ltd., 4.45%, 7/13/2025 | | $ | 1,614,000 | $ 959,523 |
| Consumer Products – 0.1% |
| Hasbro, Inc., 3.9%, 11/19/2029 | | $ | 1,321,000 | $ 1,382,582 |
| Mattel, Inc., 3.75%, 4/01/2029 (n) | | | 873,000 | 873,873 |
| | | | | $2,256,455 |
| Consumer Services – 0.2% |
| B2W Digital Lux S.à r.l., 4.375%, 12/20/2030 (n) | | $ | 1,498,000 | $ 1,295,770 |
| Booking Holdings, Inc., 3.55%, 3/15/2028 | | | 764,000 | 809,706 |
| Conservation Fund, 3.474%, 12/15/2029 | | | 1,031,000 | 1,064,242 |
| Meituan, 2.125%, 10/28/2025 (n) | | | 865,000 | 795,091 |
| Meituan, 3.05%, 10/28/2030 (n) | | | 1,511,000 | 1,260,439 |
| | | | | $5,225,248 |
| Containers – 0.1% |
| Can-Pack S.A., 3.875%, 11/15/2029 (n) | | $ | 806,000 | $ 739,505 |
| Can-Pack S.A./Eastern PA Land Investment Holding LLC, 3.125%, 11/01/2025 (n) | | | 412,000 | 400,670 |
| Can-Pack S.A./Eastern PA Land Investment Holding LLC, 2.375%, 11/01/2027 (n) | | EUR | 445,000 | 469,119 |
| San Miguel Industrias PET S.A., 3.5%, 8/02/2028 (n) | | $ | 2,000,000 | 1,825,000 |
| | | | | $3,434,294 |
| Electrical Equipment – 0.0% |
| Arrow Electronics, Inc., 3.875%, 1/12/2028 | | $ | 307,000 | $ 319,404 |
| Electronics – 0.2% |
| Broadcom, Inc., 3.469%, 4/15/2034 (n) | | $ | 854,000 | $ 824,387 |
| Broadcom, Inc., 3.187%, 11/15/2036 (n) | | | 2,395,000 | 2,224,194 |
| NXP B.V./NXP Funding LLC/NXP USA, Inc., 3.4%, 5/01/2030 (n) | | | 2,036,000 | 2,055,306 |
| NXP B.V./NXP Funding LLC/NXP USA, Inc., 3.125%, 2/15/2042 (n) | | | 1,216,000 | 1,096,616 |
| | | | | $6,200,503 |
| Emerging Market Quasi-Sovereign – 3.4% |
| Abu Dhabi Crude Oil Pipeline, 4.6%, 11/02/2047 | | $ | 1,915,000 | $ 2,096,136 |
| Aeropuerto Internacional de Tocumen S.A. (Republic of Panama), 5.125%, 8/11/2061 (n) | | | 1,651,000 | 1,502,410 |
| Autoridad del Canal de Panama, 4.95%, 7/29/2035 (n) | | | 281,000 | 320,870 |
| Autoridad del Canal de Panama, 4.95%, 7/29/2035 | | | 1,220,000 | 1,393,103 |
| Banco de Reservas de la Republica Dominicana, 7%, 2/01/2023 | | | 1,500,000 | 1,533,765 |
| Banco Nacional de Panama, 2.5%, 8/11/2030 (n) | | | 241,000 | 212,080 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Quasi-Sovereign – continued |
| Bulgarian Energy Holding EAD, 2.45%, 7/22/2028 | | EUR | 1,104,000 | $ 1,153,884 |
| China Construction Bank Corp., 4.25% to 2/27/2024, FLR (CMT - 5yr. + 1.88%) to 2/27/2029 | | $ | 1,764,000 | 1,828,588 |
| China Development Bank Financial Leasing Co. Ltd., 2.875% to 9/28/2025, FLR (CMT - 1yr. + 2.75%) to 9/28/2030 | | | 1,618,000 | 1,599,393 |
| Comision Federal de Electricidad (United Mexican States), 4.688%, 5/15/2029 (n) | | | 1,623,000 | 1,606,770 |
| Comision Federal de Electricidad (United Mexican States), 3.348%, 2/09/2031 (n) | | | 1,360,000 | 1,207,014 |
| Comision Federal de Electricidad (United Mexican States), 3.875%, 7/26/2033 (n) | | | 1,391,000 | 1,234,179 |
| DAE Funding LLC (United Arab Emirates), 3.375%, 3/20/2028 (n) | | | 935,000 | 898,860 |
| Development Bank of Kazakhstan JSC, 2.95%, 5/06/2031 | | | 1,264,000 | 1,149,886 |
| DP World Salaam (United Arab Emirates), 6% to 1/01/2026, FLR (CMT - 5yr. + 5.75%) to 1/01/2031, FLR (CMT - 5yr. + 6.75%) to 1/01/2070 | | | 2,760,000 | 2,887,650 |
| Ecopetrol S.A. (Republic of Colombia), 5.375%, 6/26/2026 | | | 2,155,000 | 2,209,759 |
| Ecopetrol S.A. (Republic of Colombia), 6.875%, 4/29/2030 | | | 1,273,000 | 1,332,118 |
| Ecopetrol S.A. (Republic of Colombia), 4.625%, 11/02/2031 | | | 1,360,000 | 1,218,560 |
| Emirates NBD Bank PJSC, 6.125% to 7/09/2026, FLR (Swap Rate - 6yr. + 5.702%) to 1/09/2170 | | | 1,170,000 | 1,231,776 |
| Empresa de Transmision Electrica S.A. (Republic of Panama), 5.125%, 5/02/2049 (n) | | | 1,694,000 | 1,710,957 |
| Empresa Nacional del Petroleo (Republic of Chile), 4.375%, 10/30/2024 (n) | | | 2,469,000 | 2,552,353 |
| Empresa Nacional del Petroleo (Republic of Chile), 3.45%, 9/16/2031 (n) | | | 1,391,000 | 1,280,311 |
| Empresas Publicas de Medellin E.S.P., 4.375%, 2/15/2031 (n) | | | 1,193,000 | 1,033,448 |
| EQUATE Petrochemical B.V. (State of Kuwait), 4.25%, 11/03/2026 | | | 3,292,000 | 3,398,990 |
| EQUATE Petrochemical B.V. (State of Kuwait), 2.625%, 4/28/2028 (n) | | | 548,000 | 517,860 |
| Eskom Holdings SOC Ltd. (Republic of South Africa), 6.35%, 8/10/2028 (n) | | | 2,885,000 | 2,938,615 |
| Export-Import Bank of India, 2.25%, 1/13/2031 (n) | | | 2,354,000 | 2,072,650 |
| Greenko Dutch B.V. (Republic of India), 3.85%, 3/29/2026 (n) | | | 1,175,105 | 1,143,377 |
| Greenko Power II Ltd. (Republic of India), 4.3%, 12/13/2028 (n) | | | 1,204,000 | 1,142,837 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Quasi-Sovereign – continued |
| Huarong Finance 2017 Co. Ltd. (People's Republic of China), 4.95%, 11/07/2047 | | $ | 1,673,000 | $ 1,409,502 |
| Huarong Finance 2019 Co. Ltd. (People's Republic of China), 3.25%, 11/13/2024 | | | 2,684,000 | 2,543,090 |
| Indian Railway Finance Corp., 2.8%, 2/10/2031 (n) | | | 2,640,000 | 2,394,058 |
| Indian Railway Finance Corp., 3.57%, 1/21/2032 (n) | | | 738,000 | 713,462 |
| Industrial & Commercial Bank of China Ltd., 4.875%, 9/21/2025 | | | 1,689,000 | 1,813,316 |
| Ipoteka Bank (Republic of Uzbekistan), 5.5%, 11/19/2025 | | | 1,553,000 | 1,487,991 |
| Krung Thai Bank PLC (Cayman Islands Branch), 4.4% to 3/25/2026, FLR (CMT - 5yr. + 3.53%) to 9/25/2169 | | | 1,612,000 | 1,547,520 |
| MEGlobal Canada ULC (State of Kuwait), 5.875%, 5/18/2030 (n) | | | 910,000 | 1,031,030 |
| NAK Naftogaz Ukraine via Standard Bank London Holdings PLC, 7.625%, 11/08/2026 (n)(u) | | | 3,111,000 | 974,281 |
| NBK SPC Ltd. (State of Kuwait), 1.625% to 9/15/2026, FLR (SOFR - 1 day + 1.05%) to 9/15/2027 (n) | | | 1,664,000 | 1,562,113 |
| NPC Ukrenergo (Ukraine), 6.875%, 11/09/2026 (n)(u) | | | 905,000 | 285,075 |
| OCP S.A. (Republic of Madagascar), 6.875%, 4/25/2044 | | | 2,448,000 | 2,474,928 |
| Office Cherifien des Phosphates S.A. (Kingdom of Morocco), 3.75%, 6/23/2031 (n) | | | 1,113,000 | 979,440 |
| Office Cherifien des Phosphates S.A. (Kingdom of Morocco), 5.125%, 6/23/2051 (n) | | | 2,245,000 | 1,807,629 |
| Ooredoo International Finance Ltd. (State of Qatar), 2.625%, 4/08/2031 (n) | | | 3,227,000 | 3,086,884 |
| Oryx Funding Ltd. (Sultanate of Oman), 5.8%, 2/03/2031 (n) | | | 1,210,000 | 1,225,125 |
| Petroleos Mexicanos, 6.49%, 1/23/2027 | | | 1,374,000 | 1,413,846 |
| Petroleos Mexicanos, 6.84%, 1/23/2030 | | | 3,174,000 | 3,183,998 |
| Petroleos Mexicanos, 6.7%, 2/16/2032 (n) | | | 1,545,000 | 1,490,770 |
| Petroleos Mexicanos, 6.75%, 9/21/2047 | | | 3,572,000 | 2,967,260 |
| Petroleos Mexicanos, 7.69%, 1/23/2050 | | | 6,564,000 | 5,896,408 |
| Petroleos Mexicanos, 6.95%, 1/28/2060 | | | 3,229,000 | 2,680,070 |
| PJSC State Savings Bank of Ukraine, 9.375%, 3/10/2023 (u) | | | 884,100 | 572,579 |
| PJSC State Savings Bank of Ukraine, 9.625%, 3/20/2025 (u) | | | 746,200 | 537,264 |
| PT Bank Negara Indonesia (Persero) Tbk, 3.75%, 3/30/2026 | | | 1,293,000 | 1,272,523 |
| PT Indonesia Asahan Aluminium (Persero), 4.75%, 5/15/2025 (n) | | | 1,905,000 | 1,946,186 |
| PT Indonesia Asahan Aluminium (Persero), 5.8%, 5/15/2050 (n) | | | 1,191,000 | 1,204,399 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Quasi-Sovereign – continued |
| PT Pertamina (Persero) (Republic of Indonesia), 6.45%, 5/30/2044 | | $ | 1,662,000 | $ 1,952,989 |
| PT Perusahaan Listrik Negara (Republic of Indonesia), 6.15%, 5/21/2048 (n) | | | 1,317,000 | 1,450,096 |
| Qatar Petroleum, 2.25%, 7/12/2031 (n) | | | 1,397,000 | 1,315,918 |
| Qatar Petroleum, 3.125%, 7/12/2041 (n) | | | 1,292,000 | 1,214,645 |
| Qatar Petroleum, 3.3%, 7/12/2051 (n) | | | 1,053,000 | 991,305 |
| SA Global Sukuk Ltd. (Kingdom of Saudi Arabia), 2.694%, 6/17/2031 (n) | | | 593,000 | 573,933 |
| Saudi Arabian Oil Co., 3.5%, 11/24/2070 (n) | | | 1,098,000 | 960,860 |
| Southern Gas Corridor CJSC (Republic of Azerbaijan), 6.875%, 3/24/2026 (n) | | | 5,170,000 | 5,779,543 |
| State Oil Company of the Azerbaijan Republic, 4.75%, 3/13/2023 | | | 3,933,000 | 3,984,011 |
| Sweihan PV Power Co. PJSC, 3.625%, 1/31/2049 (n) | | | 1,025,000 | 978,875 |
| Uzbekneftegaz JSC (Republic of Uzbekistan), 4.75%, 11/16/2028 (n) | | | 1,236,000 | 1,071,699 |
| | | | | $113,182,820 |
| Emerging Market Sovereign – 7.4% |
| Arab Republic of Egypt, 0%, 8/02/2022 | | EGP | 15,400,000 | $ 934,164 |
| Arab Republic of Egypt, 5.8%, 9/30/2027 (n) | | $ | 1,211,000 | 1,064,280 |
| Arab Republic of Egypt, 6.588%, 2/21/2028 | | | 1,753,000 | 1,562,116 |
| Arab Republic of Egypt, 7.6%, 3/01/2029 (n) | | | 1,396,000 | 1,249,950 |
| Arab Republic of Egypt, 7.625%, 5/29/2032 (n) | | | 3,321,000 | 2,772,371 |
| Arab Republic of Egypt, 7.3%, 9/30/2033 (n) | | | 1,701,000 | 1,389,128 |
| Arab Republic of Egypt, 7.903%, 2/21/2048 (n) | | | 1,492,000 | 1,094,883 |
| Arab Republic of Egypt, 7.903%, 2/21/2048 | | | 2,991,000 | 2,194,903 |
| Arab Republic of Egypt, 8.875%, 5/29/2050 (n) | | | 1,710,000 | 1,343,342 |
| Arab Republic of Egypt, 7.5%, 2/16/2061 (n) | | | 1,617,000 | 1,149,920 |
| Dominican Republic, 6.875%, 1/29/2026 | | | 3,004,000 | 3,274,390 |
| Dominican Republic, 5.95%, 1/25/2027 | | | 3,057,000 | 3,168,611 |
| Dominican Republic, 6%, 7/19/2028 (n) | | | 3,561,000 | 3,673,207 |
| Dominican Republic, 5.5%, 2/22/2029 (n) | | | 1,714,000 | 1,704,419 |
| Dominican Republic, 4.875%, 9/23/2032 (n) | | | 3,806,000 | 3,463,498 |
| Dominican Republic, 6%, 2/22/2033 (n) | | | 2,048,000 | 2,009,866 |
| Dominican Republic, 5.3%, 1/21/2041 (n) | | | 1,002,000 | 859,225 |
| Dominican Republic, 5.875%, 1/30/2060 (n) | | | 2,282,000 | 1,922,608 |
| Dominican Republic, 5.875%, 1/30/2060 | | | 2,407,000 | 2,027,922 |
| Federal Republic of Nigeria, 7.625%, 11/21/2025 | | | 1,042,000 | 1,102,957 |
| Federal Republic of Nigeria, 6.5%, 11/28/2027 (n) | | | 2,571,000 | 2,444,841 |
| Federal Republic of Nigeria, 6.125%, 9/28/2028 (n) | | | 1,457,000 | 1,334,764 |
| Federal Republic of Nigeria, 7.143%, 2/23/2030 (n) | | | 521,000 | 487,930 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Sovereign – continued |
| Federal Republic of Nigeria, 7.375%, 9/28/2033 (n) | | $ | 1,839,000 | $ 1,626,761 |
| Federal Republic of Nigeria, 7.696%, 2/23/2038 | | | 969,000 | 815,414 |
| Federative Republic of Brazil, 10%, 1/01/2023 | | BRL | 14,946,000 | 2,846,870 |
| Federative Republic of Brazil, 4.75%, 1/14/2050 | | $ | 1,053,000 | 879,571 |
| Government of Jamaica, 8%, 3/15/2039 | | | 1,613,000 | 2,137,225 |
| Government of Jamaica, 7.875%, 7/28/2045 | | | 1,935,000 | 2,563,875 |
| Government of Romania, 2.625%, 12/02/2040 (n) | | EUR | 602,000 | 496,997 |
| Government of Ukraine, 7.75%, 9/01/2024 (n)(u) | | $ | 2,600,000 | 765,788 |
| Government of Ukraine, 7.75%, 9/01/2026 (u) | | | 3,434,000 | 1,080,319 |
| Government of Ukraine, 6.876%, 5/21/2029 (u) | | | 598,000 | 174,533 |
| Government of Ukraine, 4.375%, 1/27/2030 (n)(u) | | EUR | 1,074,000 | 373,911 |
| Government of Ukraine, 7.253%, 3/15/2033 (u) | | $ | 3,089,000 | 913,263 |
| Government of Ukraine, GDP Linked Bond, 0%, 5/31/2040 (u) | | | 6,063,000 | 1,156,820 |
| Hashemite Kingdom of Jordan, 5.85%, 7/07/2030 (n) | | | 2,432,000 | 2,280,384 |
| Hashemite Kingdom of Jordan, 7.375%, 10/10/2047 | | | 2,519,000 | 2,280,325 |
| Islamic Republic of Pakistan, 6%, 4/08/2026 (n) | | | 1,550,000 | 1,417,475 |
| Islamic Republic of Pakistan, 8.875%, 4/08/2051 (n) | | | 1,504,000 | 1,255,389 |
| Kingdom of Morocco, 1.375%, 3/30/2026 (n) | | EUR | 1,001,000 | 1,079,171 |
| Kingdom of Morocco, 2.375%, 12/15/2027 (n) | | $ | 1,562,000 | 1,433,604 |
| Kingdom of Morocco, 3%, 12/15/2032 | | | 1,357,000 | 1,178,894 |
| Kingdom of Morocco, 4%, 12/15/2050 (n) | | | 1,126,000 | 888,133 |
| Kingdom of Morocco, 4%, 12/15/2050 | | | 1,762,000 | 1,389,778 |
| Kingdom of Saudi Arabia, 2.25%, 2/02/2033 (n) | | | 1,288,000 | 1,211,364 |
| Kingdom of Saudi Arabia, 3.25%, 11/17/2051 (n) | | | 1,445,000 | 1,300,500 |
| Oriental Republic of Uruguay, 8.5%, 3/15/2028 | | UYU | 82,019,000 | 1,961,307 |
| Oriental Republic of Uruguay, 4.375%, 1/23/2031 | | $ | 2,499,000 | 2,747,051 |
| Oriental Republic of Uruguay, 8.25%, 5/21/2031 | | UYU | 53,264,000 | 1,252,667 |
| Oriental Republic of Uruguay, Inflation Linked Bond, 3.875%, 7/02/2040 | | | 86,483,830 | 2,377,763 |
| Republic of Angola, 9.375%, 5/08/2048 | | $ | 2,905,000 | 2,738,340 |
| Republic of Angola, 9.125%, 11/26/2049 | | | 3,425,000 | 3,177,715 |
| Republic of Argentina, 0.5%, 7/09/2030 | | | 1,517,982 | 484,236 |
| Republic of Argentina, 1.125%, 7/09/2035 | | | 2,781,057 | 823,193 |
| Republic of Argentina, 2%, 1/09/2038 | | | 6,106,000 | 2,259,220 |
| Republic of Benin, 4.875%, 1/19/2032 (n) | | EUR | 1,060,000 | 1,057,217 |
| Republic of Benin, 6.875%, 1/19/2052 (n) | | | 1,419,000 | 1,402,037 |
| Republic of Cameroon, 5.95%, 7/07/2032 | | | 1,136,000 | 1,111,134 |
| Republic of Chile, 2.75%, 1/31/2027 | | $ | 628,000 | 628,873 |
| Republic of Chile, 2.55%, 7/27/2033 | | | 1,604,000 | 1,461,324 |
| Republic of Chile, 3.5%, 1/31/2034 | | | 424,000 | 420,383 |
| Republic of Colombia, 5.75%, 11/03/2027 | | COP | 11,984,300,000 | 2,589,756 |
| Republic of Colombia, 3.125%, 4/15/2031 | | $ | 1,056,000 | 894,949 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Sovereign – continued |
| Republic of Colombia, 3.25%, 4/22/2032 | | $ | 2,274,000 | $ 1,902,269 |
| Republic of Costa Rica, 6.125%, 2/19/2031 | | | 1,624,000 | 1,615,880 |
| Republic of Costa Rica, 7%, 4/04/2044 | | | 1,207,000 | 1,155,703 |
| Republic of Costa Rica, 7.158%, 3/12/2045 | | | 3,275,000 | 3,165,320 |
| Republic of Cote d'Ivoire, 5.25%, 3/22/2030 (n) | | EUR | 2,432,000 | 2,528,363 |
| Republic of Cote d'Ivoire, 5.875%, 10/17/2031 (n) | | | 1,678,000 | 1,734,346 |
| Republic of Cote d'Ivoire, 4.875%, 1/30/2032 (n) | | | 1,724,000 | 1,646,366 |
| Republic of Cote d'Ivoire, 6.875%, 10/17/2040 (n) | | | 2,193,000 | 2,232,928 |
| Republic of Cote d'Ivoire, 6.875%, 10/17/2040 | | | 989,000 | 1,007,007 |
| Republic of Cote d'Ivoire, 6.625%, 3/22/2048 (n) | | | 602,000 | 576,646 |
| Republic of Croatia, 2.75%, 1/27/2030 | | | 1,000,000 | 1,149,281 |
| Republic of Croatia, 1.75%, 3/04/2041 | | | 1,325,000 | 1,266,522 |
| Republic of Ecuador, 0%, 7/31/2030 (n) | | $ | 532,211 | 312,679 |
| Republic of Ecuador, 5%, 7/31/2030 | | | 1,965,000 | 1,719,375 |
| Republic of Ecuador, 1%, 7/31/2035 (n) | | | 3,587,406 | 2,531,848 |
| Republic of Ecuador, 1%, 7/31/2035 | | | 4,854,000 | 3,425,759 |
| Republic of Ecuador, 0.5%, 7/31/2040 (n) | | | 3,326,765 | 2,068,449 |
| Republic of Ecuador, 0.5%, 7/31/2040 | | | 6,176,000 | 3,839,990 |
| Republic of Gabon, 7%, 11/24/2031 (n) | | | 1,215,000 | 1,114,155 |
| Republic of Gabon, 7%, 11/24/2031 | | | 937,000 | 859,229 |
| Republic of Ghana, 7.75%, 4/07/2029 (n) | | | 1,182,000 | 803,169 |
| Republic of Ghana, 7.75%, 4/07/2029 | | | 262,000 | 178,029 |
| Republic of Ghana, 8.625%, 4/07/2034 | | | 1,170,000 | 772,200 |
| Republic of Ghana, 7.875%, 2/11/2035 | | | 2,325,000 | 1,519,215 |
| Republic of Guatemala, 4.9%, 6/01/2030 | | | 4,648,000 | 4,671,240 |
| Republic of Guatemala, 5.375%, 4/24/2032 (n) | | | 880,000 | 906,400 |
| Republic of Guatemala, 3.7%, 10/07/2033 (n) | | | 1,018,000 | 922,563 |
| Republic of Guatemala, 4.65%, 10/07/2041 (n) | | | 808,000 | 739,328 |
| Republic of Guatemala, 6.125%, 6/01/2050 | | | 2,624,000 | 2,702,720 |
| Republic of Hungary, 1.75%, 6/05/2035 | | EUR | 2,896,000 | 2,937,694 |
| Republic of India, 7.27%, 4/08/2026 | | INR | 269,280,000 | 3,725,372 |
| Republic of Indonesia, 1.1%, 3/12/2033 | | EUR | 1,082,000 | 1,060,039 |
| Republic of Indonesia, 4.35%, 1/11/2048 | | $ | 1,978,000 | 2,015,958 |
| Republic of Kenya, 7%, 5/22/2027 (n) | | | 1,709,000 | 1,640,025 |
| Republic of Kenya, 8%, 5/22/2032 | | | 3,895,000 | 3,671,466 |
| Republic of Kenya, 8.25%, 2/28/2048 (n) | | | 1,974,000 | 1,704,549 |
| Republic of Kenya, 8.25%, 2/28/2048 | | | 1,785,000 | 1,541,348 |
| Republic of North Macedonia, 1.625%, 3/10/2028 (n) | | EUR | 1,618,000 | 1,627,685 |
| Republic of Panama, 3.362%, 6/30/2031 (n) | | $ | 1,539,000 | 1,474,362 |
| Republic of Panama, 2.252%, 9/29/2032 | | | 2,191,000 | 1,935,398 |
| Republic of Panama, 4.5%, 1/19/2063 | | | 1,439,000 | 1,368,000 |
| Republic of Paraguay, 3.849%, 6/28/2033 (n) | | | 612,000 | 583,854 |
| Republic of Paraguay, 6.1%, 8/11/2044 | | | 4,048,000 | 4,351,641 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Sovereign – continued |
| Republic of Paraguay, 5.6%, 3/13/2048 | | $ | 2,372,000 | $ 2,383,884 |
| Republic of Paraguay, 5.4%, 3/30/2050 (n) | | | 1,944,000 | 1,914,859 |
| Republic of Philippines, 1.2%, 4/28/2033 | | EUR | 2,353,000 | 2,367,084 |
| Republic of Philippines, 1.75%, 4/28/2041 | | | 1,891,000 | 1,834,045 |
| Republic of Romania, 1.75%, 7/13/2030 (n) | | | 1,556,000 | 1,454,136 |
| Republic of Romania, 2.124%, 7/16/2031 | | | 1,290,000 | 1,208,275 |
| Republic of Romania, 2%, 1/28/2032 (n) | | | 3,455,000 | 3,119,667 |
| Republic of Romania, 2%, 1/28/2032 | | | 1,150,000 | 1,038,384 |
| Republic of Romania, 2%, 4/14/2033 (n) | | | 3,229,000 | 2,786,755 |
| Republic of Romania, 3.75%, 2/07/2034 (n) | | | 813,000 | 829,976 |
| Republic of Romania, 2.75%, 4/14/2041 (n) | | | 1,029,000 | 849,460 |
| Republic of Rwanda, 5.5%, 8/09/2031 (n) | | $ | 793,000 | 742,048 |
| Republic of Senegal, 4.75%, 3/13/2028 (n) | | EUR | 1,883,000 | 1,974,184 |
| Republic of Senegal, 5.375%, 6/08/2037 (n) | | | 633,000 | 584,036 |
| Republic of Senegal, 6.75%, 3/13/2048 | | $ | 1,061,000 | 891,601 |
| Republic of Serbia, 3.125%, 5/15/2027 (n) | | EUR | 1,566,000 | 1,716,370 |
| Republic of Serbia, 1.65%, 3/03/2033 (n) | | | 1,574,000 | 1,360,729 |
| Republic of Serbia, 2.05%, 9/23/2036 (n) | | | 1,516,000 | 1,263,812 |
| Republic of South Africa, 8%, 1/31/2030 | | ZAR | 37,114,000 | 2,221,369 |
| Republic of South Africa, 8.25%, 3/31/2032 | | | 33,855,000 | 1,978,913 |
| Republic of South Africa, 5.65%, 9/27/2047 | | $ | 1,596,000 | 1,371,602 |
| Republic of South Africa, 5.75%, 9/30/2049 | | | 1,359,000 | 1,171,974 |
| Republic of Sri Lanka, 6.125%, 6/03/2025 | | | 4,379,000 | 2,145,710 |
| Republic of Sri Lanka, 7.55%, 3/28/2030 | | | 2,892,000 | 1,272,480 |
| Republic of Turkey, 4.75%, 1/26/2026 | | | 1,172,000 | 1,069,626 |
| Republic of Turkey, 5.875%, 6/26/2031 | | | 1,223,000 | 1,035,270 |
| Republic of Turkey, 5.75%, 5/11/2047 | | | 2,106,000 | 1,511,409 |
| Republic of Uzbekistan, 3.7%, 11/25/2030 (n) | | | 1,498,000 | 1,295,770 |
| Republic of Uzbekistan, 3.9%, 10/19/2031 (n) | | | 835,000 | 701,400 |
| Russian Federation, 4.25%, 6/23/2027 | | | 3,000,000 | 1,050,000 |
| State of Qatar, 3.75%, 4/16/2030 (n) | | | 1,818,000 | 1,962,531 |
| State of Qatar, 5.103%, 4/23/2048 (n) | | | 2,326,000 | 2,919,139 |
| State of Qatar, 4.817%, 3/14/2049 (n) | | | 1,236,000 | 1,500,405 |
| Sultanate of Oman, 6%, 8/01/2029 | | | 1,515,000 | 1,555,541 |
| Sultanate of Oman, 6.25%, 1/25/2031 | | | 1,488,000 | 1,543,621 |
| Sultanate of Oman, 6.5%, 3/08/2047 | | | 1,603,000 | 1,499,190 |
| Sultanate of Oman, 6.75%, 1/17/2048 | | | 4,752,000 | 4,554,526 |
| Sultanate of Oman, 7%, 1/25/2051 (n) | | | 3,249,000 | 3,208,907 |
| Sultanate of Oman, 7%, 1/25/2051 | | | 1,260,000 | 1,244,452 |
| United Mexican States, 2.659%, 5/24/2031 | | | 1,818,000 | 1,669,797 |
| United Mexican States, 3.5%, 2/12/2034 | | | 1,435,000 | 1,349,632 |
| United Mexican States, 4.28%, 8/14/2041 | | | 972,000 | 912,407 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Emerging Market Sovereign – continued |
| United Mexican States, 4.4%, 2/12/2052 | | $ | 1,036,000 | $ 952,809 |
| | | | | $249,884,979 |
| Energy - Independent – 0.6% |
| Diamondback Energy, Inc., 3.125%, 3/24/2031 | | $ | 936,000 | $ 913,738 |
| Energean Israel Finance Ltd., 5.375%, 3/30/2028 | | | 1,533,000 | 1,439,487 |
| Energean Israel Finance Ltd., 5.875%, 3/30/2031 | | | 1,566,000 | 1,446,201 |
| Energean PLC, 6.5%, 4/30/2027 (n) | | | 1,565,000 | 1,478,142 |
| Hess Corp., 5.8%, 4/01/2047 | | | 1,364,000 | 1,632,234 |
| Leviathan Bond Ltd., 6.75%, 6/30/2030 (n) | | | 2,841,000 | 2,880,461 |
| Medco Bell Pte. Ltd., 6.375%, 1/30/2027 (n) | | | 1,718,000 | 1,671,906 |
| Medco Laurel Tree Pte. Ltd., 6.95%, 11/12/2028 (n) | | | 1,636,000 | 1,593,185 |
| Pioneer Natural Resources Co., 1.9%, 8/15/2030 | | | 77,000 | 69,940 |
| Sierracol Energy Andina LLC, 6%, 6/15/2028 (n) | | | 2,195,000 | 2,005,374 |
| Tengizchevroil Finance Co. International Ltd., 4%, 8/15/2026 (n) | | | 2,119,000 | 2,102,069 |
| Tengizchevroil Finance Co. International Ltd., 4%, 8/15/2026 | | | 1,507,000 | 1,494,959 |
| Tengizchevroil Finance Co. International Ltd., 3.25%, 8/15/2030 (n) | | | 3,178,000 | 2,923,989 |
| | | | | $21,651,685 |
| Energy - Integrated – 0.2% |
| BP Capital Markets America, Inc., 1.749%, 8/10/2030 | | $ | 872,000 | $ 789,872 |
| Cenovus Energy, Inc., 4.4%, 4/15/2029 | | | 356,000 | 380,446 |
| Cenovus Energy, Inc., 2.65%, 1/15/2032 | | | 1,012,000 | 940,112 |
| Cenovus Energy, Inc., 6.75%, 11/15/2039 | | | 801,000 | 1,003,708 |
| Cenovus Energy, Inc., 3.75%, 2/15/2052 | | | 238,000 | 214,742 |
| Eni S.p.A., 4.75%, 9/12/2028 (n) | | | 1,818,000 | 1,988,548 |
| Eni S.p.A., 4.25%, 5/09/2029 (n) | | | 276,000 | 293,288 |
| Total Capital International S.A., 3.127%, 5/29/2050 | | | 347,000 | 320,659 |
| | | | | $5,931,375 |
| Financial Institutions – 0.4% |
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 3.65%, 7/21/2027 | | $ | 1,425,000 | $ 1,448,159 |
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 3.3%, 1/30/2032 | | | 434,000 | 412,029 |
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 3.85%, 10/29/2041 | | | 346,000 | 320,647 |
| Air Lease Corp., 2.875%, 1/15/2032 | | | 2,331,000 | 2,180,935 |
| Avolon Holdings Funding Ltd., 4.25%, 4/15/2026 (n) | | | 909,000 | 934,161 |
| Avolon Holdings Funding Ltd., 4.375%, 5/01/2026 (n) | | | 855,000 | 880,453 |
| Avolon Holdings Funding Ltd., 2.75%, 2/21/2028 (n) | | | 1,636,000 | 1,542,932 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Financial Institutions – continued |
| Muthoot Finance Ltd., 4.4%, 9/02/2023 (n) | | $ | 2,255,000 | $ 2,260,637 |
| Shriram Transport Finance Co. Ltd., 4.4%, 3/13/2024 (n) | | | 2,049,000 | 2,005,459 |
| Sunac China Holdings Ltd., 7.5%, 2/01/2024 | | | 1,792,000 | 716,800 |
| Times China Holdings Ltd., 6.75%, 7/08/2025 | | | 1,256,000 | 427,040 |
| | | | | $13,129,252 |
| Food & Beverages – 0.7% |
| Agrosuper S.A., 4.6%, 1/20/2032 (n) | | $ | 610,000 | $ 594,750 |
| Anheuser-Busch InBev Worldwide, Inc., 3.5%, 6/01/2030 | | | 1,618,000 | 1,690,382 |
| Anheuser-Busch InBev Worldwide, Inc., 5.55%, 1/23/2049 | | | 1,364,000 | 1,688,917 |
| Aragvi Finance International DAC, 8.45%, 4/29/2026 (n) | | | 1,588,000 | 1,574,712 |
| Bacardi Ltd., 5.15%, 5/15/2038 (n) | | | 1,036,000 | 1,189,275 |
| Central America Bottling Co., 5.25%, 4/27/2029 (n) | | | 2,121,000 | 2,147,513 |
| CIA Cervecerias Unidas S.A., 3.35%, 1/19/2032 (n) | | | 1,439,000 | 1,383,282 |
| Constellation Brands, Inc., 2.25%, 8/01/2031 | | | 1,839,000 | 1,680,299 |
| Constellation Brands, Inc., 4.1%, 2/15/2048 | | | 2,446,000 | 2,457,591 |
| Grupo Bimbo S.A.B. de C.V., 5.95%, 4/17/2059 | | | 1,248,000 | 1,261,741 |
| JBS Finance Luxembourg S.à r.l., 3.625%, 1/15/2032 (n) | | | 1,297,000 | 1,176,833 |
| JBS USA Lux S.A./JBS USA Finance, Inc., 6.5%, 4/15/2029 (n) | | | 1,304,000 | 1,388,825 |
| JBS USA Lux S.A./JBS USA Food Co./JBS USA Finance, Inc., 3%, 2/02/2029 (n) | | | 1,065,000 | 1,005,413 |
| JBS USA Lux S.A./JBS USA Food Co./JBS USA Finance, Inc., 6.5%, 4/15/2029 | | | 1,107,000 | 1,179,010 |
| PT Indofood CBP Sukses Makmur Tbk, 3.398%, 6/09/2031 | | | 1,243,000 | 1,172,158 |
| PT Indofood CBP Sukses Makmur Tbk, 4.805%, 4/27/2052 | | | 1,637,000 | 1,506,928 |
| SYSCO Corp., 2.4%, 2/15/2030 | | | 218,000 | 208,305 |
| SYSCO Corp., 2.45%, 12/14/2031 | | | 1,256,000 | 1,196,434 |
| SYSCO Corp., 4.45%, 3/15/2048 | | | 477,000 | 507,899 |
| | | | | $25,010,267 |
| Gaming & Lodging – 0.2% |
| GENM Capital Labuan Ltd., 3.882%, 4/19/2031 (n) | | $ | 1,716,000 | $ 1,567,360 |
| GLP Capital LP/GLP Financing II, Inc., 3.25%, 1/15/2032 | | | 654,000 | 613,880 |
| Marriott International, Inc., 4.625%, 6/15/2030 | | | 455,000 | 491,285 |
| Marriott International, Inc., 2.85%, 4/15/2031 | | | 1,961,000 | 1,869,115 |
| Marriott International, Inc., 3.5%, 10/15/2032 | | | 1,164,000 | 1,160,572 |
| Wynn Macau Ltd., 5.625%, 8/26/2028 | | | 1,623,000 | 1,412,927 |
| | | | | $7,115,139 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Industrial – 0.2% |
| Arabian Centres Sukuk II Ltd., 5.625%, 10/07/2026 (n) | | $ | 2,278,000 | $ 2,227,519 |
| Dar Al-Arkan Sukuk Co. Ltd., 6.875%, 2/26/2027 | | | 1,811,000 | 1,847,220 |
| GEMS Menasa Cayman Ltd./GEMS Education Delaware LLC, 7.125%, 7/31/2026 (n) | | | 1,470,000 | 1,488,816 |
| Howard University, Washington D.C., 2.738%, 10/01/2022 | | | 190,000 | 190,416 |
| Howard University, Washington D.C., 2.801%, 10/01/2023 | | | 209,000 | 209,535 |
| Howard University, Washington D.C., AGM, 2.416%, 10/01/2024 | | | 230,000 | 229,557 |
| Howard University, Washington D.C., AGM, 2.516%, 10/01/2025 | | | 285,000 | 280,995 |
| Trustees of the University of Pennsylvania, 2.396%, 10/01/2050 | | | 2,127,000 | 1,827,962 |
| | | | | $8,302,020 |
| Insurance - Health – 0.1% |
| UnitedHealth Group, Inc., 2.3%, 5/15/2031 | | $ | 525,000 | $ 505,779 |
| UnitedHealth Group, Inc., 4.625%, 7/15/2035 | | | 2,782,000 | 3,205,636 |
| UnitedHealth Group, Inc., 3.25%, 5/15/2051 | | | 477,000 | 463,194 |
| | | | | $4,174,609 |
| Insurance - Property & Casualty – 0.1% |
| Aon Corp./Aon Global Holdings PLC, 2.05%, 8/23/2031 | | $ | 2,318,000 | $ 2,130,455 |
| Aon Corp./Aon Global Holdings PLC, 2.6%, 12/02/2031 | | | 187,000 | 177,351 |
| Marsh & McLennan Cos., Inc., 2.375%, 12/15/2031 | | | 479,000 | 452,228 |
| Willis North America, Inc., 3.875%, 9/15/2049 | | | 1,818,000 | 1,779,428 |
| | | | | $4,539,462 |
| International Market Quasi-Sovereign – 0.1% |
| Airport Authority Hong Kong, 3.25%, 1/12/2052 (n) | | $ | 698,000 | $ 655,143 |
| Israel Electric Corp. Ltd., 3.75%, 2/22/2032 (n) | | | 1,246,000 | 1,231,671 |
| Ontario Teachers' Cadillac Fairview Properties, 2.5%, 10/15/2031 (n) | | | 1,158,000 | 1,102,094 |
| | | | | $2,988,908 |
| International Market Sovereign – 0.1% |
| Government of Bermuda, 2.375%, 8/20/2030 (n) | | $ | 1,818,000 | $ 1,718,010 |
| Government of Bermuda, 3.375%, 8/20/2050 (n) | | | 1,290,000 | 1,201,313 |
| | | | | $2,919,323 |
| Machinery & Tools – 0.1% |
| CNH Industrial Capital LLC, 3.85%, 11/15/2027 | | $ | 3,018,000 | $ 3,150,809 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Major Banks – 2.2% |
| Australia and New Zealand Banking Group Ltd., 2.57%, 11/25/2035 (n) | | $ | 982,000 | $ 894,032 |
| Bank of America Corp., 3.366% to 1/23/2025, FLR (LIBOR - 3mo. + 0.81%) to 1/23/2026 | | | 3,238,000 | 3,299,181 |
| Bank of America Corp., 3.419% to 12/20/2027, FLR (LIBOR - 3mo. + 1.04%) to 12/20/2028 | | | 3,227,000 | 3,299,089 |
| Bank of America Corp., 2.496% to 2/13/2030, FLR (LIBOR - 3mo. + 0.99%) to 2/13/2031 | | | 950,000 | 904,678 |
| Bank of America Corp., 3.311% to 4/22/2041, FLR (SOFR - 1 day + 1.58%) to 4/22/2042 | | | 2,255,000 | 2,161,200 |
| Barclays PLC, 2.894% to 11/24/2031, FLR (CMT - 1yr. + 1.3%) to 11/24/2032 | | | 1,724,000 | 1,633,537 |
| Commonwealth Bank of Australia, 3.61% to 9/12/2029, FLR (CMT - 1yr. + 2.05%) to 9/12/2034 (n) | | | 1,818,000 | 1,815,295 |
| Commonwealth Bank of Australia, 3.305%, 3/11/2041 (n) | | | 1,818,000 | 1,676,873 |
| Credit Agricole S.A., 1.247% to 1/26/2026, FLR (SOFR - 1 day + 0.89162%) to 1/26/2027 (n) | | | 2,273,000 | 2,137,327 |
| Credit Suisse Group AG, 3.091% to 5/14/2031, FLR (SOFR - 1 day + 1.73%) to 5/14/2032 (n) | | | 1,373,000 | 1,301,912 |
| Goldman Sachs Group, Inc., 2.64% to 2/24/2027, FLR (SOFR - 1 day + 1.114%) to 2/24/2028 | | | 1,735,000 | 1,709,662 |
| Goldman Sachs Group, Inc., 2.65% to 10/21/2031, FLR (SOFR - 1 day + 1.264%) to 10/21/2032 | | | 2,804,000 | 2,659,013 |
| Goldman Sachs Group, Inc., 3.102% to 2/24/2032, FLR (SOFR - 1 day + 1.41%) to 2/24/2033 | | | 725,000 | 713,677 |
| Goldman Sachs Group, Inc., 2.908%, 7/21/2042 | | | 1,896,000 | 1,683,517 |
| Goldman Sachs Group, Inc., 3.436% to 2/24/2042, FLR (SOFR - 1 day + 1.632%) to 2/24/2043 | | | 690,000 | 664,202 |
| HSBC Holdings PLC, 2.099% to 6/04/2025, FLR (SOFR - 1 day + 1.929%) to 6/04/2026 | | | 3,637,000 | 3,545,711 |
| HSBC Holdings PLC, 2.357% to 8/18/2030, FLR (SOFR - 1 day + 1.947%) to 8/18/2031 | | | 3,604,000 | 3,310,078 |
| HSBC Holdings PLC, 5.25%, 3/14/2044 | | | 1,093,000 | 1,252,892 |
| JPMorgan Chase & Co., 3.782% to 2/01/2027, FLR (LIBOR - 3mo. + 1.337%) to 2/01/2028 | | | 5,000,000 | 5,220,472 |
| JPMorgan Chase & Co., 2.545% to 11/08/2031, FLR (SOFR - 1 day + 1.18%) to 11/08/2032 | | | 1,504,000 | 1,436,911 |
| JPMorgan Chase & Co., 3.109% to 4/22/2040, FLR (SOFR - 1 day + 2.46%) to 4/22/2041 | | | 909,000 | 854,368 |
| Kasikornbank PLC (Hong Kong Branch), 3.343% to 10/02/2026, FLR (CMT - 5yr. + 1.7%) to 10/02/2031 | | | 1,269,000 | 1,229,416 |
| Mitsubishi UFJ Financial Group, Inc., 1.64% to 10/13/2026, FLR (CMT - 1yr. + 0.67%) to 10/13/2027 | | | 1,798,000 | 1,706,730 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Major Banks – continued |
| Mitsubishi UFJ Financial Group, Inc., 2.494% to 10/13/2031, FLR (CMT - 1yr. + 0.97%) to 10/13/2032 | | $ | 885,000 | $ 832,659 |
| Morgan Stanley, 3.125%, 7/27/2026 | | | 3,309,000 | 3,373,045 |
| Morgan Stanley, 3.622% to 4/01/2030, FLR (SOFR - 1 day + 3.12%) to 4/01/2031 | | | 2,782,000 | 2,876,032 |
| Morgan Stanley, 3.217% to 4/22/2041, FLR (SOFR - 1 day + 1.485%) to 4/22/2042 | | | 1,309,000 | 1,249,510 |
| National Australia Bank Ltd., 3.347% to 1/12/2032, FLR (CMT - 5yr. + 1.7%) to 1/12/2037 (n) | | | 1,743,000 | 1,663,615 |
| Nordea Bank Abp, 1.5%, 9/30/2026 (n) | | | 2,400,000 | 2,285,214 |
| Oversea-Chinese Banking Corp. Ltd., 1.832% to 9/10/2025, FLR (CMT - 1yr. + 1.58%) to 9/10/2030 (n) | | | 723,000 | 700,168 |
| Royal Bank of Canada, 2.3%, 11/03/2031 | | | 2,566,000 | 2,426,068 |
| Société Générale S.A., 2.797%, 1/19/2028 (n) | | | 1,226,000 | 1,190,356 |
| Sumitomo Mitsui Financial Group, Inc., 1.71%, 1/12/2031 | | | 1,818,000 | 1,623,026 |
| Toronto Dominion Bank, 1.25%, 9/10/2026 | | | 1,802,000 | 1,708,279 |
| Toronto Dominion Bank, 2%, 9/10/2031 | | | 2,381,000 | 2,211,274 |
| UBS Group AG, 3.179% to 2/11/2042, FLR (CMT - 1yr. + 1.1%) to 2/11/2043 (n) | | | 1,349,000 | 1,253,456 |
| UniCredit S.p.A., 2.569% to 9/22/2025, FLR (CMT - 1yr. + 2.3%) to 9/22/2026 (n) | | | 1,750,000 | 1,671,993 |
| Wells Fargo & Co., 3.35% to 3/02/2032, FLR (SOFR - 1 day + 1.5%) to 3/02/2033 | | | 2,705,000 | 2,739,552 |
| | | | | $72,914,020 |
| Medical & Health Technology & Services – 0.4% |
| Alcon Finance Corp., 2.75%, 9/23/2026 (n) | | $ | 1,818,000 | $ 1,825,589 |
| Alcon, Inc., 2.6%, 5/27/2030 (n) | | | 1,818,000 | 1,735,245 |
| Becton, Dickinson and Co., 2.823%, 5/20/2030 | | | 3,182,000 | 3,126,671 |
| HCA, Inc., 5.125%, 6/15/2039 | | | 1,600,000 | 1,783,112 |
| ProMedica Toledo Hospital, “B”, AGM, 5.325%, 11/15/2028 | | | 1,721,000 | 1,962,053 |
| Thermo Fisher Scientific, Inc., 2.8%, 10/15/2041 | | | 1,407,000 | 1,295,401 |
| | | | | $11,728,071 |
| Medical Equipment – 0.1% |
| Boston Scientific Corp., 3.75%, 3/01/2026 | | $ | 764,000 | $ 797,687 |
| Danaher Corp., 2.6%, 10/01/2050 | | | 1,545,000 | 1,325,630 |
| | | | | $2,123,317 |
| Metals & Mining – 0.4% |
| Anglo American Capital PLC, 2.875%, 3/17/2031 (n) | | $ | 2,616,000 | $ 2,477,687 |
| ArcelorMittal S.A., 4.25%, 7/16/2029 | | | 716,000 | 733,915 |
| Ero Copper Corp., 6.5%, 2/15/2030 (n) | | | 613,000 | 592,394 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Metals & Mining – continued |
| First Quantum Minerals Ltd., 6.875%, 10/15/2027 (n) | | $ | 2,976,000 | $ 3,162,655 |
| Glencore Funding LLC, 2.5%, 9/01/2030 (n) | | | 909,000 | 836,376 |
| Glencore Funding LLC, 2.85%, 4/27/2031 (n) | | | 918,000 | 862,182 |
| JSW Steel Ltd., 5.05%, 4/05/2032 (n) | | | 1,876,000 | 1,737,197 |
| Minsur S.A., 4.5%, 10/28/2031 (n) | | | 814,000 | 793,650 |
| Petra Diamonds US$ Treasury PLC, 10.5% PIK to 12/31/2022, 10.5% PIK/9.75% Cash to 6/30/2023, 9.75% Cash to 3/08/2026 (n)(p) | | | 1,529,897 | 1,533,722 |
| | | | | $12,729,778 |
| Midstream – 0.5% |
| Cheniere Corpus Christi Holdings LLC, 3.7%, 11/15/2029 | | $ | 822,000 | $ 837,434 |
| Energy Transfer LP, 4%, 10/01/2027 | | | 479,000 | 495,121 |
| Energy Transfer LP, 3.75%, 5/15/2030 | | | 473,000 | 480,646 |
| Energy Transfer Partners LP, 5.15%, 3/15/2045 | | | 1,364,000 | 1,390,017 |
| Galaxy Pipeline Assets Bidco Ltd., 1.75%, 9/30/2027 (n) | | | 1,957,300 | 1,902,548 |
| Galaxy Pipeline Assets Bidco Ltd., 2.625%, 3/31/2036 (n) | | | 2,156,000 | 1,946,508 |
| Galaxy Pipeline Assets Bidco Ltd., 2.94%, 9/30/2040 (n) | | | 1,779,000 | 1,635,991 |
| Galaxy Pipeline Assets Bidco Ltd., 3.25%, 9/30/2040 (n) | | | 1,589,000 | 1,468,222 |
| Plains All American Pipeline LP/PAA Finance Corp., 3.55%, 12/15/2029 | | | 1,827,000 | 1,803,139 |
| Plains All American Pipeline LP/PAA Finance Corp., 4.3%, 1/31/2043 | | | 1,364,000 | 1,224,401 |
| Sabine Pass Liquefaction LLC, 4.2%, 3/15/2028 | | | 3,055,000 | 3,212,688 |
| Sabine Pass Liquefaction LLC, 4.5%, 5/15/2030 | | | 927,000 | 1,000,037 |
| | | | | $17,396,752 |
| Mortgage-Backed – 3.5% | |
| Fannie Mae, 4.5%, 1/01/2023 - 11/01/2042 | | $ | 1,677,460 | $ 1,818,091 |
| Fannie Mae, 5%, 7/01/2023 - 3/01/2042 | | | 3,285,007 | 3,639,532 |
| Fannie Mae, 3%, 11/01/2028 - 9/01/2046 | | | 6,117,663 | 6,292,718 |
| Fannie Mae, 2.5%, 11/01/2031 - 10/01/2046 | | | 665,050 | 663,471 |
| Fannie Mae, 3.5%, 12/25/2031 - 2/25/2036 (i) | | | 602,833 | 59,754 |
| Fannie Mae, 6.5%, 1/01/2033 - 10/01/2037 | | | 42,426 | 46,663 |
| Fannie Mae, 3%, 2/25/2033 (i) | | | 769,568 | 75,743 |
| Fannie Mae, 5.5%, 5/01/2033 - 5/01/2044 | | | 3,136,436 | 3,508,306 |
| Fannie Mae, 6%, 8/01/2034 - 6/01/2038 | | | 159,759 | 179,489 |
| Fannie Mae, 3.5%, 4/25/2040 - 12/01/2047 | | | 2,739,032 | 2,857,334 |
| Fannie Mae, 4%, 9/01/2040 - 7/01/2043 | | | 4,016,314 | 4,298,297 |
| Fannie Mae, 2%, 10/25/2040 - 5/25/2044 | | | 301,801 | 301,137 |
| Fannie Mae, UMBS, 1.5%, 2/01/2042 | | | 42,743 | 40,262 |
| Fannie Mae, UMBS, 2%, 2/01/2042 - 3/01/2052 | | | 4,105,347 | 3,968,356 |
| Fannie Mae, UMBS, 2.5%, 3/01/2042 - 3/01/2052 | | | 5,883,154 | 5,831,266 |
| Fannie Mae, UMBS, 5.5%, 5/01/2044 | | | 511,826 | 574,796 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Mortgage-Backed – continued | |
| Fannie Mae, UMBS, 3.5%, 5/01/2049 | | $ | 540,373 | $ 567,576 |
| Fannie Mae, UMBS, 3%, 7/01/2050 - 12/01/2051 | | | 497,274 | 504,960 |
| Freddie Mac, 5%, 4/01/2023 - 12/01/2044 | | | 1,691,151 | 1,879,025 |
| Freddie Mac, 0.895%, 4/25/2024 (i) | | | 16,717,792 | 265,285 |
| Freddie Mac, 0.604%, 7/25/2024 (i) | | | 23,894,876 | 232,375 |
| Freddie Mac, 4.5%, 9/01/2024 - 5/01/2042 | | | 1,027,682 | 1,115,406 |
| Freddie Mac, 4%, 7/01/2025 - 4/01/2044 | | | 1,179,411 | 1,262,342 |
| Freddie Mac, 3.5%, 1/15/2027 - 10/25/2058 | | | 4,325,015 | 4,533,096 |
| Freddie Mac, 1.367%, 3/25/2027 (i) | | | 2,188,000 | 137,611 |
| Freddie Mac, 0.576%, 7/25/2027 (i) | | | 45,234,282 | 1,258,241 |
| Freddie Mac, 0.429%, 8/25/2027 (i) | | | 34,249,798 | 735,309 |
| Freddie Mac, 0.291%, 1/25/2028 (i) | | | 63,661,441 | 1,091,265 |
| Freddie Mac, 0.302%, 1/25/2028 (i) | | | 26,243,182 | 462,840 |
| Freddie Mac, 0.133%, 2/25/2028 (i) | | | 78,448,675 | 711,161 |
| Freddie Mac, 2.5%, 3/15/2028 | | | 257,889 | 259,112 |
| Freddie Mac, 0.119%, 4/25/2028 (i) | | | 50,447,067 | 427,181 |
| Freddie Mac, 3%, 6/15/2028 - 3/01/2047 | | | 5,494,148 | 5,635,681 |
| Freddie Mac, 1.089%, 7/25/2029 (i) | | | 8,105,703 | 572,537 |
| Freddie Mac, 1.143%, 8/25/2029 (i) | | | 14,222,258 | 1,054,014 |
| Freddie Mac, 1.798%, 4/25/2030 (i) | | | 3,344,437 | 437,002 |
| Freddie Mac, 1.868%, 4/25/2030 (i) | | | 8,166,315 | 1,102,691 |
| Freddie Mac, 1.662%, 5/25/2030 (i) | | | 4,373,949 | 533,146 |
| Freddie Mac, 1.796%, 5/25/2030 (i) | | | 9,928,903 | 1,305,165 |
| Freddie Mac, 5.5%, 6/01/2030 - 9/01/2041 | | | 1,022,481 | 1,149,590 |
| Freddie Mac, 1.341%, 6/25/2030 (i) | | | 3,957,955 | 395,131 |
| Freddie Mac, 1.599%, 8/25/2030 (i) | | | 3,506,241 | 422,071 |
| Freddie Mac, 1.17%, 9/25/2030 (i) | | | 2,193,674 | 196,101 |
| Freddie Mac, 0.33%, 1/25/2031 (i) | | | 12,736,271 | 318,678 |
| Freddie Mac, 0.781%, 1/25/2031 (i) | | | 4,987,462 | 314,664 |
| Freddie Mac, 6%, 8/01/2034 - 10/01/2038 | | | 208,633 | 236,942 |
| Freddie Mac, 5.5%, 2/15/2036 (i) | | | 185,199 | 32,624 |
| Freddie Mac, 6.5%, 5/01/2037 | | | 7,902 | 8,855 |
| Freddie Mac, 4.5%, 12/15/2040 (i) | | | 65,231 | 6,195 |
| Freddie Mac, UMBS, 2.5%, 8/01/2040 - 3/01/2052 | | | 3,396,325 | 3,360,643 |
| Freddie Mac, UMBS, 2%, 2/01/2042 - 2/01/2052 | | | 3,480,362 | 3,353,059 |
| Freddie Mac, UMBS, 3%, 2/01/2050 - 1/01/2052 | | | 1,383,667 | 1,409,851 |
| Ginnie Mae, 5.5%, 5/15/2033 - 1/20/2042 | | | 156,265 | 176,222 |
| Ginnie Mae, 4.5%, 7/20/2033 - 9/20/2041 | | | 2,432,993 | 2,657,228 |
| Ginnie Mae, 5.69%, 8/20/2034 | | | 524,047 | 577,355 |
| Ginnie Mae, 4%, 5/16/2039 - 7/20/2049 | | | 1,107,765 | 1,158,944 |
| Ginnie Mae, 3.5%, 10/20/2041 (i) | | | 296,930 | 19,341 |
| Ginnie Mae, 3.5%, 12/15/2041 - 4/20/2047 | | | 3,466,178 | 3,676,322 |
| Ginnie Mae, 2.5%, 6/20/2042 - 11/20/2051 | | | 4,564,896 | 4,568,530 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Mortgage-Backed – continued | |
| Ginnie Mae, 4%, 8/16/2042 (i) | | $ | 329,292 | $ 45,597 |
| Ginnie Mae, 3%, 4/20/2045 - 9/20/2047 | | | 2,621,038 | 2,690,706 |
| Ginnie Mae, 2%, 1/20/2052 | | | 1,795,046 | 1,757,562 |
| Ginnie Mae, 0.584%, 2/16/2059 (i) | | | 1,129,451 | 46,411 |
| Ginnie Mae, TBA, 3.5%, 3/15/2052 - 4/21/2052 | | | 425,000 | 438,061 |
| Ginnie Mae, TBA, 4%, 3/15/2052 | | | 265,238 | 275,578 |
| UMBS, TBA, 2%, 3/25/2037 - 4/25/2052 | | | 21,825,000 | 21,084,518 |
| UMBS, TBA, 2.5%, 11/25/2051 | | | 4,405,000 | 4,345,980 |
| UMBS, TBA, 3.5%, 3/14/2052 | | | 2,050,000 | 2,111,180 |
| UMBS, TBA, 3%, 3/25/2052 | | | 1,475,000 | 1,489,750 |
| | | | | $118,561,925 |
| Municipals – 0.2% |
| Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “B”, 2.746%, 6/01/2034 | | $ | 855,000 | $ 835,825 |
| Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “B”, 3%, 6/01/2046 | | | 825,000 | 835,524 |
| Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “B-1”, 1.85%, 6/01/2031 | | | 635,000 | 632,606 |
| Massachusetts Educational Financing Authority, Education Loan Rev., “A”, 2.562%, 7/01/2026 | | | 55,000 | 55,535 |
| Massachusetts Educational Financing Authority, Education Loan Rev., “A”, 2.682%, 7/01/2027 | | | 255,000 | 257,941 |
| Michigan Finance Authority Tobacco Settlement Asset-Backed Rev. (2006 Sold Tobacco Receipts), “A-1”, 2.326%, 6/01/2030 | | | 599,796 | 601,879 |
| Philadelphia, PA, School District, “A”, AGM, 5.995%, 9/01/2030 | | | 1,210,000 | 1,505,983 |
| State of Florida, “A”, 2.154%, 7/01/2030 | | | 936,000 | 908,474 |
| Texas Transportation Commission, Central Texas Turnpike System First Tier Refunding Rev., Taxable, “B”, 1.98%, 8/15/2042 | | | 1,355,000 | 1,359,585 |
| West Virginia Tobacco Settlement Financing Authority Asset-Backed Refunding, “A-1”, 1.497%, 6/01/2024 | | | 210,000 | 206,962 |
| West Virginia Tobacco Settlement Financing Authority Asset-Backed Refunding, “A-1”, 1.647%, 6/01/2025 | | | 175,000 | 170,889 |
| | | | | $7,371,203 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Natural Gas - Distribution – 0.1% |
| ENN Clean Energy International Investment Ltd., 3.375%, 5/12/2026 (n) | | $ | 1,893,000 | $ 1,852,104 |
| Infraestructura Energética Nova S.A.B. de C.V., 4.875%, 1/14/2048 | | | 2,466,000 | 2,188,600 |
| NiSource, Inc., 5.65%, 2/01/2045 | | | 462,000 | 553,464 |
| | | | | $4,594,168 |
| Network & Telecom – 0.3% |
| AT&T, Inc., 2.75%, 6/01/2031 | | $ | 1,998,000 | $ 1,944,489 |
| AT&T, Inc., 3.3%, 2/01/2052 | | | 757,000 | 672,260 |
| AT&T, Inc., 3.55%, 9/15/2055 | | | 519,000 | 470,621 |
| Total Play Telecomunicaciones S.A. de C.V., 6.375%, 9/20/2028 (n) | | | 1,574,000 | 1,416,915 |
| Verizon Communications, Inc., 2.1%, 3/22/2028 | | | 236,000 | 227,935 |
| Verizon Communications, Inc., 3.15%, 3/22/2030 | | | 427,000 | 428,410 |
| Verizon Communications, Inc., 2.55%, 3/21/2031 | | | 2,477,000 | 2,377,692 |
| Verizon Communications, Inc., 3.4%, 3/22/2041 | | | 864,000 | 832,049 |
| | | | | $8,370,371 |
| Oil Services – 0.1% |
| Acu Petroleo Luxembourg S.à r.l., 7.5%, 1/13/2032 (n) | | $ | 629,000 | $ 581,888 |
| Guara Norte S.à r.l., 5.198%, 6/15/2034 (n) | | | 1,230,131 | 1,131,720 |
| Halliburton Co., 5%, 11/15/2045 | | | 909,000 | 1,010,773 |
| MV24 Capital B.V., 6.748%, 6/01/2034 | | | 1,125,225 | 1,101,033 |
| | | | | $3,825,414 |
| Oils – 0.2% |
| FS Luxembourg S.à r.l., 10%, 12/15/2025 (n) | | $ | 1,740,000 | $ 1,800,917 |
| MC Brazil Downstream Trading S.à r.l., 7.25%, 6/30/2031 (n) | | | 1,553,000 | 1,436,525 |
| Puma International Financing S.A., 5%, 1/24/2026 | | | 2,372,000 | 2,324,560 |
| Valero Energy Corp., 2.8%, 12/01/2031 | | | 1,219,000 | 1,151,720 |
| | | | | $6,713,722 |
| Other Banks & Diversified Financials – 0.8% |
| ABQ Finance Ltd., 2%, 7/06/2026 | | $ | 961,000 | $ 923,213 |
| Banco Continental S.A.E.C.A., 2.75%, 12/10/2025 (n) | | | 1,239,000 | 1,164,053 |
| Banco de Chile, 2.99%, 12/09/2031 (n) | | | 809,000 | 757,426 |
| Banco GNB Sudameris S.A., 7.5% to 4/16/2026, FLR (CMT - 5yr. + 6.66%) to 4/16/2031 (n) | | | 1,456,000 | 1,392,591 |
| Banco Industrial S. A., 4.875% to 1/29/2026, FLR (CMT - 5yr. + 4.442%) to 1/29/2031 (n) | | | 1,050,000 | 1,021,650 |
| Bangkok Bank Public Co. Ltd., 3.466% to 9/23/2031, FLR (CMT - 5yr. + 2.15%) to 9/23/2036 (n) | | | 2,084,000 | 1,967,900 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Other Banks & Diversified Financials – continued |
| Bank Hapoalim B.M., 3.255% to 1/21/2027, FLR (CMT - 5yr. + 2.155%) to 1/21/2032 (n) | | $ | 1,974,000 | $ 1,890,105 |
| Bank Leumi le-Israel B.M., 3.275% to 1/29/2026, FLR (CMT - 5yr. + 1.631%) to 1/29/2031 (n) | | | 3,963,000 | 3,796,554 |
| BBVA Bancomer S.A./Texas, 5.875%, 9/13/2034 (n) | | | 823,000 | 817,651 |
| BPCE S.A., 1.652% to 10/06/2025, FLR (SOFR + 1.52%) to 10/06/2026 (n) | | | 2,670,000 | 2,547,152 |
| Commercial Bank PSQC, 4.5% to 9/03/2026, FLR (CMT - 5yr. + 3.874%) to 9/03/2169 | | | 2,148,000 | 2,135,112 |
| Mizrahi Tefahot Bank Ltd., 3.077% to 4/07/2026, FLR (CMT - 5yr. + 2.25%) to 4/07/2031 (n) | | | 1,818,000 | 1,738,008 |
| NBK Tier 1 Financing Ltd., 3.625% to 2/24/2027, FLR (Swap Rate - 6yr. + 2.875%) to 8/24/2169 | | | 1,256,000 | 1,202,620 |
| United Overseas Bank Ltd., 2% to 10/14/2026, FLR (CMT - 5yr. + 1.23%) to 10/14/2031 (n) | | | 1,677,000 | 1,620,821 |
| Uzbek Industrial and Construction Bank, 5.75%, 12/02/2024 | | | 3,783,000 | 3,704,389 |
| | | | | $26,679,245 |
| Railroad & Shipping – 0.0% |
| Canadian Pacific Railway Co., 3%, 12/02/2041 | | $ | 323,000 | $ 299,662 |
| Canadian Pacific Railway Co., 3.1%, 12/02/2051 | | | 480,000 | 435,168 |
| | | | | $734,830 |
| Real Estate - Apartment – 0.1% |
| American Homes 4 Rent L.P., REIT, 2.375%, 7/15/2031 | | $ | 1,118,000 | $ 1,027,888 |
| American Homes 4 Rent L.P., REIT, 3.375%, 7/15/2051 | | | 1,114,000 | 955,218 |
| | | | | $1,983,106 |
| Real Estate - Office – 0.1% |
| Corporate Office Property LP, REIT, 2%, 1/15/2029 | | $ | 1,314,000 | $ 1,216,471 |
| Corporate Office Property LP, REIT, 2.75%, 4/15/2031 | | | 1,544,000 | 1,450,908 |
| | | | | $2,667,379 |
| Real Estate - Other – 0.1% |
| EPR Properties, REIT, 3.6%, 11/15/2031 | | $ | 741,000 | $ 699,504 |
| Lexington Realty Trust Co., 2.7%, 9/15/2030 | | | 1,082,000 | 1,031,424 |
| Lexington Realty Trust Co., 2.375%, 10/01/2031 | | | 641,000 | 591,444 |
| W.P. Carey, Inc., REIT, 2.45%, 2/01/2032 | | | 555,000 | 515,363 |
| | | | | $2,837,735 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Real Estate - Retail – 0.2% |
| Brixmor Operating Partnership LP, REIT, 4.05%, 7/01/2030 | | $ | 1,573,000 | $ 1,631,899 |
| Brixmor Operating Partnership LP, REIT, 2.5%, 8/16/2031 | | | 597,000 | 551,819 |
| STORE Capital Corp., REIT, 2.75%, 11/18/2030 | | | 1,909,000 | 1,801,947 |
| STORE Capital Corp., REIT, 2.7%, 12/01/2031 | | | 1,198,000 | 1,111,614 |
| | | | | $5,097,279 |
| Restaurants – 0.1% |
| Starbucks Corp., 3%, 2/14/2032 | | $ | 2,068,000 | $ 2,056,155 |
| Retailers – 0.2% |
| Alibaba Group Holding Ltd., 2.125%, 2/09/2031 | | $ | 1,975,000 | $ 1,777,606 |
| Alimentation Couche-Tard, Inc., 3.8%, 1/25/2050 (n) | | | 1,378,000 | 1,327,031 |
| Grupo Axo S.A.P.I. de C.V., 5.75%, 6/08/2026 (n) | | | 1,154,000 | 1,144,341 |
| Home Depot, Inc., 3.9%, 6/15/2047 | | | 1,773,000 | 1,882,352 |
| MercadoLibre, Inc., 2.375%, 1/14/2026 | | | 550,000 | 515,003 |
| MercadoLibre, Inc., 3.125%, 1/14/2031 | | | 507,000 | 446,353 |
| Nordstrom, Inc., 4.25%, 8/01/2031 | | | 882,000 | 789,708 |
| Nordstrom, Inc., 5%, 1/15/2044 | | | 478,000 | 420,640 |
| | | | | $8,303,034 |
| Specialty Chemicals – 0.0% |
| Braskem Idesa S.A.P.I., 6.99%, 2/20/2032 (n) | | $ | 1,207,000 | $ 1,152,685 |
| Specialty Stores – 0.1% |
| DICK'S Sporting Goods, 3.15%, 1/15/2032 | | $ | 640,000 | $ 615,134 |
| DICK'S Sporting Goods, 4.1%, 1/15/2052 | | | 1,171,000 | 1,024,782 |
| | | | | $1,639,916 |
| Supranational – 0.1% |
| Inter-American Development Bank, 4.375%, 1/24/2044 | | $ | 511,000 | $ 673,786 |
| West African Development Bank, 4.7%, 10/22/2031 (n) | | | 1,855,000 | 1,899,520 |
| | | | | $2,573,306 |
| Telecommunications - Wireless – 0.5% |
| American Tower Corp., REIT, 2.1%, 6/15/2030 | | $ | 1,765,000 | $ 1,598,186 |
| American Tower Corp., REIT, 2.95%, 1/15/2051 | | | 1,167,000 | 957,061 |
| Cellnex Finance Co. S.A., 3.875%, 7/07/2041 (n) | | | 1,304,000 | 1,088,957 |
| Crown Castle International Corp., 4.45%, 2/15/2026 | | | 799,000 | 844,752 |
| Crown Castle International Corp., 3.7%, 6/15/2026 | | | 3,355,000 | 3,463,511 |
| CT Trust, 5.125%, 2/03/2032 (n) | | | 925,000 | 926,563 |
| Millicom International Cellular S.A., 4.5%, 4/27/2031 (n) | | | 512,000 | 479,079 |
| Rogers Communications, Inc., 3.7%, 11/15/2049 | | | 1,709,000 | 1,527,833 |
| Telefonica Celular del Paraguay S.A., 5.875%, 4/15/2027 (n) | | | 1,846,000 | 1,877,364 |
| Telefonica Celular del Paraguay S.A., 5.875%, 4/15/2027 | | | 1,203,000 | 1,223,439 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Telecommunications - Wireless – continued |
| T-Mobile USA, Inc., 3.5%, 4/15/2025 | | $ | 2,182,000 | $ 2,243,140 |
| VEON Holdings B.V., 4%, 4/09/2025 (n)(u) | | | 1,444,000 | 552,330 |
| | | | | $16,782,215 |
| Transportation - Services – 0.3% |
| Adani Ports & Special Economic Zone Ltd., 5%, 8/02/2041 (n) | | $ | 1,694,000 | $ 1,627,291 |
| Cliffton Ltd., 6.25%, 10/25/2025 (n) | | | 2,561,000 | 2,436,151 |
| Delhi International Airport Ltd., 6.45%, 6/04/2029 (n) | | | 1,600,000 | 1,490,208 |
| ERAC USA Finance LLC, 3.3%, 12/01/2026 | | | 2,463,000 | 2,535,122 |
| Hacienda Investments Ltd. via DME Airport Ltd., 5.35%, 2/08/2028 (n)(u) | | | 609,000 | 301,455 |
| ICTSI Treasury B.V., 5.875%, 9/17/2025 | | | 1,055,000 | 1,162,009 |
| JSW Infrastructure Ltd., 4.95%, 1/21/2029 (n) | | | 1,065,000 | 1,037,459 |
| | | | | $10,589,695 |
| U.S. Government Agencies and Equivalents – 0.0% |
| Small Business Administration, 6.07%, 3/01/2022 | | $ | 1,368 | $ 1,368 |
| Small Business Administration, 5.16%, 2/01/2028 | | | 22,756 | 23,640 |
| Small Business Administration, 2.21%, 2/01/2033 | | | 121,725 | 120,489 |
| Small Business Administration, 2.22%, 3/01/2033 | | | 186,973 | 185,303 |
| Small Business Administration, 3.15%, 7/01/2033 | | | 217,017 | 222,085 |
| Small Business Administration, 3.16%, 8/01/2033 | | | 275,281 | 281,598 |
| Small Business Administration, 3.62%, 9/01/2033 | | | 228,395 | 236,400 |
| | | | | $1,070,883 |
| U.S. Treasury Obligations – 3.2% |
| U.S. Treasury Bonds, 6.375%, 8/15/2027 | | $ | 106,000 | $ 131,428 |
| U.S. Treasury Bonds, 5.25%, 2/15/2029 | | | 2,965,000 | 3,630,967 |
| U.S. Treasury Bonds, 1.625%, 5/15/2031 | | | 4,940,000 | 4,854,129 |
| U.S. Treasury Bonds, 1.125%, 8/15/2040 | | | 3,024,000 | 2,505,431 |
| U.S. Treasury Bonds, 1.375%, 11/15/2040 | | | 1,929,000 | 1,667,982 |
| U.S. Treasury Bonds, 2.875%, 5/15/2043 | | | 6,853,400 | 7,513,575 |
| U.S. Treasury Bonds, 2.875%, 11/15/2046 (f) | | | 7,328,000 | 8,132,362 |
| U.S. Treasury Bonds, 2%, 8/15/2051 | | | 1,150,000 | 1,103,102 |
| U.S. Treasury Bonds, 1.875%, 11/15/2051 | | | 6,268,500 | 5,848,315 |
| U.S. Treasury Notes, 1.75%, 6/15/2022 | | | 11,589,000 | 11,631,673 |
| U.S. Treasury Notes, 0.125%, 9/30/2022 | | | 6,171,000 | 6,148,100 |
| U.S. Treasury Notes, 2.5%, 8/15/2023 | | | 7,225,000 | 7,350,026 |
| U.S. Treasury Notes, 0.375%, 10/31/2023 | | | 11,653,300 | 11,454,830 |
| U.S. Treasury Notes, 2.75%, 2/15/2024 | | | 7,855,000 | 8,050,761 |
| U.S. Treasury Notes, 2.5%, 5/15/2024 | | | 4,680,000 | 4,778,170 |
| U.S. Treasury Notes, 0.875%, 9/30/2026 | | | 5,600,000 | 5,383,656 |
| U.S. Treasury Notes, 2.25%, 8/15/2027 | | | 8,936,000 | 9,156,957 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| U.S. Treasury Obligations – continued |
| U.S. Treasury Notes, 2.375%, 5/15/2029 | | $ | 8,149,500 | $ 8,454,151 |
| | | | | $107,795,615 |
| Utilities - Electric Power – 1.8% |
| Adani Green Energy (UP) Ltd./Prayatna Developers Private Ltd., 6.25%, 12/10/2024 (n) | | $ | 3,526,000 | $ 3,684,670 |
| Adani Transmission Ltd., 4.25%, 5/21/2036 (n) | | | 2,828,125 | 2,690,197 |
| AES Gener S.A., 7.125% to 7/06/2024, FLR (Swap Rate - 5yr. + 4.644%) to 7/06/2029, FLR (Swap Rate - 5yr. + 4.894%) to 7/06/2044, FLR (Swap Rate - 5yr. + 5.644%) to 3/26/2079 | | | 1,802,000 | 1,802,018 |
| AES Gener S.A., 6.35% to 4/07/2025, FLR (CMT - 5yr. + 4.917%) to 4/07/2030, FLR (CMT - 5yr. + 5.167%) to 4/07/2045, FLR (CMT - 5yr. + 5.917%) to 10/07/2079 (n) | | | 1,885,000 | 1,882,663 |
| AES Panama Generation Holdings SRL, 4.375%, 5/31/2030 (n) | | | 1,897,000 | 1,830,795 |
| Alabama Power Co., 3.45%, 10/01/2049 | | | 1,609,000 | 1,533,390 |
| Alfa Desarrollo S.p.A., 4.55%, 9/27/2051 (n) | | | 1,031,000 | 872,752 |
| American Electric Power Co., Inc., 2.3%, 3/01/2030 | | | 955,000 | 893,189 |
| American Transmission Systems, Inc., 2.65%, 1/15/2032 (n) | | | 305,000 | 292,812 |
| Azure Power Energy Ltd., 3.575%, 8/19/2026 (n) | | | 1,132,348 | 1,092,715 |
| CenterPoint Energy, Inc., 2.65%, 6/01/2031 | | | 936,000 | 895,439 |
| Clean Renewable Power, 4.25%, 3/25/2027 (n) | | | 1,545,000 | 1,490,925 |
| Dominion Energy, Inc., 2.25%, 8/15/2031 | | | 1,172,000 | 1,084,848 |
| Duke Energy Corp., 3.3%, 6/15/2041 | | | 1,936,000 | 1,772,033 |
| Duke Energy Indiana LLC, 2.75%, 4/01/2050 | | | 691,000 | 586,719 |
| Electricidad Firme de Mexico, 4.9%, 11/20/2026 (n) | | | 1,619,000 | 1,576,517 |
| Empresa Generadora de Electricidad Haina S.A., 5.625%, 11/08/2028 (n) | | | 1,480,000 | 1,436,725 |
| Energuate Trust, 5.875%, 5/03/2027 | | | 1,613,000 | 1,600,177 |
| EnfraGen Energia Sur S.A., 5.375%, 12/30/2030 (n) | | | 1,426,000 | 1,158,639 |
| Evergy, Inc., 2.9%, 9/15/2029 | | | 842,000 | 835,025 |
| FirstEnergy Corp., 2.65%, 3/01/2030 | | | 2,000,000 | 1,879,320 |
| Florida Power & Light Co., 2.85%, 4/01/2025 | | | 477,000 | 487,143 |
| Florida Power & Light Co., 2.45%, 2/03/2032 | | | 734,000 | 712,824 |
| Florida Power & Light Co., 3.95%, 3/01/2048 | | | 1,062,000 | 1,143,181 |
| Investment Energy Resources Ltd., 6.25%, 4/26/2029 (n) | | | 1,219,000 | 1,261,665 |
| Jersey Central Power & Light Co., 2.75%, 3/01/2032 (n) | | | 3,045,000 | 2,930,287 |
| Listrindo Capital B.V., 4.95%, 9/14/2026 | | | 1,877,000 | 1,881,693 |
| Mercury Chile Holdco LLC, 6.5%, 1/24/2027 (n) | | | 1,039,000 | 1,002,635 |
| MidAmerican Energy Co., 3.95%, 8/01/2047 | | | 1,818,000 | 1,935,940 |
| NextEra Energy Capital Holdings, Inc., 2.44%, 1/15/2032 | | | 1,798,000 | 1,682,240 |
| NextEra Energy Capital Holdings, Inc., 3.8%, 3/15/2082 | | | 928,000 | 870,826 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Utilities - Electric Power – continued |
| Pacific Gas & Electric Co., 3.25%, 2/16/2024 | | $ | 654,000 | $ 658,294 |
| Pacific Gas & Electric Co., 2.5%, 2/01/2031 | | | 1,083,000 | 964,369 |
| Pacific Gas & Electric Co., 4.95%, 7/01/2050 | | | 471,000 | 466,556 |
| ReNew Wind Energy AP2/ReNew Power Private Ltd., 4.5%, 7/14/2028 (n) | | | 1,249,000 | 1,158,088 |
| Southern California Edison Co., 4.5%, 9/01/2040 | | | 454,000 | 468,179 |
| Southern California Edison Co., 3.65%, 2/01/2050 | | | 1,836,000 | 1,735,779 |
| Star Energy Geothermal (Salak-Darajat) B.V., 4.85%, 10/14/2038 (n) | | | 1,119,000 | 1,132,081 |
| TermoCandelaria Power Ltd., 7.875%, 1/30/2029 (n) | | | 2,120,750 | 2,023,747 |
| TerraForm Global Operating LLC, 6.125%, 3/01/2026 (n) | | | 1,536,000 | 1,532,160 |
| Transelec S.A., 3.875%, 1/12/2029 (n) | | | 3,854,000 | 3,964,841 |
| Virginia Electric & Power Co., 2.875%, 7/15/2029 | | | 2,473,000 | 2,486,168 |
| | | | | $61,390,264 |
| Utilities - Water – 0.1% |
| Aegea Finance S.à r.l., 5.75%, 10/10/2024 | | $ | 1,716,000 | $ 1,735,305 |
| Total Bonds (Identified Cost, $1,198,078,860) | | $ 1,122,914,786 |
| Preferred Stocks – 0.2% |
| Computer Software - Systems – 0.2% | | | | |
| Samsung Electronics Co. Ltd. (Identified Cost, $7,543,244) | | 146,350 | $ 8,060,558 |
| Convertible Preferred Stocks – 0.2% |
| Medical Equipment – 0.2% | |
| Boston Scientific Corp., 5.5% | | 30,481 | $ 3,520,251 |
| Danaher Corp., 4.75% | | 857 | 1,556,732 |
| Total Convertible Preferred Stocks (Identified Cost, $4,229,789) | $ 5,076,983 |
| Investment Companies (h) – 27.3% |
| Bond Funds – 24.1% |
| MFS High Yield Pooled Portfolio (v) | | | 92,273,163 | $ 809,235,637 |
| Money Market Funds – 3.2% | |
| MFS Institutional Money Market Portfolio, 0.06% (v) | | | 106,862,112 | $ 106,862,112 |
| Total Investment Companies (Identified Cost, $893,365,106) | $ 916,097,749 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Collateral for Securities Loaned – 0.1% |
| JPMorgan U.S. Government Money Market Fund, 0.03% (j) (Identified Cost, $2,836,100) | | | 2,836,100 | $ 2,836,100 |
|
|
| Other Assets, Less Liabilities – (0.8)% | | (27,000,455) |
| Net Assets – 100.0% | $3,354,787,612 |
| (a) | Non-income producing security. |
| (f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
| (h) | An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $916,097,749 and $2,465,690,318, respectively. |
| (i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
| (j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
| (l) | A portion of this security is on loan. See Note 2 for additional information. |
| (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 $379,431,943, representing 11.3% 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: |
| Restricted Securities | Acquisition
Date | Cost | Value |
| ReadyCap Commercial Mortgage Trust, 2021-FL5, “A”, FLR, 1.187% (LIBOR - 1mo. + 1%), 4/25/2038 | 2/14/2022 | $731,774 | $733,416 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.386% (LIBOR - 1mo. + 1.2%), 11/25/2036 | 11/12/2021 | 359,971 | 356,484 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 1.687% (LIBOR - 1mo. + 1.5%), 11/25/2036 | 11/12/2021 | 109,000 | 107,530 |
| Total Restricted Securities | | | $1,197,430 |
| % of Net assets | | | 0.0% |
Portfolio of Investments – continued
| The following abbreviations are used in this report and are defined: |
| ADR | American Depositary Receipt |
| AGM | Assured Guaranty Municipal |
| CLO | Collateralized Loan Obligation |
| CMT | Constant Maturity Treasury |
| FLR | Floating Rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
| IEU | International Equity Unit |
| LIBOR | London Interbank Offered Rate |
| PCL | Public Company Limited |
| REIT | Real Estate Investment Trust |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
| UMBS | Uniform Mortgage-Backed Security |
| Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below: |
| BRL | Brazilian Real |
| CLP | Chilean Peso |
| COP | Colombian Peso |
| EGP | Egypt Pound |
| EUR | Euro |
| IDR | Indonesian Rupiah |
| INR | Indian Rupee |
| KRW | South Korean Won |
| KZT | Kazakhstani Tenge |
| MXN | Mexican Peso |
| MYR | Malaysian Ringgit |
| RUB | Russian Ruble |
| THB | Thai Baht |
| UYU | Uruguayan Peso |
| ZAR | South African Rand |
Derivative Contracts at 2/28/22
| Forward Foreign Currency Exchange Contracts |
Currency
Purchased | Currency
Sold | Counterparty | Settlement
Date | Unrealized
Appreciation
(Depreciation) |
| Asset Derivatives |
| BRL | 9,284,000 | USD | 1,668,104 | JPMorgan Chase Bank N.A. | 3/02/2022 | $134,020 |
| BRL | 4,334,000 | USD | 806,859 | JPMorgan Chase Bank N.A. | 3/03/2022 | 34,208 |
| CLP | 2,272,021,450 | USD | 2,767,080 | Goldman Sachs International | 4/26/2022 | 54,294 |
| MXN | 25,058,000 | USD | 1,215,020 | JPMorgan Chase Bank N.A. | 4/08/2022 | 205 |
| THB | 63,553,000 | USD | 1,941,557 | JPMorgan Chase Bank N.A. | 3/17/2022 | 926 |
| USD | 3,000,578 | BRL | 15,421,171 | JPMorgan Chase Bank N.A. | 3/03/2022 | 7,164 |
| USD | 1,853,760 | BRL | 9,284,000 | JPMorgan Chase Bank N.A. | 3/02/2022 | 51,636 |
| USD | 2,176,687 | BRL | 11,087,171 | JPMorgan Chase Bank N.A. | 5/03/2022 | 60,713 |
| USD | 934,559 | EUR | 832,001 | Deutsche Bank AG | 4/08/2022 | 192 |
| USD | 56,840,810 | EUR | 49,968,186 | Goldman Sachs International | 4/08/2022 | 724,717 |
Portfolio of Investments – continued
| Forward Foreign Currency Exchange Contracts - continued |
Currency
Purchased | Currency
Sold | Counterparty | Settlement
Date | Unrealized
Appreciation
(Depreciation) |
| Asset Derivatives - continued |
| USD | 1,228,672 | EUR | 1,078,451 | HSBC Bank | 4/08/2022 | $17,531 |
| USD | 912,159 | EUR | 810,756 | Morgan Stanley Capital Services, Inc. | 4/08/2022 | 1,650 |
| USD | 1,385,792 | INR | 103,703,000 | Morgan Stanley Capital Services, Inc. | 3/14/2022 | 11,267 |
| USD | 1,795,474 | KZT | 812,901,000 | Deutsche Bank AG | 5/03/2022 | 180,729 |
| USD | 1,243,005 | RUB | 95,371,000 | Goldman Sachs International | 4/25/2022 | 403,244 |
| | | | | | | $1,682,496 |
| Liability Derivatives |
| BRL | 15,421,171 | USD | 3,000,578 | BNP Paribas S.A. | 3/03/2022 | $(7,164) |
| BRL | 11,087,171 | USD | 2,212,875 | JPMorgan Chase Bank N.A. | 3/03/2022 | (61,273) |
| BRL | 9,284,000 | USD | 1,822,679 | JPMorgan Chase Bank N.A. | 5/03/2022 | (50,839) |
| EUR | 1,404,000 | USD | 1,613,799 | Deutsche Bank AG | 4/08/2022 | (37,056) |
| EUR | 1,163,809 | USD | 1,309,967 | HSBC Bank | 4/08/2022 | (2,967) |
| EUR | 1,342,000 | USD | 1,542,899 | JPMorgan Chase Bank N.A. | 4/08/2022 | (35,784) |
| EUR | 990,000 | USD | 1,132,312 | Merrill Lynch International | 4/08/2022 | (20,506) |
| IDR | 1,502,653,589 | USD | 104,460 | JPMorgan Chase Bank N.A. | 4/27/2022 | (278) |
| INR | 293,697,188 | USD | 3,922,500 | JPMorgan Chase Bank N.A. | 3/14/2022 | (29,709) |
| KRW | 4,431,487,000 | USD | 3,691,737 | Merrill Lynch International | 4/11/2022 | (8,396) |
| KZT | 812,902,000 | USD | 1,822,446 | Deutsche Bank AG | 5/03/2022 | (207,698) |
| MYR | 17,295,572 | USD | 4,128,610 | Barclays Bank PLC | 4/11/2022 | (15,284) |
| RUB | 95,372,000 | USD | 1,268,051 | JPMorgan Chase Bank N.A. | 4/25/2022 | (428,281) |
| USD | 2,696,834 | BRL | 15,421,171 | BNP Paribas S.A. | 3/03/2022 | (295,834) |
| USD | 2,947,624 | COP | 11,727,389,450 | Goldman Sachs International | 3/25/2022 | (23,627) |
| USD | 6,237,387 | INR | 476,243,184 | Barclays Bank PLC | 3/14/2022 | (74,949) |
| USD | 1,888,929 | THB | 63,553,000 | JPMorgan Chase Bank N.A. | 3/17/2022 | (53,555) |
| USD | 4,076,826 | ZAR | 63,316,608 | UBS AG | 4/08/2022 | (20,436) |
| | | | | | | $(1,373,636) |
| Futures Contracts |
| Description | Long/
Short | Currency | Contracts | Notional
Amount | Expiration
Date | Value/Unrealized
Appreciation
(Depreciation) |
| Asset Derivatives |
| Interest Rate Futures | | |
| U.S. Treasury Note 10 yr | Long | USD | 313 | $39,887,937 | June – 2022 | $306,117 |
| U.S. Treasury Note 2 yr | Long | USD | 147 | 31,638,305 | June – 2022 | 103,986 |
| U.S. Treasury Ultra Bond | Long | USD | 52 | 9,668,750 | June – 2022 | 109,243 |
| | | | | | | $519,346 |
| Liability Derivatives |
| Interest Rate Futures | | |
| U.S. Treasury Bond | Short | USD | 52 | $8,147,750 | June – 2022 | $(135,474) |
| U.S. Treasury Note 5 yr | Short | USD | 39 | 4,612,969 | June – 2022 | (33,515) |
Portfolio of Investments – continued
| Futures Contracts - continued |
| Description | Long/
Short | Currency | Contracts | Notional
Amount | Expiration
Date | Value/Unrealized
Appreciation
(Depreciation) |
| Liability Derivatives - continued |
| Interest Rate Futures - continued |
| U.S. Treasury Ultra Note 10 yr | Short | USD | 352 | $49,747,500 | June – 2022 | $(586,792) |
| | | | | | | $(755,781) |
At February 28, 2022, the fund had liquid securities with an aggregate value of $664,752 to cover any collateral or margin obligations for certain derivative contracts.
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
At 2/28/22
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
| Assets | |
| Investments in unaffiliated issuers, at value, including $4,229,551 of securities on loan (identified cost, $2,219,697,683) | $2,465,690,318 |
| Investments in affiliated issuers, at value (identified cost, $893,365,106) | 916,097,749 |
| Cash | 654,174 |
| Restricted cash for MBS/TBA | 536,000 |
| Receivables for | |
| Forward foreign currency exchange contracts | 1,682,496 |
| Investments sold | 3,288,375 |
| TBA sale commitments | 21,304,895 |
| Fund shares sold | 2,240,047 |
| Interest and dividends | 17,336,177 |
| Other assets | 8,796 |
| Total assets | $3,428,839,027 |
| Liabilities | |
| Payable to custodian | $465,221 |
| Payables for | |
| Distributions | 723,045 |
| Forward foreign currency exchange contracts | 1,373,636 |
| Net daily variation margin on open futures contracts | 189,798 |
| Investments purchased | 6,703,077 |
| TBA purchase commitments | 54,586,545 |
| Fund shares reacquired | 5,733,116 |
| Collateral for securities loaned, at value (c) | 2,836,100 |
| Payable to affiliates | |
| Investment adviser | 216,499 |
| Administrative services fee | 5,077 |
| Shareholder servicing costs | 825,333 |
| Distribution and service fees | 82,598 |
| Payable for independent Trustees' compensation | 614 |
| Deferred country tax expense payable | 37,247 |
| Accrued expenses and other liabilities | 273,509 |
| Total liabilities | $74,051,415 |
| Net assets | $3,354,787,612 |
Statement of Assets and Liabilities – continued
| Net assets consist of | |
| Paid-in capital | $3,094,945,212 |
| Total distributable earnings (loss) | 259,842,400 |
| Net assets | $3,354,787,612 |
| Shares of beneficial interest outstanding | 259,842,668 |
| (c) | Non-cash collateral is not included. |
| | Net assets | Shares
outstanding | Net asset value
per share (a) |
| Class A | $1,563,026,916 | 121,040,901 | $12.91 |
| Class C | 355,639,260 | 27,556,121 | 12.91 |
| Class I | 1,145,617,439 | 88,749,313 | 12.91 |
| Class R1 | 225,276 | 17,464 | 12.90 |
| Class R2 | 1,646,719 | 127,564 | 12.91 |
| Class R3 | 22,252,894 | 1,722,914 | 12.92 |
| Class R4 | 5,994,894 | 464,111 | 12.92 |
| Class R6 | 260,384,214 | 20,164,280 | 12.91 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $13.48 [100 / 95.75 x $12.91]. On sales of $100,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
Financial Statements
Statement of Operations
Year ended 2/28/22
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net investment income (loss) | |
| Income | |
| Dividends from affiliated issuers | $48,504,703 |
| Interest | 44,005,265 |
| Dividends | 41,528,799 |
| Other | 287,270 |
| Income on securities loaned | 15,926 |
| Foreign taxes withheld | (1,448,085) |
| Total investment income | $132,893,878 |
| Expenses | |
| Management fee | $21,184,479 |
| Distribution and service fees | 8,298,454 |
| Shareholder servicing costs | 3,362,503 |
| Administrative services fee | 473,853 |
| Independent Trustees' compensation | 42,846 |
| Custodian fee | 356,702 |
| Shareholder communications | 208,847 |
| Audit and tax fees | 97,255 |
| Legal fees | 17,703 |
| Miscellaneous | 272,005 |
| Total expenses | $34,314,647 |
| Fees paid indirectly | (812) |
| Reduction of expenses by investment adviser and distributor | (464,436) |
| Net expenses | $33,849,399 |
| Net investment income (loss) | $99,044,479 |
Statement of Operations – continued
| Realized and unrealized gain (loss) |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers (net of $20,648 country tax) | $116,685,726 |
| Affiliated issuers | (126,457) |
| Futures contracts | 451,210 |
| Forward foreign currency exchange contracts | 2,739,523 |
| Foreign currency | 711,859 |
| Net realized gain (loss) | $120,461,861 |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers (net of $37,247 increase in deferred country tax) | $(61,001,004) |
| Affiliated issuers | (41,708,261) |
| Futures contracts | (340,804) |
| Forward foreign currency exchange contracts | (373,230) |
| Translation of assets and liabilities in foreign currencies | (53,706) |
| Net unrealized gain (loss) | $(103,477,005) |
| Net realized and unrealized gain (loss) | $16,984,856 |
| Change in net assets from operations | $116,029,335 |
See Notes to Financial Statements
Financial Statements
Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| | Year ended |
| | 2/28/22 | 2/28/21 |
| Change in net assets | | |
| From operations | | |
| Net investment income (loss) | $99,044,479 | $106,181,817 |
| Net realized gain (loss) | 120,461,861 | (18,075,299) |
| Net unrealized gain (loss) | (103,477,005) | 63,447,015 |
| Change in net assets from operations | $116,029,335 | $151,553,533 |
| Total distributions to shareholders | $(174,809,430) | $(106,424,048) |
| Change in net assets from fund share transactions | $(76,548,918) | $(554,489,316) |
| Total change in net assets | $(135,329,013) | $(509,359,831) |
| Net assets | | |
| At beginning of period | 3,490,116,625 | 3,999,476,456 |
| At end of period | $3,354,787,612 | $3,490,116,625 |
See Notes to Financial Statements
Financial Statements
Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.14 | $12.86 | $12.35 | $12.10 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.38 | $0.37 | $0.37 | $0.39 | $0.37 |
| Net realized and unrealized gain (loss) | 0.07 | 0.28 | 0.51 | 0.33 | (0.10) |
| Total from investment operations | $0.45 | $0.65 | $0.88 | $0.72 | $0.27 |
| Less distributions declared to shareholders |
| From net investment income | $(0.41) | $(0.34) | $(0.37) | $(0.39) | $(0.39) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.68) | $(0.37) | $(0.37) | $(0.47) | $(0.45) |
| Net asset value, end of period (x) | $12.91 | $13.14 | $12.86 | $12.35 | $12.10 |
| Total return (%) (r)(s)(t)(x) | 3.22 | 5.28 | 7.20 | 6.10 | 2.19 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 0.99 | 0.99 | 0.98 | 0.99 | 0.99 |
| Expenses after expense reductions (f)(h) | 0.98 | 0.98 | 0.97 | 0.98 | 0.98 |
| Net investment income (loss) | 2.78 | 2.97 | 2.86 | 3.21 | 2.97 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $1,563,027 | $1,577,032 | $1,540,570 | $1,315,625 | $1,343,257 |
See Notes to Financial Statements
Financial Highlights – continued
| Class C | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.14 | $12.85 | $12.35 | $12.09 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.28 | $0.28 | $0.28 | $0.30 | $0.28 |
| Net realized and unrealized gain (loss) | 0.06 | 0.29 | 0.49 | 0.34 | (0.11) |
| Total from investment operations | $0.34 | $0.57 | $0.77 | $0.64 | $0.17 |
| Less distributions declared to shareholders |
| From net investment income | $(0.30) | $(0.25) | $(0.27) | $(0.30) | $(0.30) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.57) | $(0.28) | $(0.27) | $(0.38) | $(0.36) |
| Net asset value, end of period (x) | $12.91 | $13.14 | $12.85 | $12.35 | $12.09 |
| Total return (%) (r)(s)(t)(x) | 2.44 | 4.57 | 6.32 | 5.40 | 1.34 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 1.74 | 1.74 | 1.73 | 1.75 | 1.74 |
| Expenses after expense reductions (f)(h) | 1.73 | 1.73 | 1.72 | 1.74 | 1.73 |
| Net investment income (loss) | 2.05 | 2.27 | 2.14 | 2.48 | 2.23 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $355,639 | $456,806 | $724,758 | $756,643 | $931,292 |
See Notes to Financial Statements
Financial Highlights – continued
| Class I | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.14 | $12.86 | $12.35 | $12.09 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.41 | $0.40 | $0.40 | $0.42 | $0.40 |
| Net realized and unrealized gain (loss) | 0.07 | 0.29 | 0.51 | 0.34 | (0.11) |
| Total from investment operations | $0.48 | $0.69 | $0.91 | $0.76 | $0.29 |
| Less distributions declared to shareholders |
| From net investment income | $(0.44) | $(0.38) | $(0.40) | $(0.42) | $(0.42) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.71) | $(0.41) | $(0.40) | $(0.50) | $(0.48) |
| Net asset value, end of period (x) | $12.91 | $13.14 | $12.86 | $12.35 | $12.09 |
| Total return (%) (r)(s)(t)(x) | 3.47 | 5.54 | 7.46 | 6.45 | 2.36 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 0.74 | 0.74 | 0.73 | 0.74 | 0.74 |
| Expenses after expense reductions (f)(h) | 0.73 | 0.73 | 0.72 | 0.74 | 0.73 |
| Net investment income (loss) | 3.03 | 3.24 | 3.11 | 3.47 | 3.23 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $1,145,617 | $1,156,030 | $1,425,004 | $1,181,300 | $1,371,333 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R1 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.13 | $12.85 | $12.34 | $12.08 | $12.26 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.28 | $0.28 | $0.27 | $0.31 | $0.28 |
| Net realized and unrealized gain (loss) | 0.06 | 0.28 | 0.51 | 0.33 | (0.10) |
| Total from investment operations | $0.34 | $0.56 | $0.78 | $0.64 | $0.18 |
| Less distributions declared to shareholders |
| From net investment income | $(0.30) | $(0.25) | $(0.27) | $(0.30) | $(0.30) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.57) | $(0.28) | $(0.27) | $(0.38) | $(0.36) |
| Net asset value, end of period (x) | $12.90 | $13.13 | $12.85 | $12.34 | $12.08 |
| Total return (%) (r)(s)(t)(x) | 2.44 | 4.49 | 6.40 | 5.40 | 1.42 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 1.74 | 1.74 | 1.73 | 1.75 | 1.75 |
| Expenses after expense reductions (f)(h) | 1.73 | 1.73 | 1.72 | 1.74 | 1.74 |
| Net investment income (loss) | 2.03 | 2.22 | 2.12 | 2.57 | 2.29 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $225 | $241 | $214 | $193 | $573 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R2 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.14 | $12.86 | $12.35 | $12.09 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.34 | $0.35 | $0.34 | $0.36 | $0.34 |
| Net realized and unrealized gain (loss) | 0.07 | 0.27 | 0.51 | 0.34 | (0.11) |
| Total from investment operations | $0.41 | $0.62 | $0.85 | $0.70 | $0.23 |
| Less distributions declared to shareholders |
| From net investment income | $(0.37) | $(0.31) | $(0.34) | $(0.36) | $(0.36) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.64) | $(0.34) | $(0.34) | $(0.44) | $(0.42) |
| Net asset value, end of period (x) | $12.91 | $13.14 | $12.86 | $12.35 | $12.09 |
| Total return (%) (r)(s)(t)(x) | 2.96 | 5.01 | 6.93 | 5.92 | 1.85 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 1.24 | 1.24 | 1.23 | 1.25 | 1.24 |
| Expenses after expense reductions (f)(h) | 1.23 | 1.23 | 1.22 | 1.24 | 1.23 |
| Net investment income (loss) | 2.53 | 2.78 | 2.65 | 2.99 | 2.73 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $1,647 | $1,830 | $3,085 | $3,486 | $4,396 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R3 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.15 | $12.86 | $12.36 | $12.10 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.38 | $0.37 | $0.37 | $0.39 | $0.37 |
| Net realized and unrealized gain (loss) | 0.07 | 0.29 | 0.50 | 0.34 | (0.10) |
| Total from investment operations | $0.45 | $0.66 | $0.87 | $0.73 | $0.27 |
| Less distributions declared to shareholders |
| From net investment income | $(0.41) | $(0.34) | $(0.37) | $(0.39) | $(0.39) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.68) | $(0.37) | $(0.37) | $(0.47) | $(0.45) |
| Net asset value, end of period (x) | $12.92 | $13.15 | $12.86 | $12.36 | $12.10 |
| Total return (%) (r)(s)(t)(x) | 3.21 | 5.36 | 7.11 | 6.18 | 2.19 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 0.99 | 0.99 | 0.98 | 1.00 | 0.99 |
| Expenses after expense reductions (f)(h) | 0.98 | 0.98 | 0.97 | 0.99 | 0.98 |
| Net investment income (loss) | 2.78 | 2.98 | 2.86 | 3.21 | 2.97 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $22,253 | $22,760 | $24,385 | $19,159 | $20,013 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R4 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.15 | $12.86 | $12.36 | $12.10 | $12.29 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.42 | $0.41 | $0.41 | $0.41 | $0.40 |
| Net realized and unrealized gain (loss) | 0.06 | 0.29 | 0.49 | 0.35 | (0.10) |
| Total from investment operations | $0.48 | $0.70 | $0.90 | $0.76 | $0.30 |
| Less distributions declared to shareholders |
| From net investment income | $(0.44) | $(0.38) | $(0.40) | $(0.42) | $(0.43) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.71) | $(0.41) | $(0.40) | $(0.50) | $(0.49) |
| Net asset value, end of period (x) | $12.92 | $13.15 | $12.86 | $12.36 | $12.10 |
| Total return (%) (r)(s)(t)(x) | 3.47 | 5.62 | 7.38 | 6.45 | 2.36 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 0.74 | 0.74 | 0.73 | 0.74 | 0.74 |
| Expenses after expense reductions (f)(h) | 0.73 | 0.73 | 0.72 | 0.73 | 0.73 |
| Net investment income (loss) | 3.05 | 3.24 | 3.15 | 3.43 | 3.20 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $5,995 | $8,626 | $9,783 | $10,063 | $7,915 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R6 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $13.14 | $12.86 | $12.35 | $12.10 | $12.28 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.42 | $0.42 | $0.41 | $0.43 | $0.38 |
| Net realized and unrealized gain (loss) | 0.07 | 0.28 | 0.51 | 0.33 | (0.06)(g) |
| Total from investment operations | $0.49 | $0.70 | $0.92 | $0.76 | $0.32 |
| Less distributions declared to shareholders |
| From net investment income | $(0.45) | $(0.39) | $(0.41) | $(0.43) | $(0.44) |
| From net realized gain | (0.27) | (0.03) | (0.00)(w) | (0.08) | (0.06) |
| Total distributions declared to shareholders | $(0.72) | $(0.42) | $(0.41) | $(0.51) | $(0.50) |
| Net asset value, end of period (x) | $12.91 | $13.14 | $12.86 | $12.35 | $12.10 |
| Total return (%) (r)(s)(t)(x) | 3.57 | 5.64 | 7.55 | 6.46 | 2.54 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f)(h) | 0.65 | 0.65 | 0.64 | 0.65 | 0.65 |
| Expenses after expense reductions (f)(h) | 0.64 | 0.64 | 0.63 | 0.64 | 0.64 |
| Net investment income (loss) | 3.12 | 3.32 | 3.19 | 3.55 | 3.08 |
| Portfolio turnover | 72 | 111 | 57 | 36 | 44 |
| Net assets at end of period (000 omitted) | $260,384 | $266,792 | $271,679 | $218,650 | $214,111 |
| (d) | Per share data is based on average shares outstanding. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information. |
| (g) | The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. |
| (h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (w) | Per share amount was less than $0.01. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
Notes to Financial Statements
(1) Business and Organization
MFS Diversified Income Fund (the fund) is a diversified series of MFS Series Trust XIII (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(2) Significant Accounting Policies
General — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
The fund invests in the MFS High Yield Pooled Portfolio (“High Yield Pooled Portfolio”). MFS does not receive a management fee from the High Yield Pooled Portfolio. The High Yield Pooled Portfolio’s investment objective is to seek total return with an emphasis on high current income, but also considering capital appreciation. The accounting policies of the High Yield Pooled Portfolio are outlined in its shareholder report, which is available without charge by calling 1-800-225-2606 and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov. The accounting policies detailed in the Significant Accounting Policies note cover both the fund and the High Yield Pooled Portfolio. For purposes of this policy disclosure, “fund” refers to both the fund and the High Yield Pooled Portfolio in which the fund invests. The High Yield Pooled Portfolio’s shareholder report is not covered by this report. The fund and the High Yield Pooled Portfolio invest 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 and the High Yield Pooled Portfolio invest 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. The fund invests a significant amount of its net assets in U.S. and foreign real estate related investments and as a result is subject to certain risks associated with the direct ownership of real estate and the real estate industry in general. These include risks related to general, regional and local economic conditions; difficulties in valuing and disposing of real estate; fluctuations in interest rates and property tax rates, shifts in zoning laws, environmental regulations and other governmental action; cash flow dependency; increased operating expenses; lack of availability of mortgage funds; losses due to
Notes to Financial Statements - continued
natural disasters; overbuilding; losses due to casualty or condemnation; changes in property values and rental rates; the management skill and creditworthiness of the manager; and other factors. The fund invests in emerging market issuers. Investments in emerging markets can involve additional and greater risks than the risks associated with investments in developed foreign markets. Emerging markets can have less developed markets, greater custody and operational risk, less developed legal, regulatory, accounting, and auditing systems, greater government involvement in the economy, greater risk of new or inconsistent government treatment of or restrictions on issuers and instruments, and greater political, social, and economic instability than developed markets.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — The investments of the fund and the High Yield Pooled Portfolio are valued as described below.
Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Exchange-traded options are generally valued at the last sale or official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. For put options, the position may be valued at the last daily ask quotation if there are no trades reported during the day. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. Futures contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a third-party pricing service. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. 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
Notes to Financial Statements - continued
utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other 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
Notes to Financial Statements - continued
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 February 28, 2022 in valuing the fund's assets and liabilities:
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Equity Securities: | | | | |
| United States | $907,353,697 | $— | $— | $907,353,697 |
| United Kingdom | 69,864,598 | — | — | 69,864,598 |
| Switzerland | 69,696,914 | — | — | 69,696,914 |
| Japan | — | 52,088,852 | — | 52,088,852 |
| Canada | 32,371,419 | — | — | 32,371,419 |
| South Korea | 2,349,152 | 28,541,701 | — | 30,890,853 |
| China | 8,657,988 | 18,961,548 | — | 27,619,536 |
| Taiwan | 17,109,296 | 9,517,495 | — | 26,626,791 |
| Singapore | — | 22,965,215 | — | 22,965,215 |
| Other Countries | 86,429,258 | 13,567,462 | 464,837 | 100,461,557 |
| U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | — | 108,866,498 | — | 108,866,498 |
| Non - U.S. Sovereign Debt | — | 364,715,503 | 6,833,833 | 371,549,336 |
| Municipal Bonds | — | 7,371,203 | — | 7,371,203 |
| U.S. Corporate Bonds | — | 225,688,460 | — | 225,688,460 |
| Residential Mortgage-Backed Securities | — | 118,561,925 | — | 118,561,925 |
| Commercial Mortgage-Backed Securities | — | 10,594,683 | — | 10,594,683 |
| Asset-Backed Securities (including CDOs) | — | 11,167,969 | — | 11,167,969 |
| Foreign Bonds | — | 268,260,927 | 853,785 | 269,114,712 |
| Mutual Funds | 918,933,849 | — | — | 918,933,849 |
| Total | $2,112,766,171 | $1,260,869,441 | $8,152,455 | $3,381,788,067 |
| Other Financial Instruments | | | | |
| Futures Contracts – Assets | $519,346 | $— | $— | $519,346 |
| Futures Contracts – Liabilities | (755,781) | — | — | (755,781) |
| Forward Foreign Currency Exchange Contracts – Assets | — | 1,682,496 | — | 1,682,496 |
| Forward Foreign Currency Exchange Contracts – Liabilities | — | (1,373,636) | — | (1,373,636) |
Notes to Financial Statements - continued
For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the High Yield Pooled Portfolio's shareholder report for further information regarding the levels used in valuing its assets or liabilities.
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 | Fixed Income Securities |
| Balance as of 2/28/21 | $— | $0 |
| Realized gain (loss) | — | (193,321) |
| Change in unrealized appreciation or depreciation | — | 193,321 |
| Transfers into level 3 | 464,837 | 7,687,618 |
| Disposition of worthless securities | — | 0 |
| Balance as of 2/28/22 | $464,837 | $7,687,618 |
At February 28, 2022, the fund held thirteen level 3 securities.
Inflation-Adjusted Debt Securities — The fund invests in inflation-adjusted debt securities issued by foreign corporations and/or foreign governments. The principal value of these debt securities is adjusted through income according to changes in an inflation index or another general price or wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.
Foreign Currency Translation — Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives — The fund uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
Notes to Financial Statements - continued
The derivative instruments used by the fund during the period were purchased options, futures contracts, and forward foreign currency exchange contracts. Depending on the type of derivative, a fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement with the derivative counterparty, or novating the position to a third party. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by the exchange. The fund's period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at February 28, 2022 as reported in the Statement of Assets and Liabilities:
| | | Fair Value (a) |
| Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives |
| Interest Rate | Futures Contracts | $519,346 | $(755,781) |
| Foreign Exchange | Forward Foreign Currency Exchange Contracts | 1,682,496 | (1,373,636) |
| Total | | $2,201,842 | $(2,129,417) |
| (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 February 28, 2022 as reported in the Statement of Operations:
| Risk | Futures
Contracts | Forward Foreign
Currency
Exchange
Contracts | Unaffiliated Issuers
(Purchased
Options) |
| Interest Rate | $451,210 | $ — | $ — |
| Foreign Exchange | — | 2,739,523 | — |
| Equity | — | — | (6,237,000) |
| Total | $451,210 | $2,739,523 | $(6,237,000) |
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 February 28, 2022 as reported in the Statement of Operations:
| Risk | Futures
Contracts | Forward Foreign
Currency
Exchange
Contracts | Unaffiliated Issuers
(Purchased
Options) |
| Interest Rate | $(340,804) | $ — | $ — |
| Foreign Exchange | — | (373,230) | — |
| Equity | — | — | 5,819,000 |
| Total | $(340,804) | $(373,230) | $5,819,000 |
Notes to Financial Statements - continued
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 “Miscellaneous” expense in the Statement of Operations.
Purchased Options — The fund purchased put options for a premium. Purchased put options entitle the holder to sell a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing put options may hedge against an anticipated decline in the value of portfolio securities or currency or decrease the fund's exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for put options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased put option, the premium paid is offset against the proceeds on the sale of the underlying security or financial instrument in order to determine the realized gain or loss on investments.
Notes to Financial Statements - continued
Whether or not the option is exercised, the fund's maximum risk of loss from purchasing an option is the amount of premium paid. All option contracts involve credit risk if the counterparty to the option contract fails to perform. For uncleared options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Futures Contracts — The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a specified percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is realized.
The fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Forward Foreign Currency Exchange Contracts — The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
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
Notes to Financial Statements - continued
foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Security Loans — Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co., as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund's Portfolio of Investments, with a fair value of $4,229,551. The fair value of the fund's investment securities on loan and a related liability of $2,836,100 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of $1,582,549 held by the lending agent. The collateral on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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.
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,
Notes to Financial Statements - continued
the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income — Investment transactions are recorded on the trade date. Some securities may be purchased or sold on an extended settlement basis, which means that the receipt or delivery of the securities by the fund and related payments occur at a future date, usually beyond the customary settlement period.
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. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward based on the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even though the adjusted principal is not received until maturity. Distributions from REITs may be characterized as ordinary income, net capital gain, or a return of capital to the fund. The proper characterization of REIT distributions is generally not known until after the end of each calendar year. As such, estimates are used in reporting the character of income and distributions for financial statement purposes. The fund receives substantial distributions from holdings in REITs.
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.
The fund may purchase or sell mortgage-backed securities on a “To Be Announced” (TBA) basis. A TBA transaction is subject to extended settlement and typically does not designate the actual security to be delivered, but instead includes an approximate principal amount. The price of the TBA security and the date that it will be settled are fixed at the time the transaction is negotiated. The value of the security varies with market fluctuations and no interest accrues to the fund until settlement takes place. TBA purchase and sale commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy and included in TBA purchase and TBA sale commitments in the Statement of Assets and Liabilities. Losses may arise as a result of changes in the value of the TBA investment prior to settlement date or due to counterparty non-performance. At the time that it enters into a TBA transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments.
Notes to Financial Statements - continued
The fund may also enter into mortgage dollar rolls, typically TBA dollar rolls, in which the fund sells TBA mortgage-backed securities to financial institutions and simultaneously agrees to repurchase similar (same issuer, type and coupon) securities at a later date at an agreed-upon price. During the period between the sale and repurchase, the fund will not be entitled to receive interest and principal payments on the securities sold. The fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. Dollar roll transactions involve the risk that the market value of the securities that the fund is required to purchase may decline below the agreed upon repurchase price of those securities.
To mitigate the counterparty credit risk on TBA transactions, mortgage dollar rolls, and other types of forward settling mortgage-backed and asset-backed security transactions, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed and asset-backed securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and an amount is posted from one party to the other to collateralize such obligations. Cash that has been pledged to cover the fund's collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Fees Paid Indirectly — The fund's custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the credit, for the year ended February 28, 2022, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Notes to Financial Statements - continued
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily relate to amortization and accretion of debt securities, wash sale loss deferrals, straddle loss deferrals, and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
| | Year ended
2/28/22 | Year ended
2/28/21 |
| Ordinary income (including any short-term capital gains) | $112,252,493 | $99,621,041 |
| Long-term capital gains | 62,556,937 | 6,803,007 |
| Total distributions | $174,809,430 | $106,424,048 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
| As of 2/28/22 | |
| Cost of investments | $3,160,091,130 |
| Gross appreciation | 342,012,437 |
| Gross depreciation | (120,243,075) |
| Net unrealized appreciation (depreciation) | $ 221,769,362 |
| Undistributed ordinary income | 9,375,042 |
| Undistributed long-term capital gain | 36,226,460 |
| Other temporary differences | (7,528,464) |
| Total distributable earnings (loss) | $ 259,842,400 |
Multiple Classes of Shares of Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income and common expenses are allocated to shareholders based on the value of settled shares outstanding of each class. The fund's realized and unrealized gain (loss) are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class C shares will convert to Class A
Notes to Financial Statements - continued
shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
| | Year
ended
2/28/22 | | Year
ended
2/28/21 |
| Class A | $80,153,863 | | $44,341,535 |
| Class C | 16,876,828 | | 13,078,504 |
| Class I | 61,796,880 | | 39,272,282 |
| Class R1 | 11,007 | | 5,201 |
| Class R2 | 89,714 | | 50,897 |
| Class R3 | 1,143,825 | | 703,020 |
| Class R4 | 406,553 | | 274,982 |
| Class R6 | 14,330,760 | | 8,697,627 |
| Total | $174,809,430 | | $106,424,048 |
(3) Transactions with Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $1 billion | 0.65% |
| In excess of $1 billion and up to $2.5 billion | 0.60% |
| In excess of $2.5 billion and up to $5 billion | 0.55% |
| In excess of $5 billion | 0.50% |
MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. For the year ended February 28, 2022, this management fee reduction amounted to $464,117, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended February 28, 2022 was equivalent to an annual effective rate of 0.59% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as fees and expenses associated with investments in investment companies and other similar investment vehicles), such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
| | | | Classes | | | | |
| A | C | I | R1 | R2 | R3 | R4 | R6 |
| 1.10% | 1.85% | 0.85% | 1.85% | 1.35% | 1.10% | 0.85% | 0.79% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until June 30, 2023. For the year ended February 28, 2022, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Notes to Financial Statements - continued
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $46,842 for the year ended February 28, 2022, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Distribution Plan Fee Table:
| | Distribution
Fee Rate (d) | Service
Fee Rate (d) | Total
Distribution
Plan (d) | Annual
Effective
Rate (e) | Distribution
and Service
Fee |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 4,060,574 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 4,167,321 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 2,486 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 9,429 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 58,644 |
| Total Distribution and Service Fees | | | | | $8,298,454 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended February 28, 2022 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended February 28, 2022, this rebate amounted to $276 and $43 for Class A and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended February 28, 2022, were as follows:
| | Amount |
| Class A | $46,808 |
| Class C | 6,503 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended February 28, 2022, the fee was $191,773, which equated to 0.0054% annually of the fund's average daily net assets. MFSC also receives reimbursement from
Notes to Financial Statements - continued
the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R6 shares do not incur sub-accounting fees. For the year ended February 28, 2022, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $3,170,730.
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 February 28, 2022 was equivalent to an annual effective rate of 0.0134% of the fund's average daily net assets.
Trustees’ and Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other — 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 invests in the High Yield Pooled Portfolio, which is a mutual fund advised by MFS that does not pay management fees to MFS but does incur investment and operating costs. The fund invests in the High Yield Pooled Portfolio to gain exposure to high income debt instruments, rather than investing in high income debt instruments directly. Income earned on this investment is included in “Dividends from affiliated issuers” in the Statement of Operations. The High Yield Pooled Portfolio does not pay distribution and/or service fees to MFD.
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 February 28, 2022, the fund engaged in sale transactions pursuant to this policy, which amounted to $771,782. The sales transactions resulted in net realized gains (losses) of $248,605.
The adviser has voluntarily undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time. For the year ended February 28, 2022, this reimbursement amounted to $92,203, which is included in “Other” income in the Statement of Operations.
Notes to Financial Statements - continued
(4) Portfolio Securities
For the year ended February 28, 2022, purchases and sales of investments, other than and short-term obligations, were as follows:
| | Purchases | Sales |
| U.S. Government securities | $1,053,792,495 | $1,370,822,156 |
| Non-U.S. Government securities | 1,420,884,542 | 1,286,701,460 |
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Shares sold | | | | | |
| Class A | 14,607,047 | $198,557,562 | | 26,698,817 | $334,629,453 |
| Class C | 1,711,416 | 23,298,433 | | 2,317,040 | 28,643,678 |
| Class I | 16,504,267 | 224,664,063 | | 21,074,382 | 260,990,032 |
| Class R1 | 6,820 | 93,515 | | 4,179 | 50,747 |
| Class R2 | 20,842 | 284,007 | | 35,647 | 449,430 |
| Class R3 | 226,162 | 3,076,702 | | 274,176 | 3,430,576 |
| Class R4 | 120,292 | 1,623,061 | | 159,223 | 2,005,362 |
| Class R6 | 3,701,055 | 50,342,326 | | 4,833,104 | 60,253,088 |
| | 36,897,901 | $501,939,669 | | 55,396,568 | $690,452,366 |
Shares issued to shareholders
in reinvestment of distributions | | | | | |
| Class A | 5,582,553 | $75,785,017 | | 3,375,341 | $42,228,518 |
| Class C | 1,161,810 | 15,773,452 | | 946,276 | 11,795,795 |
| Class I | 3,782,563 | 51,329,884 | | 2,541,818 | 31,726,946 |
| Class R1 | 809 | 10,977 | | 399 | 4,993 |
| Class R2 | 6,579 | 89,333 | | 3,739 | 46,640 |
| Class R3 | 84,146 | 1,142,993 | | 56,059 | 700,910 |
| Class R4 | 29,898 | 406,227 | | 22,000 | 274,956 |
| Class R6 | 1,018,378 | 13,826,069 | | 660,976 | 8,265,621 |
| | 11,666,736 | $158,363,952 | | 7,606,608 | $95,044,379 |
Notes to Financial Statements - continued
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Shares reacquired | | | | | |
| Class A | (19,136,980) | $(259,994,737) | | (29,866,177) | $(368,944,745) |
| Class C | (10,093,308) | (136,833,130) | | (24,873,333) | (313,101,450) |
| Class I | (19,524,445) | (264,711,290) | | (46,458,975) | (567,582,659) |
| Class R1 | (8,494) | (115,225) | | (2,873) | (36,133) |
| Class R2 | (39,154) | (529,170) | | (140,095) | (1,765,344) |
| Class R3 | (318,717) | (4,323,050) | | (494,519) | (6,285,453) |
| Class R4 | (342,221) | (4,608,637) | | (285,574) | (3,527,252) |
| Class R6 | (4,853,890) | (65,737,300) | | (6,317,809) | (78,743,025) |
| | (54,317,209) | $(736,852,539) | | (108,439,355) | $(1,339,986,061) |
| Net change | | | | | |
| Class A | 1,052,620 | $14,347,842 | | 207,981 | $7,913,226 |
| Class C | (7,220,082) | (97,761,245) | | (21,610,017) | (272,661,977) |
| Class I | 762,385 | 11,282,657 | | (22,842,775) | (274,865,681) |
| Class R1 | (865) | (10,733) | | 1,705 | 19,607 |
| Class R2 | (11,733) | (155,830) | | (100,709) | (1,269,274) |
| Class R3 | (8,409) | (103,355) | | (164,284) | (2,153,967) |
| Class R4 | (192,031) | (2,579,349) | | (104,351) | (1,246,934) |
| Class R6 | (134,457) | (1,568,905) | | (823,729) | (10,224,316) |
| | (5,752,572) | $(76,548,918) | | (45,436,179) | $(554,489,316) |
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit of which $1 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an agreed upon spread. For the year ended February 28, 2022, the fund’s commitment fee and interest expense were $13,771 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
Notes to Financial Statements - continued
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning
Value | Purchases | Sales
Proceeds | Realized
Gain
(Loss) | Change in
Unrealized
Appreciation or
Depreciation | Ending
Value |
| MFS High Yield Pooled Portfolio | $1,016,507,214 | $61,298,130 | $226,734,989 | $(126,457) | $(41,708,261) | $809,235,637 |
| MFS Institutional Money Market Portfolio | 165,569,182 | 1,236,498,426 | 1,295,205,496 | — | — | 106,862,112 |
| | $1,182,076,396 | $1,297,796,556 | $1,521,940,485 | $(126,457) | $(41,708,261) | $916,097,749 |
| Affiliated Issuers | Dividend
Income | Capital Gain
Distributions |
| MFS High Yield Pooled Portfolio | $48,454,886 | $— |
| MFS Institutional Money Market Portfolio | 49,817 | — |
| | $48,504,703 | $— |
(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 investments in certain debt instruments and derivatives (if any), as well as borrowings by the fund and certain other contractual arrangements of the fund, may be based on 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 investments in certain debt instruments and derivatives, as well as borrowings by the fund and any other contractual arrangements of the fund that undergo reference rate-related modifications as a result of the
Notes to Financial Statements - continued
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 account for those modified contracts as a continuation of the existing contracts. 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.
(10) Russia and Ukraine Conflict
The fund invests in securities and/or derivative instruments that are economically tied to Russia and/or Ukraine. Escalation of the conflict between Russia and Ukraine in late February 2022 caused market volatility and disruption in the tradability of Russian securities, including closure of the local securities market, temporary restriction on securities sales by non-residents, and disruptions to clearance and payment systems. To the extent that the fund is unable to sell securities, whether due to market constraints or to the sanctions imposed on Russia by the United States and other countries, those securities are considered illiquid and the value of those securities reflects their illiquid classification. Management continues to monitor these events and to evaluate the related impacts on fund performance.
Report of Independent Registered Public Accounting Firm
To the Shareholders of MFS Diversified Income Fund and the Board of Trustees of MFS Series Trust XIII
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS Diversified Income Fund (the “Fund”) (one of the funds constituting MFS Series Trust XIII (the “Trust”)), including the portfolio of investments, as of February 28, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting MFS Series Trust XIII) at February 28, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
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 February 28, 2022, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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
April 14, 2022
Trustees and Officers — Identification and Background
The Trustees and Officers of the Trust, as of April 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) | | 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 | | 136 | | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | | N/A |
| INDEPENDENT TRUSTEES | | | | | | | | | | |
John P. Kavanaugh
(age 67) | | Trustee and Chair of Trustees | | January 2009 | | 136 | | Private investor | | N/A |
Steven E. Buller
(age 70) | | Trustee | | February 2014 | | 136 | | Private investor | | N/A |
John A. Caroselli
(age 67) | | Trustee | | March 2017 | | 136 | | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | | N/A |
Maureen R. Goldfarb
(age 66) | | Trustee | | January 2009 | | 136 | | Private investor | | N/A |
Peter D. Jones
(age 66) | | Trustee | | January 2019 | | 136 | | Private investor | | N/A |
James W. Kilman, Jr.
(age 60) | | Trustee | | January 2019 | | 136 | | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | | Alpha-En Corporation, Director (2016-2019) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with Fund | | Trustee/Officer Since(h) | | Number of MFS Funds overseen by the Trustee | | Principal Occupations During
the Past Five Years | | Other Directorships During
the Past Five Years (j) |
Clarence Otis, Jr.
(age 65) | | Trustee | | March 2017 | | 136 | | Private investor | | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director |
Maryanne L. Roepke
(age 66) | | Trustee | | May 2014 | | 136 | | Private investor | | N/A |
Laurie J. Thomsen
(age 64) | | Trustee | | March 2005 | | 136 | | Private investor | | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
| OFFICERS | | | | | | | | |
Christopher R. Bohane (k)
(age 48) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel |
Kino Clark (k)
(age 53) | | Assistant Treasurer | | January 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
John W. Clark, Jr. (k)
(age 55) | | Assistant Treasurer | | April 2017 | | 136 | | 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 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
David L. DiLorenzo (k)
(age 53) | | President | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
Heidi W. Hardin (k)
(age 54) | | Secretary and Clerk | | April 2017 | | 136 | | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (until January 2017) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
Brian E. Langenfeld (k)
(age 49) | | Assistant Secretary and Assistant Clerk | | June 2006 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
Rosa E. Licea-Mailloux(k)
(age 45) | | Chief Compliance Officer | | March 2022 | | 136 | | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) |
Amanda S. Mooradian (k)
(age 43) | | Assistant Secretary and Assistant Clerk | | September 2018 | | 136 | | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel |
Susan A. Pereira (k)
(age 51) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
Kasey L. Phillips (k)
(age 51) | | Assistant Treasurer | | September 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
Matthew A. Stowe (k)
(age 47) | | Assistant Secretary and Assistant Clerk | | October 2014 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
James O. Yost (k)
(age 61) | | Treasurer | | September 1990 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
Trustees and Officers - continued
Each Trustee (other than Messrs. Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of 75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618 | JPMorgan Chase Bank, NA
4 Metrotech Center
New York, NY 11245 |
| Distributor | Independent Registered Public Accounting Firm |
MFS Fund Distributors, Inc.
111 Huntington Avenue
Boston, MA 02199-7618 | Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116 |
| Portfolio Manager(s) | |
Robert Almeida
Neeraj Arora
David Cole
Rick Gable
Alexander Mackey
Henry Peabody
Matt Ryan
Jonathan Sage
Geoffrey Schechter
Michael Skatrud | |
Proxy Voting Policies and Information
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund Contracts and Legal Claims
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Federal Tax Information (unaudited)
The fund will notify shareholders of amounts for use in preparing 2022 income tax forms in January 2023. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund designates $72,494,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 7.21% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
Federal Tax Information (unaudited) - continued
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
The fund intends to pass through the maximum amount allowable as Section 163(j) Interest Dividends as defined in Treasury Regulation §1.163(j)-1(b).
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances |
| • Account transactions and transaction history |
| • Checking account information and wire transfer instructions |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your
personal information | Does MFS share? | Can you limit
this sharing? |
For our everyday business purposes –
such as to process your transactions, maintain your
account(s), respond to court orders and legal
investigations, or report to credit bureaus | Yes | No |
For our marketing purposes –
to offer our products and services to you | No | We don't share |
For joint marketing with other
financial companies | No | We don't share |
For our affiliates' everyday business purposes –
information about your transactions and experiences | No | We don't share |
For our affiliates' everyday business purposes –
information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
| Who we are |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do |
How does MFS
protect my personal
information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
How does MFS
collect my personal
information? | We collect your personal information, for example, when you |
| • open an account or provide account information |
| • direct us to buy securities or direct us to sell your securities |
| • make a wire transfer |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness |
| • affiliates from using your information to market to you |
| • sharing for nonaffiliates to market to you |
| State laws and individual companies may give you additional rights to limit sharing. |
| Definitions |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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1. Go to mfs.com.
2. Log in via MFS® Access.
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CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Annual Report
February 28, 2022
MFS® Government
Securities Fund
MFS® Government
Securities Fund
| 1 |
| 2 |
| 4 |
| 6 |
| 9 |
| 11 |
| 20 |
| 22 |
| 23 |
| 24 |
| 30 |
| 46 |
| 48 |
| 52 |
| 52 |
| 52 |
| 52 |
| 52 |
| 53 |
The report is prepared for the general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
LETTER FROM THE CHAIR AND CEO
Dear Shareholders:
As a result of Russia’s invasion of Ukraine, the danger of wider geopolitical conflict has risen to a level not seen in decades, and this comes as sanctions aimed at countering Russia’s actions are exacerbating already mounting inflation. Consequently, at a time when global growth faces multiple headwinds, central banks have been presented with the challenge of reining in rising prices without tipping economies into recession. The US Federal Reserve recently raised rates for the first time since 2018 and indicated that it is likely to tighten policy much more over the coming year. Meanwhile, the unsettled geopolitical backdrop and prospect of tighter financial conditions has led to increased volatility.
There are, however, encouraging signs for the markets. The Omicron wave of the coronavirus is receding outside Asia, unemployment is low, and there are signs that some global supply chain bottlenecks are beginning to ease, though events in Ukraine could hamper these advances. Additionally, easier Chinese monetary policy and the record pace of corporate stock buybacks are supportive elements, albeit amid an otherwise turbulent investment environment.
It is important to have a deep understanding of company fundamentals during times of market transition, 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 try 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
Chair and Chief Executive Officer
MFS Investment Management
April 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.
Portfolio structure (i)
Fixed income sectors (i)
| Mortgage-Backed Securities | 43.4% |
| U.S. Treasury Securities | 42.7% |
| Commercial Mortgage-Backed Securities | 4.6% |
| Collateralized Debt Obligations | 1.8% |
| Municipal Bonds | 1.7% |
| Investment Grade Corporates | 0.6% |
| U.S. Government Agencies | 0.2% |
| Non-U.S. Government Bonds | 0.1% |
| Asset-Backed Securities (o) | 0.0% |
Composition including fixed income credit quality (a)(i)
| AAA | 5.1% |
| AA | 1.8% |
| A | 1.6% |
| BBB | 0.3% |
| U.S. Government | 43.5% |
| Federal Agencies | 43.6% |
| Not Rated | (0.8)% |
| Cash & Cash Equivalents | 4.0% |
| Other | 0.9% |
Portfolio facts (i)
| Average Duration (d) | 5.8 |
| Average Effective Maturity (m) | 6.4 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. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. |
Not Rated includes fixed income securities and fixed income derivatives that have not been rated by any rating agency. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.
Portfolio Composition - continued
| (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.
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of February 28, 2022.
The portfolio is actively managed and current holdings may be different.
Management Review
Summary of Results
For the twelve months ended February 28, 2022, Class A shares of the MFS Government Securities Fund (fund) provided a total return of -2.43%, at net asset value. This compares with a return of -2.43% for the fund’s benchmark, the Bloomberg U.S. Government/Mortgage Index.
Market Environment
At the end of the period, just as the Omicron wave of the pandemic appeared to be receding in much of the world, markets experienced a geopolitical shock as Russia launched a full-scale invasion of neighboring Ukraine. Given Europe's heavy reliance on imported oil and gas from Russia, European markets were among the hardest hit. Energy prices spiked in the wake of the invasion, adding to already multi-decade high levels of inflation, and non-energy commodities rose sharply as well. Both the equity and fixed income markets experienced significant upticks in volatility.
The ripple effects from the Russian invasion further complicated the mission central banks must undertake to rein in surging inflation. Energy shocks have historically resulted in global growth slowdowns, if not pullbacks, so policymakers will find themselves in the difficult position of trying to restrain inflation without tipping economies into recession. As a result of potential growth challenges, expectations for aggressive monetary policy tightening from developed market central banks have moderated. While the Fed is expected to raise interest rates multiple times in 2022, the rate path is expected to be less aggressive than prior to the invasion. Anticipation of tighter policy from the European Central Bank has moderated considerably with no move expected until late this year.
Against an environment of rising labor and raw materials prices, higher interest rates and waning fiscal and monetary stimulus, investor anxiety increased over the potential that corporate profit margins may be past peak for this cycle. That said, tentative signs that some supply chain bottlenecks may be easing, low levels of unemployment across developed markets and loosening of coronavirus restrictions are supportive factors for the macroeconomic backdrop.
Factors Affecting Performance
Relative to the Bloomberg U.S. Government/Mortgage Index, the fund's shorter duration(d) stance supported relative performance as interest rates generally rose over the reporting period. Security selection within the agency mortgage-backed securities (MBS) sector further benefited the fund’s relative performance. The fund's out-of-benchmark exposure to the commercial mortgage-backed securities (CMBS) sector was another area of relative strength.
Management Review - continued
During the reporting period, there were no factors that materially detracted from the fund’s performance.
Respectfully,
Portfolio Manager(s)
Geoffrey Schechter and Jake Stone
| (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. |
The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
Performance Summary THROUGH 2/28/22
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
Performance Summary - continued
Total Returns through 2/28/22
Average annual without sales charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) |
| A | 7/25/84 | (2.43)% | 1.84% | 1.41% | N/A |
| B | 8/30/93 | (3.16)% | 1.10% | 0.66% | N/A |
| C | 4/01/96 | (3.15)% | 1.10% | 0.65% | N/A |
| I | 1/02/97 | (2.18)% | 2.09% | 1.66% | N/A |
| R1 | 4/01/05 | (3.16)% | 1.08% | 0.66% | N/A |
| R2 | 10/31/03 | (2.67)% | 1.58% | 1.16% | N/A |
| R3 | 4/01/05 | (2.43)% | 1.86% | 1.41% | N/A |
| R4 | 4/01/05 | (2.18)% | 2.09% | 1.66% | N/A |
| R6 | 7/02/12 | (2.08)% | 2.20% | N/A | 1.69% |
Comparative benchmark(s)
| | | | | |
| Bloomberg U.S. Government/Mortgage Index (f) | (2.43)% | 2.22% | 1.95% | N/A |
Average annual with sales charge
| | | | | |
A
With Initial Sales Charge (4.25%) | (6.57)% | 0.96% | 0.97% | N/A |
B
With CDSC (Declining over six years from 4% to 0%) (v) | (7.03)% | 0.71% | 0.66% | N/A |
C
With CDSC (1% for 12 months) (v) | (4.12)% | 1.10% | 0.65% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (t) | For the period from the class inception date through the stated period end (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
| (v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Bloomberg U.S. Government/Mortgage Index(a) – measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
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. |
Performance Summary - continued
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund's share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
Expense Table
Fund expenses borne by the shareholders during the period,
September 1, 2021 through February 28, 2022
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2021 through February 28, 2022.
The expenses include the payment of a portion of the transfer-agent related expenses of MFS funds that invest in the fund. For further information, please see the Notes to Financial Statements.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Table - continued
Share
Class | | Annualized
Expense
Ratio | Beginning
Account Value
9/01/21 | Ending
Account Value
2/28/22 | Expenses
Paid During
Period (p)
9/01/21-2/28/22 |
| A | Actual | 0.76% | $1,000.00 | $967.61 | $3.71 |
| Hypothetical (h) | 0.76% | $1,000.00 | $1,021.03 | $3.81 |
| B | Actual | 1.51% | $1,000.00 | $963.93 | $7.35 |
| Hypothetical (h) | 1.51% | $1,000.00 | $1,017.31 | $7.55 |
| C | Actual | 1.51% | $1,000.00 | $964.98 | $7.36 |
| Hypothetical (h) | 1.51% | $1,000.00 | $1,017.31 | $7.55 |
| I | Actual | 0.51% | $1,000.00 | $969.74 | $2.49 |
| Hypothetical (h) | 0.51% | $1,000.00 | $1,022.27 | $2.56 |
| R1 | Actual | 1.51% | $1,000.00 | $963.93 | $7.35 |
| Hypothetical (h) | 1.51% | $1,000.00 | $1,017.31 | $7.55 |
| R2 | Actual | 1.01% | $1,000.00 | $966.36 | $4.92 |
| Hypothetical (h) | 1.01% | $1,000.00 | $1,019.79 | $5.06 |
| R3 | Actual | 0.76% | $1,000.00 | $968.56 | $3.71 |
| Hypothetical (h) | 0.76% | $1,000.00 | $1,021.03 | $3.81 |
| R4 | Actual | 0.51% | $1,000.00 | $968.83 | $2.49 |
| Hypothetical (h) | 0.51% | $1,000.00 | $1,022.27 | $2.56 |
| R6 | Actual | 0.41% | $1,000.00 | $969.31 | $2.00 |
| Hypothetical (h) | 0.41% | $1,000.00 | $1,022.76 | $2.06 |
| (h) | 5% class return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
Notes to Expense Table
Changes to the fund’s fee arrangements occurred during the six month period. Had these fee changes been in effect throughout the entire six month period, the annualized expense ratios, the actual expenses paid during the period, and the hypothetical expenses paid during the period would have been approximately 0.75%, $3.66, and $3.76 for Class A, 1.50%, $7.30, and $7.50 for Class B, 1.50%, $7.31, and $7.50 for Class C, 0.50%, $2.44, and $2.51 for Class I, 1.50%, $7.30, and $7.50 for Class R1, 1.00%, $4.88, and $5.01 for Class R2, 0.75%, $3.66, and $3.76 for Class R3, 0.50%, $2.44, and $2.51 for Class R4, and 0.40%, $1.95, and $2.01 for Class R6, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
Portfolio of Investments
2/28/22
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | | | Shares/Par | Value ($) |
| Bonds – 95.7% |
| Asset-Backed & Securitized – 6.3% |
| 3650R Commercial Mortgage Trust, 2021-PF1, “XA”, 1.037%, 11/15/2054 (i) | | $ | 22,096,086 | $ 1,558,835 |
| ACREC 2021-FL1 Ltd., “AS”, FLR, 1.636% (LIBOR - 1mo. + 1.5%), 10/16/2036 (n) | | | 7,778,000 | 7,695,890 |
| Allegro CLO Ltd., 2016-1A, “BR2”, FLR, 1.791% (LIBOR - 3mo. + 1.55%), 1/15/2030 (n) | | | 6,215,880 | 6,181,046 |
| Arbor Realty Trust, Inc., CLO, 2021-FL1, “B”, FLR, 1.691% (LIBOR - 1mo. + 1.5%), 12/15/2035 (n) | | | 3,901,000 | 3,861,928 |
| Arbor Realty Trust, Inc., CLO, 2021-FL3, “AS”, FLR, 1.591% (LIBOR - 1mo. + 1.4%), 8/15/2034 (n) | | | 6,638,000 | 6,593,937 |
| AREIT 2022-CRE6 Trust, “AS”, FLR, 1.698% (SOFR - 30 day + 1.65%), 11/17/2024 (n) | | | 7,155,500 | 7,129,168 |
| BBCMS Mortgage Trust, 2021-C10, “XA”, 1.306%, 7/15/2054 (i) | | | 21,328,031 | 1,940,042 |
| BBCMS Mortgage Trust, 2021-C9, “XA”, 1.637%, 2/15/2054 (i) | | | 13,938,991 | 1,574,849 |
| Benchmark 2021-B23 Mortgage Trust, “XA”, 1.276%, 2/15/2054 (i) | | | 43,974,167 | 3,797,086 |
| Benchmark 2021-B24 Mortgage Trust, “XA”, 1.154%, 3/15/2054 (i) | | | 26,362,245 | 2,064,169 |
| Benchmark 2021-B26 Mortgage Trust, “XA”, 0.999%, 6/15/2054 (i) | | | 38,180,445 | 2,362,957 |
| Benchmark 2021-B27 Mortgage Trust, “XA”, 1.271%, 7/15/2054 (i) | | | 33,792,279 | 3,037,165 |
| Benchmark 2021-B28 Mortgage Trust, “XA”, 1.29%, 8/15/2054 (i) | | | 40,433,044 | 3,684,797 |
| Benchmark 2021-B29 Mortgage Trust, “XA”, 1.048%, 9/15/2054 (i)(n) | | | 45,583,276 | 3,255,302 |
| BSPDF 2021-FL1 Issuer Ltd., “A”, 1.391%, 10/15/2036 (n) | | | 3,712,000 | 3,684,457 |
| BSPDF 2021-FL1 Issuer Ltd., “AS”, FLR, 1.671% (LIBOR - 1mo. + 1.48%), 10/15/2036 (n) | | | 4,700,500 | 4,672,165 |
| BSPRT 2021-FL7 Issuer Ltd., “A”, FLR, 0.969% (LIBOR - 1mo. + 0.85%), 2/15/2037 (n) | | | 967,039 | 964,411 |
| BSPRT 2021-FL7 Issuer Ltd., “B”, FLR, 1.67% (LIBOR - 1mo. + 1.55%), 2/15/2037 (n) | | | 1,306,500 | 1,301,948 |
| BXMT 2021-FL4 Ltd., “AS”, FLR, 1.491% (LIBOR - 1mo. + 1.3%), 5/15/2038 (n) | | | 7,779,500 | 7,682,377 |
| Capital Automotive, 2020-1A, “A4”, REIT, 3.19%, 2/15/2050 (n) | | | 1,255,101 | 1,250,442 |
| Citigroup Commercial Mortgage Trust, 2019-XA, “C7”, 0.873%, 12/15/2072 (i)(n) | | | 23,480,447 | 1,312,839 |
| Commercial Mortgage Pass-Through Certificates, 2021-BN31, “XA”, 1.332%, 2/15/2054 (i) | | | 33,802,551 | 3,182,514 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Asset-Backed & Securitized – continued |
| Commercial Mortgage Pass-Through Certificates, 2021-BN32, “XA”, 0.783%, 4/15/2054 (i) | | $ | 19,060,508 | $ 1,041,014 |
| Commercial Mortgage Pass-Through Certificates, 2021-BN35, “XA”, 1.053%, 6/15/2064 (i) | | | 13,390,834 | 999,075 |
| Commercial Mortgage Trust, 2014-CR19, “A5”, 3.796%, 8/10/2047 | | | 1,000,000 | 1,030,163 |
| Commercial Mortgage Trust, 2015-DC1, “A5”, 3.35%, 2/10/2048 | | | 4,990,000 | 5,101,961 |
| Commercial Mortgage Trust, 2015-LC21, “A4”, 3.708%, 7/10/2048 | | | 3,135,000 | 3,230,039 |
| Commercial Mortgage Trust, 2015-PC1, “A5”, 3.902%, 7/10/2050 | | | 5,300,000 | 5,490,509 |
| CSAIL Commercial Mortgage Trust, 2015-C2, “A4”, 3.504%, 6/15/2057 | | | 5,341,994 | 5,465,284 |
| GS Mortgage Securities Trust, 2015-GC30, “A4”, 3.382%, 5/10/2050 | | | 5,951,000 | 6,079,459 |
| GS Mortgage Securities Trust, 2015-GC32, “A2”, 3.062%, 7/10/2048 | | | 507,808 | 510,724 |
| KREF 2018-FT1 Ltd., “AS”, FLR, 1.42% (LIBOR - 1mo. + 1.3%), 2/15/2039 (n) | | | 759,000 | 741,937 |
| LoanCore 2021-CRE5 Ltd., “AS”, FLR, 1.941% (LIBOR - 1mo. + 1.75%), 7/15/2036 (n) | | | 6,508,500 | 6,481,970 |
| LoanCore 2021-CRE6 Ltd., “AS”, FLR, 1.841% (LIBOR - 1mo. + 1.65%), 11/15/2038 (n) | | | 10,000,000 | 9,950,960 |
| Madison Park Funding Ltd., 2014-13A, “BR2”, FLR, 1.748% (LIBOR - 3mo. + 1.5%), 4/19/2030 (n) | | | 5,711,934 | 5,683,032 |
| MF1 2021-FL5 Ltd., “AS”, FLR, 1.385% (LIBOR - 1mo. + 1.2%), 7/15/2036 (n) | | | 3,875,500 | 3,839,892 |
| MF1 2021-FL5 Ltd., “B”, FLR, 1.635% (LIBOR - 1mo. + 1.45%), 7/15/2036 (n) | | | 4,881,500 | 4,822,835 |
| Morgan Stanley Capital I Trust, 2018-H4, “XA”, 0.836%, 12/15/2051 (i) | | | 24,406,974 | 1,152,607 |
| Morgan Stanley Capital I Trust, 2021-L5, “XA”, 1.299%, 5/15/2054 (i) | | | 16,818,285 | 1,489,249 |
| Morgan Stanley Capital I Trust, 2021-L6, “XA”, 1.237%, 6/15/2054 (i) | | | 20,714,600 | 1,665,709 |
| Morgan Stanley Capital I Trust, 2021-L7, “XA”, 1.106%, 10/15/2054 (i) | | | 81,077,329 | 6,157,296 |
| PFP III 2021-7 Ltd., “AS”, FLR, 1.341% (LIBOR - 1mo. + 1.15%), 4/14/2038 (n) | | | 5,441,728 | 5,388,481 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.386% (LIBOR - 1mo. + 1.2%), 11/25/2036 (z) | | | 4,104,673 | 4,064,909 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Asset-Backed & Securitized – continued |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 1.687% (LIBOR - 1mo. + 1.5%), 11/25/2036 (z) | | $ | 1,261,500 | $ 1,244,492 |
| Wells Fargo Commercial Mortgage Trust, 2018-C48, “XA”, 0.949%, 1/15/2052 (i)(n) | | | 13,770,544 | 760,791 |
| Wells Fargo Commercial Mortgage Trust, 2021-C60, “XA”, 1.555%, 8/15/2054 (i) | | | 20,939,621 | 2,333,731 |
| | | | | $163,514,443 |
| Automotive – 0.2% |
| Hyundai Capital America, 2.85%, 11/01/2022 (n) | | $ | 2,831,000 | $ 2,851,034 |
| Hyundai Capital America, 2.375%, 2/10/2023 (n) | | | 1,899,000 | 1,904,365 |
| | | | | $4,755,399 |
| Consumer Services – 0.1% |
| Conservation Fund, 3.474%, 12/15/2029 | | $ | 2,018,000 | $ 2,083,066 |
| Industrial – 0.1% |
| Howard University, Washington D.C., 2.738%, 10/01/2022 | | $ | 458,000 | $ 459,004 |
| Howard University, Washington D.C., 2.801%, 10/01/2023 | | | 505,000 | 506,292 |
| Howard University, Washington D.C., AGM, 2.416%, 10/01/2024 | | | 556,000 | 554,928 |
| Howard University, Washington D.C., AGM, 2.516%, 10/01/2025 | | | 688,000 | 678,331 |
| | | | | $2,198,555 |
| Medical & Health Technology & Services – 0.3% |
| ProMedica Toledo Hospital, “B”, AGM, 5.325%, 11/15/2028 | | $ | 4,139,000 | $ 4,718,732 |
| ProMedica Toledo Hospital, “B”, AGM, 5.75%, 11/15/2038 | | | 1,992,000 | 2,258,092 |
| | | | | $6,976,824 |
| Mortgage-Backed – 43.3% | |
| Fannie Mae, 2.152%, 1/25/2023 | | $ | 1,333,855 | $ 1,337,002 |
| Fannie Mae, 2.41%, 5/01/2023 | | | 1,349,073 | 1,358,810 |
| Fannie Mae, 2.55%, 5/01/2023 | | | 1,159,900 | 1,169,491 |
| Fannie Mae, 5.5%, 6/01/2023 - 5/01/2044 | | | 10,232,689 | 11,422,072 |
| Fannie Mae, 5%, 3/01/2024 - 3/01/2042 | | | 8,781,277 | 9,731,074 |
| Fannie Mae, 4.5%, 5/01/2025 - 6/01/2044 | | | 21,888,764 | 23,702,206 |
| Fannie Mae, 2.572%, 12/25/2026 | | | 4,085,108 | 4,169,043 |
| Fannie Mae, 4%, 3/25/2028 - 7/01/2047 | | | 43,387,329 | 46,309,084 |
| Fannie Mae, 3%, 11/01/2028 - 5/25/2053 | | | 26,731,655 | 27,427,489 |
| Fannie Mae, 2.5%, 11/01/2031 - 10/01/2046 | | | 4,286,017 | 4,274,916 |
| Fannie Mae, 3.5%, 12/25/2031 - 2/25/2036 (i) | | | 1,752,182 | 175,212 |
| Fannie Mae, 6.5%, 1/01/2032 - 10/01/2037 | | | 762,350 | 843,178 |
| Fannie Mae, 6%, 1/01/2033 - 12/01/2037 | | | 2,318,204 | 2,594,863 |
| Fannie Mae, 3%, 2/25/2033 (i) | | | 1,830,331 | 180,147 |
| Fannie Mae, 3.5%, 4/01/2038 - 12/01/2047 | | | 29,351,098 | 30,697,883 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Mortgage-Backed – continued | |
| Fannie Mae, 2%, 10/25/2040 - 4/25/2046 | | $ | 2,200,999 | $ 2,182,920 |
| Fannie Mae, 1.75%, 9/25/2041 - 10/25/2041 | | | 6,368,444 | 6,259,524 |
| Fannie Mae, 2.75%, 9/25/2042 | | | 2,061,330 | 2,091,826 |
| Fannie Mae, UMBS, 1.5%, 2/01/2042 | | | 553,734 | 521,595 |
| Fannie Mae, UMBS, 2%, 2/01/2042 - 3/01/2052 | | | 49,990,138 | 48,244,057 |
| Fannie Mae, UMBS, 2.5%, 3/01/2042 - 3/01/2052 | | | 77,586,256 | 76,806,256 |
| Fannie Mae, UMBS, 5.5%, 5/01/2044 | | | 1,531,424 | 1,719,836 |
| Fannie Mae, UMBS, 3.5%, 5/01/2049 | | | 767,898 | 806,556 |
| Fannie Mae, UMBS, 3%, 12/01/2051 | | | 4,301,424 | 4,367,907 |
| Freddie Mac, 5.5%, 5/01/2022 - 9/01/2041 | | | 4,457,947 | 4,983,025 |
| Freddie Mac, 4.5%, 11/01/2022 - 5/01/2042 | | | 3,772,900 | 4,083,342 |
| Freddie Mac, 3.32%, 2/25/2023 | | | 4,453,009 | 4,524,743 |
| Freddie Mac, 5%, 4/01/2023 - 12/01/2044 | | | 9,882,548 | 10,947,331 |
| Freddie Mac, 3.25%, 4/25/2023 | | | 8,919,975 | 9,066,556 |
| Freddie Mac, 6%, 6/01/2023 - 10/01/2038 | | | 1,434,374 | 1,614,360 |
| Freddie Mac, 3.06%, 7/25/2023 | | | 871,000 | 886,606 |
| Freddie Mac, 3.531%, 7/25/2023 | | | 240,000 | 245,661 |
| Freddie Mac, 3.458%, 8/25/2023 | | | 4,600,000 | 4,711,860 |
| Freddie Mac, 0.895%, 4/25/2024 (i) | | | 43,162,212 | 684,915 |
| Freddie Mac, 0.604%, 7/25/2024 (i) | | | 57,885,683 | 562,932 |
| Freddie Mac, 3.303%, 7/25/2024 | | | 4,700,000 | 4,846,226 |
| Freddie Mac, 3.064%, 8/25/2024 | | | 6,021,710 | 6,160,751 |
| Freddie Mac, 2.67%, 12/25/2024 | | | 10,948,000 | 11,153,811 |
| Freddie Mac, 3.062%, 12/25/2024 | | | 325,000 | 334,567 |
| Freddie Mac, 2.811%, 1/25/2025 | | | 9,000,000 | 9,205,227 |
| Freddie Mac, 3.329%, 5/25/2025 | | | 16,621,000 | 17,292,801 |
| Freddie Mac, 3.284%, 6/25/2025 | | | 1,125,000 | 1,169,045 |
| Freddie Mac, 4%, 7/01/2025 - 4/01/2044 | | | 3,345,998 | 3,569,851 |
| Freddie Mac, 3.01%, 7/25/2025 | | | 2,651,000 | 2,735,183 |
| Freddie Mac, 3.5%, 11/15/2025 - 10/25/2058 | | | 39,851,201 | 41,562,869 |
| Freddie Mac, 3.3%, 10/25/2026 | | | 7,808,000 | 8,207,181 |
| Freddie Mac, 1.367%, 3/25/2027 (i) | | | 5,583,000 | 351,134 |
| Freddie Mac, 3.117%, 6/25/2027 | | | 5,237,000 | 5,486,176 |
| Freddie Mac, 0.576%, 7/25/2027 (i) | | | 105,442,828 | 2,933,008 |
| Freddie Mac, 0.429%, 8/25/2027 (i) | | | 82,894,241 | 1,779,656 |
| Freddie Mac, 0.291%, 1/25/2028 (i) | | | 150,818,282 | 2,585,282 |
| Freddie Mac, 0.302%, 1/25/2028 (i) | | | 62,075,038 | 1,094,793 |
| Freddie Mac, 0.133%, 2/25/2028 (i) | | | 176,228,829 | 1,597,567 |
| Freddie Mac, 2.5%, 3/15/2028 | | | 617,473 | 620,401 |
| Freddie Mac, 0.119%, 4/25/2028 (i) | | | 113,438,069 | 960,582 |
| Freddie Mac, 3%, 6/15/2028 - 2/25/2059 | | | 28,821,239 | 29,538,643 |
| Freddie Mac, 1.089%, 7/25/2029 (i) | | | 19,366,383 | 1,367,921 |
| Freddie Mac, 1.143%, 8/25/2029 (i) | | | 33,841,221 | 2,507,980 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Mortgage-Backed – continued | |
| Freddie Mac, 1.798%, 4/25/2030 (i) | | $ | 14,430,646 | $ 1,885,586 |
| Freddie Mac, 1.868%, 4/25/2030 (i) | | | 20,077,463 | 2,711,044 |
| Freddie Mac, 1.662%, 5/25/2030 (i) | | | 12,033,779 | 1,466,812 |
| Freddie Mac, 1.796%, 5/25/2030 (i) | | | 26,880,424 | 3,533,461 |
| Freddie Mac, 1.341%, 6/25/2030 (i) | | | 11,124,134 | 1,110,547 |
| Freddie Mac, 1.599%, 8/25/2030 (i) | | | 10,235,210 | 1,232,086 |
| Freddie Mac, 1.17%, 9/25/2030 (i) | | | 6,568,138 | 587,151 |
| Freddie Mac, 1.081%, 11/25/2030 (i) | | | 13,158,725 | 1,112,204 |
| Freddie Mac, 0.33%, 1/25/2031 (i) | | | 50,216,686 | 1,256,487 |
| Freddie Mac, 0.781%, 1/25/2031 (i) | | | 19,512,958 | 1,231,092 |
| Freddie Mac, 0.936%, 1/25/2031 (i) | | | 14,681,587 | 1,092,297 |
| Freddie Mac, 0.528%, 3/25/2031 (i) | | | 40,533,673 | 1,653,129 |
| Freddie Mac, 0.74%, 3/25/2031 (i) | | | 17,260,719 | 1,048,433 |
| Freddie Mac, 1.224%, 5/25/2031 (i) | | | 7,120,528 | 708,676 |
| Freddie Mac, 0.938%, 7/25/2031 (i) | | | 11,674,001 | 927,492 |
| Freddie Mac, 0.508%, 8/25/2031 (i) | | | 14,903,213 | 637,716 |
| Freddie Mac, 0.536%, 9/25/2031 (i) | | | 50,149,699 | 2,367,562 |
| Freddie Mac, 0.855%, 9/25/2031 (i) | | | 14,983,637 | 1,090,031 |
| Freddie Mac, 0.349%, 11/25/2031 (i) | | | 73,361,326 | 2,362,279 |
| Freddie Mac, 0.497%, 12/25/2031 (i) | | | 73,957,916 | 3,154,527 |
| Freddie Mac, 0.567%, 12/25/2031 (i) | | | 12,187,459 | 593,171 |
| Freddie Mac, 5.5%, 2/15/2036 (i) | | | 440,473 | 77,593 |
| Freddie Mac, 2%, 8/15/2036 | | | 2,902,885 | 2,914,039 |
| Freddie Mac, 6.5%, 5/01/2037 | | | 172,203 | 192,958 |
| Freddie Mac, 4.5%, 12/15/2040 (i) | | | 155,230 | 14,743 |
| Freddie Mac, 1.75%, 8/15/2041 | | | 1,615,032 | 1,597,610 |
| Freddie Mac, UMBS, 2.5%, 8/01/2040 - 12/01/2051 | | | 9,946,132 | 9,855,969 |
| Freddie Mac, UMBS, 2%, 2/01/2042 - 2/01/2052 | | | 14,937,694 | 14,442,017 |
| Freddie Mac, UMBS, 3%, 2/01/2050 - 1/01/2052 | | | 8,515,198 | 8,667,233 |
| Ginnie Mae, 5.5%, 3/15/2033 - 1/20/2042 | | | 2,057,476 | 2,303,888 |
| Ginnie Mae, 4.5%, 7/20/2033 - 7/20/2049 | | | 5,716,424 | 6,276,274 |
| Ginnie Mae, 5.69%, 8/20/2034 | | | 1,567,217 | 1,726,638 |
| Ginnie Mae, 4%, 5/16/2039 - 7/20/2049 | | | 4,540,422 | 4,758,288 |
| Ginnie Mae, 3.5%, 10/20/2041 (i) | | | 706,357 | 46,010 |
| Ginnie Mae, 3.5%, 12/15/2041 - 7/20/2043 | | | 9,033,231 | 9,606,795 |
| Ginnie Mae, 2.5%, 6/20/2042 - 11/20/2051 | | | 29,169,890 | 29,191,819 |
| Ginnie Mae, 4%, 8/16/2042 (i) | | | 783,342 | 108,468 |
| Ginnie Mae, 3%, 2/20/2043 - 2/20/2052 | | | 22,535,850 | 23,057,650 |
| Ginnie Mae, 2.25%, 9/20/2043 | | | 1,340,001 | 1,339,331 |
| Ginnie Mae, 2%, 1/20/2052 | | | 20,518,372 | 20,089,907 |
| Ginnie Mae, 0.584%, 2/16/2059 (i) | | | 2,847,731 | 117,018 |
| Ginnie Mae, TBA, 3.5%, 3/15/2052 - 4/21/2052 | | | 37,117,230 | 38,253,054 |
| Ginnie Mae, TBA, 4%, 3/15/2052 | | | 14,951,247 | 15,534,112 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Mortgage-Backed – continued | |
| Ginnie Mae, TBA, 3%, 3/21/2052 | | $ | 27,750,000 | $ 28,210,693 |
| UMBS, TBA, 2%, 3/25/2037 - 4/25/2052 | | | 227,075,000 | 219,425,454 |
| UMBS, TBA, 2.5%, 11/25/2051 | | | 76,590,000 | 75,563,813 |
| UMBS, TBA, 3.5%, 3/14/2052 | | | 29,500,000 | 30,380,391 |
| UMBS, TBA, 3%, 3/25/2052 | | | 34,800,000 | 35,148,000 |
| | | | | $ 1,118,426,481 |
| Municipals – 1.7% |
| California Earthquake Authority Rev., “B”, 1.477%, 7/01/2023 | | $ | 1,355,000 | $ 1,356,606 |
| Chicago, IL, Transit Authority Sales Tax Receipts Refunding Rev., Taxable, “B”, 1.838%, 12/01/2023 | | | 492,000 | 491,164 |
| Chicago, IL, Transit Authority Sales Tax Receipts Refunding Rev., Taxable, “B”, 2.064%, 12/01/2024 | | | 985,000 | 979,456 |
| Chicago, IL, Transit Authority Sales Tax Receipts Refunding Rev., Taxable, “B”, 2.214%, 12/01/2025 | | | 738,000 | 732,769 |
| Chicago, IL, Transit Authority Sales Tax Receipts Refunding Rev., Taxable, “B”, 2.481%, 12/01/2026 | | | 1,723,000 | 1,721,717 |
| Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “B”, 3%, 6/01/2046 | | | 4,695,000 | 4,754,889 |
| Massachusetts Educational Financing Authority, Education Loan Rev., “A”, 2.562%, 7/01/2026 | | | 445,000 | 449,327 |
| Massachusetts Educational Financing Authority, Education Loan Rev., “A”, 2.682%, 7/01/2027 | | | 2,165,000 | 2,189,971 |
| Michigan Finance Authority Tobacco Settlement Asset-Backed Rev. (2006 Sold Tobacco Receipts), “A-1”, 2.326%, 6/01/2030 | | | 1,780,286 | 1,786,470 |
| New Jersey Economic Development Authority State Pension Funding Rev., Capital Appreciation, “B”, AGM, 0%, 2/15/2023 | | | 14,792,000 | 14,641,533 |
| New York Transportation Development Corp., Special Facilities Taxable Rev. (Terminal 4 John F. Kennedy International Airport Project), “B”, 1.61%, 12/01/2022 | | | 770,000 | 770,250 |
| Philadelphia, PA, School District, “A”, AGM, 5.995%, 9/01/2030 | | | 3,280,000 | 4,082,333 |
| Port of Oakland, CA, Senior Lien Refunding Taxable Rev., “R”, 1.517%, 5/01/2026 | | | 1,680,000 | 1,643,183 |
| Rhode Island Student Loan Authority, Education Loan Rev., “1”, 2.195%, 12/01/2039 | | | 310,000 | 300,776 |
| Texas Transportation Commission, Central Texas Turnpike System First Tier Refunding Rev., Taxable, “B”, 1.98%, 8/15/2042 | | | 3,260,000 | 3,271,031 |
| West Virginia Tobacco Settlement Financing Authority Asset-Backed Refunding, “A-1”, 1.497%, 6/01/2024 | | | 1,900,000 | 1,872,509 |
| West Virginia Tobacco Settlement Financing Authority Asset-Backed Refunding, “A-1”, 1.647%, 6/01/2025 | | | 1,550,000 | 1,513,590 |
| | | | | $42,557,574 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| Supranational – 0.1% |
| Inter-American Development Bank, 4.375%, 1/24/2044 | | $ | 2,796,000 | $ 3,686,705 |
| U.S. Government Agencies and Equivalents – 0.2% |
| Small Business Administration, 6.07%, 3/01/2022 | | $ | 9,928 | $ 9,932 |
| Small Business Administration, 4.98%, 11/01/2023 | | | 33,057 | 33,734 |
| Small Business Administration, 4.89%, 12/01/2023 | | | 97,020 | 98,576 |
| Small Business Administration, 4.77%, 4/01/2024 | | | 117,239 | 119,403 |
| Small Business Administration, 5.52%, 6/01/2024 | | | 57,428 | 58,835 |
| Small Business Administration, 4.99%, 9/01/2024 | | | 93,592 | 95,008 |
| Small Business Administration, 4.86%, 10/01/2024 | | | 70,604 | 72,013 |
| Small Business Administration, 4.86%, 1/01/2025 | | | 113,063 | 115,625 |
| Small Business Administration, 5.11%, 4/01/2025 | | | 97,712 | 100,164 |
| Small Business Administration, 2.21%, 2/01/2033 | | | 968,681 | 958,844 |
| Small Business Administration, 2.22%, 3/01/2033 | | | 1,425,814 | 1,413,081 |
| Small Business Administration, 3.15%, 7/01/2033 | | | 1,358,973 | 1,390,705 |
| Small Business Administration, 3.16%, 8/01/2033 | | | 550,561 | 563,196 |
| Small Business Administration, 3.62%, 9/01/2033 | | | 570,989 | 591,000 |
| | | | | $5,620,116 |
| U.S. Treasury Obligations – 43.4% |
| U.S. Treasury Bonds, 6.25%, 8/15/2023 | | $ | 1,445,000 | $ 1,548,859 |
| U.S. Treasury Bonds, 6%, 2/15/2026 | | | 5,933,000 | 6,917,971 |
| U.S. Treasury Bonds, 6.75%, 8/15/2026 | | | 981,000 | 1,191,494 |
| U.S. Treasury Bonds, 6.375%, 8/15/2027 | | | 2,309,000 | 2,862,889 |
| U.S. Treasury Bonds, 1.625%, 5/15/2031 | | | 41,833,000 | 41,105,825 |
| U.S. Treasury Bonds, 4.375%, 2/15/2038 | | | 2,078,000 | 2,755,379 |
| U.S. Treasury Bonds, 4.5%, 8/15/2039 | | | 11,926,300 | 16,158,739 |
| U.S. Treasury Bonds, 3.125%, 2/15/2043 | | | 9,748,800 | 11,099,542 |
| U.S. Treasury Bonds, 2.875%, 5/15/2043 | | | 27,528,200 | 30,179,940 |
| U.S. Treasury Bonds, 2.5%, 2/15/2045 | | | 97,983,000 | 101,155,965 |
| U.S. Treasury Bonds, 2.875%, 11/15/2046 | | | 26,245,000 | 29,125,799 |
| U.S. Treasury Bonds, 1.875%, 11/15/2051 | | | 27,339,000 | 25,506,433 |
| U.S. Treasury Notes, 1.5%, 9/15/2022 | | | 35,000,000 | 35,149,023 |
| U.S. Treasury Notes, 0.125%, 9/30/2022 | | | 49,534,000 | 49,350,182 |
| U.S. Treasury Notes, 0.125%, 2/28/2023 | | | 51,824,200 | 51,330,251 |
| U.S. Treasury Notes, 2.5%, 3/31/2023 | | | 131,000,000 | 132,888,242 |
| U.S. Treasury Notes, 0.125%, 5/31/2023 | | | 33,455,000 | 32,996,301 |
| U.S. Treasury Notes, 0.125%, 6/30/2023 | | | 18,346,500 | 18,072,019 |
| U.S. Treasury Notes, 2.5%, 8/15/2023 (f) | | | 136,673,000 | 139,038,084 |
| U.S. Treasury Notes, 0.375%, 10/31/2023 | | | 13,343,200 | 13,115,949 |
| U.S. Treasury Notes, 0.125%, 12/15/2023 | | | 51,749,000 | 50,560,390 |
| U.S. Treasury Notes, 2.625%, 12/31/2025 | | | 20,900,000 | 21,600,476 |
| U.S. Treasury Notes, 0.75%, 5/31/2026 | | | 83,631,200 | 80,220,615 |
| U.S. Treasury Notes, 2%, 11/15/2026 | | | 51,959,000 | 52,537,450 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Bonds – continued |
| U.S. Treasury Obligations – continued |
| U.S. Treasury Notes, 2.75%, 2/15/2028 | | $ | 54,157,000 | $ 57,074,285 |
| U.S. Treasury Notes, 1%, 7/31/2028 | | | 32,248,000 | 30,641,898 |
| U.S. Treasury Notes, 2.375%, 5/15/2029 | | | 19,515,500 | 20,245,044 |
| U.S. Treasury Notes, 1.625%, 8/15/2029 | | | 29,405,000 | 29,035,140 |
| U.S. Treasury Notes, 1.75%, 11/15/2029 | | | 8,564,000 | 8,536,234 |
| U.S. Treasury Notes, 1.375%, 11/15/2031 | | | 11,425,300 | 10,952,221 |
| U.S. Treasury Notes, 1.875%, 2/15/2032 | | | 17,094,300 | 17,158,404 |
| | | | | $ 1,120,111,043 |
| Total Bonds (Identified Cost, $2,452,728,768) | | $ 2,469,930,206 |
| Investment Companies (h) – 26.2% |
| Money Market Funds – 26.2% | |
| MFS Institutional Money Market Portfolio, 0.06% (v) (Identified Cost, $677,446,421) | | | 677,447,936 | $ 677,447,936 |
|
|
| Other Assets, Less Liabilities – (21.9)% | | (565,945,231) |
| Net Assets – 100.0% | $ 2,581,432,911 |
| (f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
| (h) | An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $677,447,936 and $2,469,930,206, respectively. |
| (i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
| (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 $98,011,207, representing 3.8% of net assets. |
| (v) | Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
| (z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
Portfolio of Investments – continued
| Restricted Securities | Acquisition
Date | Cost | Value |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.386% (LIBOR - 1mo. + 1.2%), 11/25/2036 | 11/12/2021 | $4,104,673 | $4,064,909 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 1.687% (LIBOR - 1mo. + 1.5%), 11/25/2036 | 11/12/2021 | 1,261,500 | 1,244,492 |
| Total Restricted Securities | | | $5,309,401 |
| % of Net assets | | | 0.2% |
| The following abbreviations are used in this report and are defined: |
| AGM | Assured Guaranty Municipal |
| CLO | Collateralized Loan Obligation |
| FLR | Floating Rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
| LIBOR | London Interbank Offered Rate |
| REIT | Real Estate Investment Trust |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
| UMBS | Uniform Mortgage-Backed Security |
Derivative Contracts at 2/28/22
| 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 | 86 | $13,475,125 | June – 2022 | $228,207 |
| U.S. Treasury Note 10 yr | Long | USD | 1,744 | 222,251,000 | June – 2022 | 1,605,588 |
| U.S. Treasury Ultra Bond | Long | USD | 610 | 113,421,875 | June – 2022 | 1,280,319 |
| U.S. Treasury Ultra Note 10 yr | Long | USD | 123 | 17,383,359 | June – 2022 | 168,187 |
| | | | | | | $3,282,301 |
| Liability Derivatives |
| Interest Rate Futures | | |
| U.S. Treasury Note 2 yr | Short | USD | 1,149 | $247,295,319 | June – 2022 | $(847,055) |
| U.S. Treasury Note 5 yr | Short | USD | 1,191 | 140,872,969 | June – 2022 | (500,351) |
| | | | | | | $(1,347,406) |
At February 28, 2022, the fund had liquid securities with an aggregate value of $7,183,155 to cover any collateral or margin obligations for certain derivative contracts.
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
At 2/28/22
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, $2,452,728,768) | $2,469,930,206 |
| Investments in affiliated issuers, at value (identified cost, $677,446,421) | 677,447,936 |
| Cash | 389,837 |
| Restricted cash for MBS/TBA | 4,391,000 |
| Receivables for | |
| Net daily variation margin on open futures contracts | 3,447,674 |
| Investments sold | 409,270 |
| TBA sale commitments | 255,836,601 |
| Fund shares sold | 2,048,927 |
| Interest | 7,423,709 |
| Other assets | 6,619 |
| Total assets | $3,421,331,779 |
| Liabilities | |
| Payables for | |
| Distributions | $90,671 |
| Investments purchased | 128,448,861 |
| TBA purchase commitments | 708,248,957 |
| Fund shares reacquired | 2,499,374 |
| Payable to affiliates | |
| Investment adviser | 99,523 |
| Administrative services fee | 3,902 |
| Shareholder servicing costs | 343,308 |
| Distribution and service fees | 21,289 |
| Payable for independent Trustees' compensation | 5,300 |
| Accrued expenses and other liabilities | 137,683 |
| Total liabilities | $839,898,868 |
| Net assets | $2,581,432,911 |
| Net assets consist of | |
| Paid-in capital | $2,673,685,530 |
| Total distributable earnings (loss) | (92,252,619) |
| Net assets | $2,581,432,911 |
| Shares of beneficial interest outstanding | 263,319,917 |
Statement of Assets and Liabilities – continued
| | Net assets | Shares
outstanding | Net asset value
per share (a) |
| Class A | $589,493,480 | 60,074,462 | $9.81 |
| Class B | 2,756,562 | 281,257 | 9.80 |
| Class C | 10,186,517 | 1,036,565 | 9.83 |
| Class I | 274,850,887 | 28,057,930 | 9.80 |
| Class R1 | 1,959,576 | 199,922 | 9.80 |
| Class R2 | 49,375,202 | 5,037,287 | 9.80 |
| Class R3 | 38,285,520 | 3,903,417 | 9.81 |
| Class R4 | 53,251,836 | 5,427,826 | 9.81 |
| Class R6 | 1,561,273,331 | 159,301,251 | 9.80 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $10.25 [100 / 95.75 x $9.81]. On sales of $100,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
Financial Statements
Statement of Operations
Year ended 2/28/22
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 | $39,213,768 |
| Dividends from affiliated issuers | 319,245 |
| Other | 318 |
| Total investment income | $39,533,331 |
| Expenses | |
| Management fee | $9,649,358 |
| Distribution and service fees | 2,366,117 |
| Shareholder servicing costs | 2,033,820 |
| Administrative services fee | 355,922 |
| Independent Trustees' compensation | 34,061 |
| Custodian fee | 150,363 |
| Shareholder communications | 59,302 |
| Audit and tax fees | 69,212 |
| Legal fees | 12,567 |
| Miscellaneous | 242,827 |
| Total expenses | $14,973,549 |
| Fees paid indirectly | (226) |
| Reduction of expenses by investment adviser and distributor | (347,640) |
| Net expenses | $14,625,683 |
| Net investment income (loss) | $24,907,648 |
| Realized and unrealized gain (loss) |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers | $(17,593,438) |
| Futures contracts | (1,992,120) |
| Forward foreign currency exchange contracts | 3,514,379 |
| Foreign currency | (3,424,669) |
| Net realized gain (loss) | $(19,495,848) |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers | $(66,834,917) |
| Futures contracts | 2,249,036 |
| Net unrealized gain (loss) | $(64,585,881) |
| Net realized and unrealized gain (loss) | $(84,081,729) |
| Change in net assets from operations | $(59,174,081) |
See Notes to Financial Statements
Financial Statements
Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| | Year ended |
| | 2/28/22 | 2/28/21 |
| Change in net assets | | |
| From operations | | |
| Net investment income (loss) | $24,907,648 | $37,460,682 |
| Net realized gain (loss) | (19,495,848) | 11,832,530 |
| Net unrealized gain (loss) | (64,585,881) | (43,921,875) |
| Change in net assets from operations | $(59,174,081) | $5,371,337 |
| Total distributions to shareholders | $(30,875,262) | $(44,976,163) |
| Change in net assets from fund share transactions | $74,959,507 | $382,371,044 |
| Total change in net assets | $(15,089,836) | $342,766,218 |
| Net assets | | |
| At beginning of period | 2,596,522,747 | 2,253,756,529 |
| At end of period | $2,581,432,911 | $2,596,522,747 |
See Notes to Financial Statements
Financial Statements
Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.15 | $10.28 | $9.59 | $9.55 | $9.84 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.07 | $0.14 | $0.20 | $0.20 | $0.20 |
| Net realized and unrealized gain (loss) | (0.31) | (0.10) | 0.70 | 0.06 | (0.26) |
| Total from investment operations | $(0.24) | $0.04 | $0.90 | $0.26 | $(0.06) |
| Less distributions declared to shareholders |
| From net investment income | $(0.10) | $(0.17) | $(0.21) | $(0.22) | $(0.23) |
| Net asset value, end of period (x) | $9.81 | $10.15 | $10.28 | $9.59 | $9.55 |
| Total return (%) (r)(s)(t)(x) | (2.43) | 0.40 | 9.48 | 2.75 | (0.61) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 0.79 | 0.81 | 0.85 | 0.86 | 0.87 |
| Expenses after expense reductions (f) | 0.78 | 0.80 | 0.84 | 0.84 | 0.85 |
| Net investment income (loss) | 0.73 | 1.35 | 1.98 | 2.12 | 2.06 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $589,493 | $805,484 | $702,063 | $596,678 | $625,457 |
See Notes to Financial Statements
Financial Highlights – continued
| Class B | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.14 | $10.27 | $9.58 | $9.54 | $9.82 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.00)(w) | $0.07 | $0.12 | $0.13 | $0.13 |
| Net realized and unrealized gain (loss) | (0.32) | (0.10) | 0.71 | 0.06 | (0.25) |
| Total from investment operations | $(0.32) | $(0.03) | $0.83 | $0.19 | $(0.12) |
| Less distributions declared to shareholders |
| From net investment income | $(0.02) | $(0.10) | $(0.14) | $(0.15) | $(0.16) |
| Net asset value, end of period (x) | $9.80 | $10.14 | $10.27 | $9.58 | $9.54 |
| Total return (%) (r)(s)(t)(x) | (3.16) | (0.35) | 8.68 | 1.99 | (1.26) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 1.54 | 1.56 | 1.60 | 1.61 | 1.62 |
| Expenses after expense reductions (f) | 1.53 | 1.55 | 1.59 | 1.60 | 1.61 |
| Net investment income (loss) | (0.02) | 0.66 | 1.23 | 1.37 | 1.31 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $2,757 | $4,468 | $7,711 | $8,811 | $12,968 |
| Class C | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.17 | $10.29 | $9.60 | $9.57 | $9.85 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.00)(w) | $0.07 | $0.12 | $0.13 | $0.13 |
| Net realized and unrealized gain (loss) | (0.32) | (0.09) | 0.71 | 0.05 | (0.25) |
| Total from investment operations | $(0.32) | $(0.02) | $0.83 | $0.18 | $(0.12) |
| Less distributions declared to shareholders |
| From net investment income | $(0.02) | $(0.10) | $(0.14) | $(0.15) | $(0.16) |
| Net asset value, end of period (x) | $9.83 | $10.17 | $10.29 | $9.60 | $9.57 |
| Total return (%) (r)(s)(t)(x) | (3.15) | (0.25) | 8.66 | 1.88 | (1.25) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 1.54 | 1.56 | 1.60 | 1.61 | 1.62 |
| Expenses after expense reductions (f) | 1.53 | 1.55 | 1.59 | 1.60 | 1.61 |
| Net investment income (loss) | (0.01) | 0.63 | 1.23 | 1.37 | 1.30 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $10,187 | $19,052 | $20,084 | $19,919 | $29,766 |
See Notes to Financial Statements
Financial Highlights – continued
| Class I | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.14 | $10.27 | $9.58 | $9.55 | $9.83 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.10 | $0.17 | $0.22 | $0.22 | $0.22 |
| Net realized and unrealized gain (loss) | (0.32) | (0.10) | 0.70 | 0.05 | (0.24) |
| Total from investment operations | $(0.22) | $0.07 | $0.92 | $0.27 | $(0.02) |
| Less distributions declared to shareholders |
| From net investment income | $(0.12) | $(0.20) | $(0.23) | $(0.24) | $(0.26) |
| Net asset value, end of period (x) | $9.80 | $10.14 | $10.27 | $9.58 | $9.55 |
| Total return (%) (r)(s)(t)(x) | (2.18) | 0.65 | 9.76 | 2.90 | (0.26) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 0.53 | 0.56 | 0.60 | 0.61 | 0.62 |
| Expenses after expense reductions (f) | 0.52 | 0.55 | 0.59 | 0.60 | 0.61 |
| Net investment income (loss) | 0.97 | 1.60 | 2.20 | 2.36 | 2.29 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $274,851 | $162,286 | $96,407 | $43,627 | $39,572 |
| Class R1 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.14 | $10.27 | $9.58 | $9.54 | $9.83 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.00)(w) | $0.06 | $0.12 | $0.13 | $0.13 |
| Net realized and unrealized gain (loss) | (0.32) | (0.09) | 0.71 | 0.06 | (0.26) |
| Total from investment operations | $(0.32) | $(0.03) | $0.83 | $0.19 | $(0.13) |
| Less distributions declared to shareholders |
| From net investment income | $(0.02) | $(0.10) | $(0.14) | $(0.15) | $(0.16) |
| Net asset value, end of period (x) | $9.80 | $10.14 | $10.27 | $9.58 | $9.54 |
| Total return (%) (r)(s)(t)(x) | (3.16) | (0.35) | 8.68 | 1.99 | (1.36) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 1.54 | 1.56 | 1.60 | 1.61 | 1.62 |
| Expenses after expense reductions (f) | 1.53 | 1.55 | 1.59 | 1.60 | 1.61 |
| Net investment income (loss) | (0.02) | 0.61 | 1.23 | 1.37 | 1.31 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $1,960 | $2,274 | $2,158 | $2,125 | $2,237 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R2 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.14 | $10.27 | $9.58 | $9.54 | $9.83 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.05 | $0.12 | $0.17 | $0.18 | $0.18 |
| Net realized and unrealized gain (loss) | (0.32) | (0.10) | 0.71 | 0.06 | (0.26) |
| Total from investment operations | $(0.27) | $0.02 | $0.88 | $0.24 | $(0.08) |
| Less distributions declared to shareholders |
| From net investment income | $(0.07) | $(0.15) | $(0.19) | $(0.20) | $(0.21) |
| Net asset value, end of period (x) | $9.80 | $10.14 | $10.27 | $9.58 | $9.54 |
| Total return (%) (r)(s)(t)(x) | (2.67) | 0.15 | 9.22 | 2.50 | (0.86) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 1.04 | 1.06 | 1.10 | 1.11 | 1.12 |
| Expenses after expense reductions (f) | 1.03 | 1.05 | 1.09 | 1.10 | 1.11 |
| Net investment income (loss) | 0.48 | 1.12 | 1.73 | 1.87 | 1.80 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $49,375 | $63,945 | $78,519 | $86,431 | $98,060 |
| Class R3 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.15 | $10.27 | $9.58 | $9.55 | $9.83 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.07 | $0.14 | $0.20 | $0.20 | $0.20 |
| Net realized and unrealized gain (loss) | (0.31) | (0.09) | 0.70 | 0.05 | (0.25) |
| Total from investment operations | $(0.24) | $0.05 | $0.90 | $0.25 | $(0.05) |
| Less distributions declared to shareholders |
| From net investment income | $(0.10) | $(0.17) | $(0.21) | $(0.22) | $(0.23) |
| Net asset value, end of period (x) | $9.81 | $10.15 | $10.27 | $9.58 | $9.55 |
| Total return (%) (r)(s)(t)(x) | (2.43) | 0.50 | 9.49 | 2.65 | (0.51) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 0.79 | 0.81 | 0.85 | 0.86 | 0.87 |
| Expenses after expense reductions (f) | 0.78 | 0.80 | 0.84 | 0.85 | 0.86 |
| Net investment income (loss) | 0.73 | 1.36 | 1.99 | 2.12 | 2.05 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $38,286 | $49,242 | $52,773 | $66,977 | $79,274 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R4 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.15 | $10.28 | $9.59 | $9.55 | $9.84 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.10 | $0.17 | $0.22 | $0.22 | $0.23 |
| Net realized and unrealized gain (loss) | (0.32) | (0.10) | 0.71 | 0.06 | (0.26) |
| Total from investment operations | $(0.22) | $0.07 | $0.93 | $0.28 | $(0.03) |
| Less distributions declared to shareholders |
| From net investment income | $(0.12) | $(0.20) | $(0.24) | $(0.24) | $(0.26) |
| Net asset value, end of period (x) | $9.81 | $10.15 | $10.28 | $9.59 | $9.55 |
| Total return (%) (r)(s)(t)(x) | (2.18) | 0.65 | 9.75 | 3.01 | (0.36) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 0.54 | 0.56 | 0.60 | 0.61 | 0.62 |
| Expenses after expense reductions (f) | 0.53 | 0.55 | 0.59 | 0.60 | 0.61 |
| Net investment income (loss) | 0.98 | 1.61 | 2.22 | 2.36 | 2.30 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $53,252 | $67,258 | $73,230 | $58,677 | $64,691 |
| Class R6 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $10.14 | $10.27 | $9.58 | $9.54 | $9.83 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.11 | $0.18 | $0.23 | $0.24 | $0.24 |
| Net realized and unrealized gain (loss) | (0.32) | (0.10) | 0.71 | 0.05 | (0.26) |
| Total from investment operations | $(0.21) | $0.08 | $0.94 | $0.29 | $(0.02) |
| Less distributions declared to shareholders |
| From net investment income | $(0.13) | $(0.21) | $(0.25) | $(0.25) | $(0.27) |
| Net asset value, end of period (x) | $9.80 | $10.14 | $10.27 | $9.58 | $9.54 |
| Total return (%) (r)(s)(t)(x) | (2.08) | 0.75 | 9.87 | 3.13 | (0.25) |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions (f) | 0.44 | 0.46 | 0.50 | 0.50 | 0.50 |
| Expenses after expense reductions (f) | 0.42 | 0.45 | 0.49 | 0.49 | 0.50 |
| Net investment income (loss) | 1.08 | 1.69 | 2.33 | 2.48 | 2.42 |
| Portfolio turnover | 398 | 307 | 113 | 56 | 20 |
| Net assets at end of period (000 omitted) | $1,561,273 | $1,422,514 | $1,220,812 | $1,025,911 | $1,066,416 |
See Notes to Financial Statements
Financial Highlights – continued
| (d) | Per share data is based on average shares outstanding. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (w) | Per share amount was less than $0.01. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
Notes to Financial Statements
(1) Business and Organization
MFS Government Securities Fund (the fund) is a diversified series of MFS Series Trust XIII (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(2) Significant Accounting Policies
General — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — 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 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,
Notes to Financial Statements - continued
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 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. The following is a summary of the levels used as of February 28, 2022 in valuing the fund's assets and liabilities:
Notes to Financial Statements - continued
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | $— | $1,125,731,159 | $— | $1,125,731,159 |
| Non - U.S. Sovereign Debt | — | 3,686,705 | — | 3,686,705 |
| Municipal Bonds | — | 42,557,574 | — | 42,557,574 |
| U.S. Corporate Bonds | — | 16,013,844 | — | 16,013,844 |
| Residential Mortgage-Backed Securities | — | 1,118,426,481 | — | 1,118,426,481 |
| Commercial Mortgage-Backed Securities | — | 116,873,371 | — | 116,873,371 |
| Asset-Backed Securities (including CDOs) | — | 46,641,072 | — | 46,641,072 |
| Mutual Funds | 677,447,936 | — | — | 677,447,936 |
| Total | $677,447,936 | $2,469,930,206 | $— | $3,147,378,142 |
| Other Financial Instruments | | | | |
| Futures Contracts – Assets | $3,282,301 | $— | $— | $3,282,301 |
| Futures Contracts – Liabilities | (1,347,406) | — | — | (1,347,406) |
For further information regarding security characteristics, see the Portfolio of Investments.
Inflation-Adjusted Debt Securities — The fund invests in inflation-adjusted debt securities issued by the U.S. Treasury. The principal value of these debt securities is adjusted through income according to changes in the Consumer Price Index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.
Foreign Currency Translation — Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives — The fund uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate
Notes to Financial Statements - continued
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 February 28, 2022 as reported in the Statement of Assets and Liabilities:
| | | Fair Value (a) |
| Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives |
| Interest Rate | Futures Contracts | $3,282,301 | $(1,347,406) |
| (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 February 28, 2022 as reported in the Statement of Operations:
| Risk | Futures
Contracts | Forward Foreign
Currency
Exchange
Contracts |
| Interest Rate | $(1,992,120) | $ — |
| Foreign Exchange | — | 3,514,379 |
| Total | $(1,992,120) | $3,514,379 |
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 February 28, 2022 as reported in the Statement of Operations:
| Risk | Futures
Contracts |
| Interest Rate | $2,249,036 |
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
Notes to Financial Statements - continued
credit quality of the other party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each agreement to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
Collateral and margin requirements differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in the form of cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund's custodian in connection with these agreements. For derivatives traded under an ISDA Master Agreement, which contains a collateral support annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any such payments are included in “Miscellaneous” expense in the Statement of Operations.
Futures Contracts — The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a specified percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is realized.
The fund bears the risk of interest rates 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
Notes to Financial Statements - continued
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.
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. Some securities may be purchased or sold on an extended settlement basis, which means that the receipt or delivery of the securities by the fund and related payments occur at a future date, usually beyond the customary settlement period.
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. Interest payments received in additional securities are recorded on the ex-interest date in an amount equal to the value of the security on such date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund may 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.
Notes to Financial Statements - continued
The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. For these securities, the value of the debt instrument also depends on the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying assets or collateral may be difficult. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae.
The fund may purchase or sell mortgage-backed securities on a “To Be Announced” (TBA) basis. A TBA transaction is subject to extended settlement and typically does not designate the actual security to be delivered, but instead includes an approximate principal amount. The price of the TBA security and the date that it will be settled are fixed at the time the transaction is negotiated. The value of the security varies with market fluctuations and no interest accrues to the fund until settlement takes place. TBA purchase and sale commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy and included in TBA purchase and TBA sale commitments in the Statement of Assets and Liabilities. Losses may arise as a result of changes in the value of the TBA investment prior to settlement date or due to counterparty non-performance. At the time that it enters into a TBA transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments.
The fund may also enter into mortgage dollar rolls, typically TBA dollar rolls, in which the fund sells TBA mortgage-backed securities to financial institutions and simultaneously agrees to repurchase similar (same issuer, type and coupon) securities at a later date at an agreed-upon price. During the period between the sale and repurchase, the fund will not be entitled to receive interest and principal payments on the securities sold. The fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. Dollar roll transactions involve the risk that the market value of the securities that the fund is required to purchase may decline below the agreed upon repurchase price of those securities.
To mitigate the counterparty credit risk on TBA transactions, mortgage dollar rolls, and other types of forward settling mortgage-backed and asset-backed security transactions, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed and asset-backed securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and an amount is posted from one party to the other to collateralize such obligations. Cash that has been pledged to
Notes to Financial Statements - continued
cover the fund's collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Fees Paid Indirectly — The fund's custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the credit, for the year ended February 28, 2022, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily relate to amortization and accretion of debt securities, wash sale loss deferrals, straddle loss deferrals, and derivative transactions.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
| | Year ended
2/28/22 | Year ended
2/28/21 |
| Ordinary income (including any short-term capital gains) | $30,875,262 | $44,976,163 |
Notes to Financial Statements - continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
| As of 2/28/22 | |
| Cost of investments | $3,151,667,768 |
| Gross appreciation | 26,451,074 |
| Gross depreciation | (28,805,805) |
| Net unrealized appreciation (depreciation) | $ (2,354,731) |
| Undistributed ordinary income | 7,204,391 |
| Capital loss carryforwards | (94,841,984) |
| Other temporary differences | (2,260,295) |
| Total distributable earnings (loss) | $ (92,252,619) |
As of February 28, 2022, 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 | $(19,240,400) |
| Long-Term | (75,601,584) |
| Total | $(94,841,984) |
Multiple Classes of Shares of Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income and common expenses are allocated to shareholders based on the value of settled shares outstanding of each class. The fund's realized and unrealized gain (loss) are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B and Class C shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
| | Year ended
2/28/22 | Year ended
2/28/21 |
| Class A | $6,866,841 | $13,069,927 |
| Class B | 7,613 | 60,676 |
| Class C | 30,740 | 222,594 |
| Class I | 2,502,609 | 3,382,613 |
| Class R1 | 4,340 | 22,693 |
| Class R2 | 407,067 | 1,057,985 |
| Class R3 | 416,860 | 864,178 |
| Class R4 | 772,308 | 1,407,096 |
| Class R6 | 19,866,884 | 24,888,401 |
| Total | $30,875,262 | $44,976,163 |
Notes to Financial Statements - continued
(3) Transactions with Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $1 billion | 0.40% |
| In excess of $1 billion and up to $2.5 billion | 0.35% |
| In excess of $2.5 billion and up to $5 billion | 0.30% |
| In excess of $5 billion | 0.29% |
MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. For the year ended February 28, 2022, this management fee reduction amounted to $345,989, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended February 28, 2022 was equivalent to an annual effective rate of 0.35% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
| | | | | Classes | | | | |
| A | B | C | I | R1 | R2 | R3 | R4 | R6 |
| 0.80% | 1.55% | 1.55% | 0.55% | 1.55% | 1.05% | 0.80% | 0.55% | 0.44% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until June 30, 2023. For the year ended February 28, 2022, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $14,301 for the year ended February 28, 2022, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Notes to Financial Statements - continued
Distribution Plan Fee Table:
| | Distribution
Fee Rate (d) | Service
Fee Rate (d) | Total
Distribution
Plan (d) | Annual
Effective
Rate (e) | Distribution
and Service
Fee |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 1,776,757 |
| Class B | 0.75% | 0.25% | 1.00% | 1.00% | 35,019 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 138,113 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 21,374 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 286,448 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 108,406 |
| Total Distribution and Service Fees | | | | | $2,366,117 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended February 28, 2022 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended February 28, 2022, this rebate amounted to $1,570, $1, $7, and $73 for Class A, Class B, Class C, and Class R3, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended February 28, 2022, were as follows:
| | Amount |
| Class A | $76,323 |
| Class B | 6,200 |
| Class C | 1,575 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended February 28, 2022, the fee was $231,523, which equated to 0.0088% annually of the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R6 shares do not incur sub-accounting fees. For the year ended February 28, 2022, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $1,232,379.
Notes to Financial Statements - continued
Under a Special Servicing Agreement among MFS, certain MFS funds which invest in other MFS funds (“MFS fund-of-funds”) and certain underlying funds in which a MFS fund-of-funds invests (“underlying funds”), each underlying fund may pay a portion of each MFS fund-of-fund’s transfer agent-related expenses, including sub-accounting fees payable to financial intermediaries, to the extent such payments do not exceed the benefits realized or expected to be realized by the underlying fund from the investment in the underlying fund by the MFS fund-of-fund. For the period from March 1, 2021 through September 29, 2021, these costs for the fund amounted to $569,918 and are included in “Shareholder servicing costs” in the Statement of Operations. Effective September 30, 2021, the Special Servicing Agreement terminated and the fund no longer participates in this Special Servicing Agreement.
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 February 28, 2022 was equivalent to an annual effective rate of 0.0135% of the fund's average daily net assets.
Trustees’ and Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Prior to December 31, 2001, the fund had an unfunded defined benefit plan (“DB plan”) for independent Trustees. As of December 31, 2001, the Board took action to terminate the DB plan with respect to then-current and any future independent Trustees, such that the DB plan covers only certain of those former independent Trustees who retired on or before December 31, 2001. The DB plan resulted in a pension expense of $1,689 and is included in “Independent Trustees’ compensation” in the Statement of Operations for the year ended February 28, 2022. The liability for deferred retirement benefits payable to those former independent Trustees under the DB plan amounted to $4,965 at February 28, 2022, and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities.
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.
(4) Portfolio Securities
For the year ended February 28, 2022, purchases and sales of investments, other than short-term obligations, were as follows:
| | Purchases | Sales |
| U.S. Government securities | $9,954,584,588 | $9,748,929,901 |
| Non-U.S. Government securities | 138,722,824 | 162,227,157 |
Notes to Financial Statements - continued
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Shares sold | | | | | |
| Class A | 12,865,232 | $129,822,253 | | 37,432,324 | $388,976,524 |
| Class B | 21,933 | 216,332 | | 172,933 | 1,792,195 |
| Class C | 205,708 | 2,075,649 | | 1,838,016 | 19,087,959 |
| Class I | 18,031,612 | 182,635,307 | | 20,764,180 | 215,062,429 |
| Class R1 | 21,801 | 219,632 | | 157,633 | 1,631,410 |
| Class R2 | 797,169 | 8,008,502 | | 2,829,544 | 29,391,810 |
| Class R3 | 887,626 | 8,929,415 | | 1,848,618 | 19,205,838 |
| Class R4 | 1,720,152 | 17,301,502 | | 4,005,926 | 41,619,980 |
| Class R6 | 27,045,019 | 273,000,607 | | 49,026,064 | 509,164,154 |
| | 61,596,252 | $622,209,199 | | 118,075,238 | $1,225,932,299 |
Shares issued to shareholders
in reinvestment of distributions | | | | | |
| Class A | 573,886 | $5,784,485 | | 1,005,414 | $10,466,299 |
| Class B | 730 | 7,374 | | 5,698 | 59,331 |
| Class C | 2,956 | 29,928 | | 20,289 | 211,820 |
| Class I | 232,686 | 2,336,109 | | 290,751 | 3,022,529 |
| Class R1 | 430 | 4,337 | | 2,180 | 22,685 |
| Class R2 | 39,925 | 402,161 | | 99,515 | 1,035,320 |
| Class R3 | 41,361 | 416,755 | | 83,031 | 864,142 |
| Class R4 | 28,135 | 283,710 | | 63,588 | 662,276 |
| Class R6 | 1,940,314 | 19,521,118 | | 2,344,033 | 24,359,227 |
| | 2,860,423 | $28,785,977 | | 3,914,499 | $40,703,629 |
| Shares reacquired | | | | | |
| Class A | (32,694,309) | $(330,894,993) | | (27,409,355) | $(284,825,248) |
| Class B | (181,994) | (1,831,424) | | (489,221) | (5,076,599) |
| Class C | (1,045,840) | (10,566,047) | | (1,935,540) | (20,133,491) |
| Class I | (6,214,095) | (62,539,024) | | (14,438,216) | (149,772,348) |
| Class R1 | (46,555) | (467,553) | | (145,752) | (1,509,695) |
| Class R2 | (2,104,748) | (21,209,554) | | (4,272,384) | (44,167,230) |
| Class R3 | (1,877,643) | (18,929,424) | | (2,216,138) | (22,928,241) |
| Class R4 | (2,945,540) | (29,635,565) | | (4,570,079) | (47,313,619) |
| Class R6 | (9,948,777) | (99,962,085) | | (30,003,593) | (308,538,413) |
| | (57,059,501) | $(576,035,669) | | (85,480,278) | $(884,264,884) |
Notes to Financial Statements - continued
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Net change | | | | | |
| Class A | (19,255,191) | $(195,288,255) | | 11,028,383 | $114,617,575 |
| Class B | (159,331) | (1,607,718) | | (310,590) | (3,225,073) |
| Class C | (837,176) | (8,460,470) | | (77,235) | (833,712) |
| Class I | 12,050,203 | 122,432,392 | | 6,616,715 | 68,312,610 |
| Class R1 | (24,324) | (243,584) | | 14,061 | 144,400 |
| Class R2 | (1,267,654) | (12,798,891) | | (1,343,325) | (13,740,100) |
| Class R3 | (948,656) | (9,583,254) | | (284,489) | (2,858,261) |
| Class R4 | (1,197,253) | (12,050,353) | | (500,565) | (5,031,363) |
| Class R6 | 19,036,556 | 192,559,640 | | 21,366,504 | 224,984,968 |
| | 7,397,174 | $74,959,507 | | 36,509,459 | $382,371,044 |
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Fund, the MFS Conservative Allocation Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime Income Fund, the MFS Lifetime 2025 Fund, and the MFS Lifetime 2020 Fund were the owners of record of approximately 28%, 18%, 3%, 3%, 2%, and 1%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2035 Fund was the owner of record of less than 1% of the value of outstanding voting shares of the fund.
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit of which $1 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an agreed upon spread. For the year ended February 28, 2022, the fund’s commitment fee and interest expense were $10,285 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
Notes to Financial Statements - continued
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning
Value | Purchases | Sales
Proceeds | Realized
Gain
(Loss) | Change in
Unrealized
Appreciation or
Depreciation | Ending
Value |
| MFS Institutional Money Market Portfolio | $688,575,859 | $1,233,617,609 | $1,244,745,532 | $— | $— | $677,447,936 |
| Affiliated Issuers | Dividend
Income | Capital Gain
Distributions |
| MFS Institutional Money Market Portfolio | $319,245 | $— |
(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 investments in certain debt instruments and derivatives (if any), as well as borrowings by the fund and certain other contractual arrangements of the fund, may be based on 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 investments in certain debt instruments and derivatives, as well as borrowings by the fund and any 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 account for those modified contracts as a continuation of the existing contracts. 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.
Notes to Financial Statements - continued
(10) Russia and Ukraine Conflict
The market disruptions, which began in late February 2022, associated with geopolitical events related to the conflict between Russia and Ukraine may adversely affect the value of the fund’s assets and thus the fund’s performance. Management continues to monitor these events and to evaluate the related impacts, if any, to the fund.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of MFS Series Trust XIII and the Shareholders of MFS Government Securities Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of MFS Government Securities Fund (the “Fund”), including the portfolio of investments, as of February 28, 2022, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of February 28, 2022, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights.
Report of Independent Registered Public Accounting Firm – continued
Our procedures included confirmation of securities owned as of February 28, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 14, 2022
We have served as the auditor of one or more of the MFS investment companies since 1924.
Trustees and Officers — Identification and Background
The Trustees and Officers of the Trust, as of April 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) | | 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 | | 136 | | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | | N/A |
| INDEPENDENT TRUSTEES | | | | | | | | | | |
John P. Kavanaugh
(age 67) | | Trustee and Chair of Trustees | | January 2009 | | 136 | | Private investor | | N/A |
Steven E. Buller
(age 70) | | Trustee | | February 2014 | | 136 | | Private investor | | N/A |
John A. Caroselli
(age 67) | | Trustee | | March 2017 | | 136 | | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | | N/A |
Maureen R. Goldfarb
(age 66) | | Trustee | | January 2009 | | 136 | | Private investor | | N/A |
Peter D. Jones
(age 66) | | Trustee | | January 2019 | | 136 | | Private investor | | N/A |
James W. Kilman, Jr.
(age 60) | | Trustee | | January 2019 | | 136 | | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | | Alpha-En Corporation, Director (2016-2019) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with Fund | | Trustee/Officer Since(h) | | Number of MFS Funds overseen by the Trustee | | Principal Occupations During
the Past Five Years | | Other Directorships During
the Past Five Years (j) |
Clarence Otis, Jr.
(age 65) | | Trustee | | March 2017 | | 136 | | Private investor | | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director |
Maryanne L. Roepke
(age 66) | | Trustee | | May 2014 | | 136 | | Private investor | | N/A |
Laurie J. Thomsen
(age 64) | | Trustee | | March 2005 | | 136 | | Private investor | | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
| OFFICERS | | | | | | | | |
Christopher R. Bohane (k)
(age 48) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel |
Kino Clark (k)
(age 53) | | Assistant Treasurer | | January 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
John W. Clark, Jr. (k)
(age 55) | | Assistant Treasurer | | April 2017 | | 136 | | 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 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
David L. DiLorenzo (k)
(age 53) | | President | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
Heidi W. Hardin (k)
(age 54) | | Secretary and Clerk | | April 2017 | | 136 | | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (until January 2017) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
Brian E. Langenfeld (k)
(age 49) | | Assistant Secretary and Assistant Clerk | | June 2006 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
Rosa E. Licea-Mailloux(k)
(age 45) | | Chief Compliance Officer | | March 2022 | | 136 | | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) |
Amanda S. Mooradian (k)
(age 43) | | Assistant Secretary and Assistant Clerk | | September 2018 | | 136 | | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel |
Susan A. Pereira (k)
(age 51) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
Kasey L. Phillips (k)
(age 51) | | Assistant Treasurer | | September 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
Matthew A. Stowe (k)
(age 47) | | Assistant Secretary and Assistant Clerk | | October 2014 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
James O. Yost (k)
(age 61) | | Treasurer | | September 1990 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
Trustees and Officers - continued
Each Trustee (other than Messrs. Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of 75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618 | JPMorgan Chase Bank, NA
4 Metrotech Center
New York, NY 11245 |
| Distributor | Independent Registered Public Accounting Firm |
MFS Fund Distributors, Inc.
111 Huntington Avenue
Boston, MA 02199-7618 | Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116 |
| Portfolio Manager(s) | |
Geoffrey Schecter
Jake Stone | |
Proxy Voting Policies and Information
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund Contracts and Legal Claims
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Federal Tax Information (unaudited)
The fund will notify shareholders of amounts for use in preparing 2022 income tax forms in January 2023. 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).
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances |
| • Account transactions and transaction history |
| • Checking account information and wire transfer instructions |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your
personal information | Does MFS share? | Can you limit
this sharing? |
For our everyday business purposes –
such as to process your transactions, maintain your
account(s), respond to court orders and legal
investigations, or report to credit bureaus | Yes | No |
For our marketing purposes –
to offer our products and services to you | No | We don't share |
For joint marketing with other
financial companies | No | We don't share |
For our affiliates' everyday business purposes –
information about your transactions and experiences | No | We don't share |
For our affiliates' everyday business purposes –
information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
| Who we are |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do |
How does MFS
protect my personal
information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
How does MFS
collect my personal
information? | We collect your personal information, for example, when you |
| • open an account or provide account information |
| • direct us to buy securities or direct us to sell your securities |
| • make a wire transfer |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness |
| • affiliates from using your information to market to you |
| • sharing for nonaffiliates to market to you |
| State laws and individual companies may give you additional rights to limit sharing. |
| Definitions |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
Annual Report
February 28, 2022
MFS® New Discovery
Value Fund
MFS® New Discovery
Value Fund
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The report is prepared for the general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
LETTER FROM THE CHAIR AND CEO
Dear Shareholders:
As a result of Russia’s invasion of Ukraine, the danger of wider geopolitical conflict has risen to a level not seen in decades, and this comes as sanctions aimed at countering Russia’s actions are exacerbating already mounting inflation. Consequently, at a time when global growth faces multiple headwinds, central banks have been presented with the challenge of reining in rising prices without tipping economies into recession. The US Federal Reserve recently raised rates for the first time since 2018 and indicated that it is likely to tighten policy much more over the coming year. Meanwhile, the unsettled geopolitical backdrop and prospect of tighter financial conditions has led to increased volatility.
There are, however, encouraging signs for the markets. The Omicron wave of the coronavirus is receding outside Asia, unemployment is low, and there are signs that some global supply chain bottlenecks are beginning to ease, though events in Ukraine could hamper these advances. Additionally, easier Chinese monetary policy and the record pace of corporate stock buybacks are supportive elements, albeit amid an otherwise turbulent investment environment.
It is important to have a deep understanding of company fundamentals during times of market transition, 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 try 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
Chair and Chief Executive Officer
MFS Investment Management
April 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.
Portfolio structure
Top ten holdings
| Umpqua Holdings Corp. | 1.7% |
| International Game Technology PLC | 1.7% |
| SLM Corp. | 1.6% |
| Skechers USA, Inc., “A” | 1.6% |
| Cathay General Bancorp, Inc. | 1.5% |
| Black Hills Corp. | 1.5% |
| Prosperity Bancshares, Inc. | 1.4% |
| Portland General Electric Co. | 1.4% |
| KBR, Inc. | 1.3% |
| Graphic Packaging Holding Co. | 1.3% |
GICS equity sectors (g)
| Financials | 24.7% |
| Industrials | 13.4% |
| Consumer Discretionary | 12.9% |
| Materials | 11.3% |
| Information Technology | 8.5% |
| Energy | 6.6% |
| Real Estate | 6.5% |
| Health Care | 6.4% |
| Utilities | 5.6% |
| Consumer Staples | 2.6% |
| Communication Services | 0.8% |
| (g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry classification methodology for equity securities and non-equity securities that are unclassified by GICS. |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of February 28, 2022.
The portfolio is actively managed and current holdings may be different.
Management Review
Summary of Results
For the twelve months ended February 28, 2022, Class A shares of the MFS New Discovery Value Fund (fund) provided a total return of 18.34%, at net asset value. This compares with a return of 6.63% for the fund’s benchmark, the Russell 2000® Value Index.
Market Environment
At the end of the period, just as the Omicron wave of the pandemic appeared to be receding in much of the world, markets experienced a geopolitical shock as Russia launched a full-scale invasion of neighboring Ukraine. Given Europe's heavy reliance on imported oil and gas from Russia, European markets were among the hardest hit. Energy prices spiked in the wake of the invasion, adding to already multi-decade high levels of inflation, and non-energy commodities rose sharply as well. Both the equity and fixed income markets experienced significant upticks in volatility.
The ripple effects from the Russian invasion further complicated the mission central banks must undertake to rein in surging inflation. Energy shocks have historically resulted in global growth slowdowns, if not pullbacks, so policymakers will find themselves in the difficult position of trying to restrain inflation without tipping economies into recession. As a result of potential growth challenges, expectations for aggressive monetary policy tightening from developed market central banks have moderated. While the Fed is expected to raise interest rates multiple times in 2022, the rate path is expected to be less aggressive than prior to the invasion. Anticipation of tighter policy from the European Central Bank has moderated considerably with no move expected until late this year.
Against an environment of rising labor and raw materials prices, higher interest rates and waning fiscal and monetary stimulus, investor anxiety increased over the potential that corporate profit margins may be past peak for this cycle. That said, tentative signs that some supply chain bottlenecks may be easing, low levels of unemployment across developed markets and loosening of coronavirus restrictions are supportive factors for the macroeconomic backdrop.
Contributors to Performance
Stock selection and an underweight position in the health care sector contributed to the fund's performance relative to the Russell 2000® Value Index. There were no individual stocks within this sector, either in the fund or in the benchmark, that were among the fund's largest relative contributors for the reporting period.
Stock selection in both the industrials and financials sectors also aided relative results. Within the industrials sector, the fund’s overweight position in engineering company KBR benefited relative returns. Within the financials sector, an overweight position in debt collections firm Encore Capital Group supported relative performance.
Stock selection in the consumer discretionary sector further bolstered relative results. Within this sector, the timing of the fund's ownership in shares of gaming company International Game Technology, and an overweight position in internet-based mailing
Management Review - continued
and shipping solutions company Stamps.com(h) helped relative returns. The stock price of International Game Technology appreciated as the company posted strong financial results during the period, driven by strength in its lottery division.
Elsewhere, the fund's holdings of oil and gas exploration and production company Devon Energy(b), oil and natural gas properties company Viper Energy Partners(b), high purity process chemicals supplier CMC Materials(b)(h), specialty chemical company Element Solutions(b) and self-storage real estate investment trust Life Storage(b) benefited relative returns. The stock price of Devon Energy advanced as the company delivered better-than-anticipated operational and financial results, underpinned by strong oil prices. Additionally, the timing of the fund's ownership in shares of oil and gas exploration company Magnolia Oil & Gas also supported relative performance.
Detractors from Performance
An underweight position in the energy sector detracted from relative results, led by the fund not holding shares of strong-performing exploration and production (E&P) company Ovintiv.
Stocks in other sectors that held back relative performance included the fund’s holdings of cleaning and hygiene products provider Diversey Holdings(b), enterprise communication solutions provider 8x8(b)(h), integrated payment and frictionless commerce solutions company Paya(b) and educational services provider Grand Canyon Education(b). The stock price of Paya declined on the back of lower-than-expected financial results, driven by a sluggish COVID-19 recovery, specifically within its healthcare business. In addition, the fund's overweight positions in beauty salon franchiser and operator Regis(h), real estate investment trust Two Harbors Investment Corp. and apparel retailer Urban Outfitters, and not holding shares of rental car company Avis Budget Group and video game retailer GameStop, further hindered relative returns. The stock price of Regis declined as the company reported revenues below market estimates, with management noting lost revenues from government-mandated COVID-19 salon closures.
Respectfully,
Portfolio Manager(s)
Richard Offen and Kevin Schmitz
| (b) | Security is not a benchmark constituent. |
| (h) | Security was not held in the portfolio at period end. |
The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
Performance Summary THROUGH 2/28/22
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
Performance Summary - continued
Total Returns through 2/28/22
Average annual without sales charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) |
| A | 5/26/11 | 18.34% | 12.17% | 13.26% | N/A |
| B | 5/26/11 | 17.45% | 11.33% | 12.42% | N/A |
| C | 5/26/11 | 17.42% | 11.33% | 12.41% | N/A |
| I | 5/26/11 | 18.64% | 12.45% | 13.54% | N/A |
| R1 | 5/26/11 | 17.39% | 11.32% | 12.41% | N/A |
| R2 | 5/26/11 | 18.02% | 11.90% | 12.99% | N/A |
| R3 | 5/26/11 | 18.36% | 12.18% | 13.26% | N/A |
| R4 | 5/26/11 | 18.60% | 12.46% | 13.55% | N/A |
| R6 | 7/02/12 | 18.75% | 12.58% | N/A | 14.11% |
Comparative benchmark(s)
| | | | | |
| Russell 2000® Value Index (f) | 6.63% | 7.97% | 10.66% | N/A |
Average annual with sales charge
| | | | | |
A
With Initial Sales Charge (5.75%) | 11.53% | 10.85% | 12.59% | N/A |
B
With CDSC (Declining over six years from 4% to 0%) (v) | 13.45% | 11.07% | 12.42% | N/A |
C
With CDSC (1% for 12 months) (v) | 16.42% | 11.33% | 12.41% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (t) | For the period from the class inception date through the stated period end (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
| (v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Russell 2000® Value Index(h) - a market-capitalization-weighted, value-oriented index that measures the performance of small-capitalization stocks that have relatively low price-to-book ratios and lower forecasted growth values.
It is not possible to invest directly in an index.
| (h) | Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this document. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor, or endorse the content of this document. |
Performance Summary - continued
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund's share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
Expense Table
Fund expenses borne by the shareholders during the period,
September 1, 2021 through February 28, 2022
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2021 through February 28, 2022.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Table - continued
Share
Class | | Annualized
Expense
Ratio | Beginning
Account Value
9/01/21 | Ending
Account Value
2/28/22 | Expenses
Paid During
Period (p)
9/01/21-2/28/22 |
| A | Actual | 1.18% | $1,000.00 | $1,038.05 | $5.96 |
| Hypothetical (h) | 1.18% | $1,000.00 | $1,018.94 | $5.91 |
| B | Actual | 1.93% | $1,000.00 | $1,034.59 | $9.74 |
| Hypothetical (h) | 1.93% | $1,000.00 | $1,015.22 | $9.64 |
| C | Actual | 1.93% | $1,000.00 | $1,034.26 | $9.73 |
| Hypothetical (h) | 1.93% | $1,000.00 | $1,015.22 | $9.64 |
| I | Actual | 0.93% | $1,000.00 | $1,039.95 | $4.70 |
| Hypothetical (h) | 0.93% | $1,000.00 | $1,020.18 | $4.66 |
| R1 | Actual | 1.93% | $1,000.00 | $1,034.59 | $9.74 |
| Hypothetical (h) | 1.93% | $1,000.00 | $1,015.22 | $9.64 |
| R2 | Actual | 1.43% | $1,000.00 | $1,037.14 | $7.22 |
| Hypothetical (h) | 1.43% | $1,000.00 | $1,017.70 | $7.15 |
| R3 | Actual | 1.18% | $1,000.00 | $1,038.56 | $5.96 |
| Hypothetical (h) | 1.18% | $1,000.00 | $1,018.94 | $5.91 |
| R4 | Actual | 0.93% | $1,000.00 | $1,039.87 | $4.70 |
| Hypothetical (h) | 0.93% | $1,000.00 | $1,020.18 | $4.66 |
| R6 | Actual | 0.83% | $1,000.00 | $1,040.21 | $4.20 |
| Hypothetical (h) | 0.83% | $1,000.00 | $1,020.68 | $4.16 |
| (h) | 5% class return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
Portfolio of Investments
2/28/22
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – 99.3% |
| Aerospace & Defense – 2.6% | |
| CACI International, Inc., “A” (a) | | 193,041 | $ 54,010,941 |
| KBR, Inc. | | 1,153,671 | 57,268,229 |
| | | | | $111,279,170 |
| Apparel Manufacturers – 2.5% | |
| PVH Corp. | | 401,311 | $ 39,284,334 |
| Skechers USA, Inc., “A” (a) | | 1,457,399 | 67,011,206 |
| | | | | $106,295,540 |
| Automotive – 3.4% | |
| LKQ Corp. | | 982,435 | $ 46,125,323 |
| Methode Electronics, Inc. | | 1,075,251 | 49,074,456 |
| Stoneridge, Inc. (a) | | 613,838 | 10,134,465 |
| Visteon Corp. (a) | | 342,892 | 41,205,332 |
| | | | | $146,539,576 |
| Business Services – 2.1% | |
| HireRight Holdings Corp. (a) | | 1,689,766 | $ 22,085,242 |
| Paya, Inc. (a) | | 5,425,349 | 34,993,501 |
| TaskUs, Inc., “A” (a) | | 515,929 | 14,817,481 |
| WNS (Holdings) Ltd., ADR (a) | | 229,286 | 18,945,902 |
| | | | | $90,842,126 |
| Chemicals – 1.2% | |
| Element Solutions, Inc. | | 2,172,469 | $ 53,399,288 |
| Computer Software – 1.5% | |
| ACI Worldwide, Inc. (a) | | 733,333 | $ 24,581,322 |
| Everbridge, Inc. (a) | | 431,383 | 17,048,256 |
| Sabre Corp. (a) | | 1,932,807 | 21,125,581 |
| | | | | $62,755,159 |
| Computer Software - Systems – 1.8% | |
| Softchoice Corp. (l) | | 1,860,842 | $ 33,370,366 |
| Verint Systems, Inc. (a) | | 856,895 | 43,041,836 |
| | | | | $76,412,202 |
| Construction – 1.2% | |
| GMS, Inc. (a) | | 366,227 | $ 19,867,815 |
| Toll Brothers, Inc. | | 573,542 | 31,120,389 |
| | | | | $50,988,204 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Consumer Products – 2.6% | |
| Energizer Holdings, Inc. | | 649,385 | $ 21,682,965 |
| Newell Brands, Inc. | | 1,564,194 | 37,149,608 |
| Prestige Consumer Healthcare, Inc. (a) | | 911,480 | 54,260,404 |
| | | | | $113,092,977 |
| Consumer Services – 0.8% | |
| Grand Canyon Education, Inc. (a) | | 386,744 | $ 33,580,981 |
| Containers – 4.7% | |
| Ardagh Metal Packaging S.A. (a) | | 4,215,301 | $ 35,029,151 |
| Berry Global, Inc. (a) | | 862,769 | 52,326,940 |
| Graphic Packaging Holding Co. | | 2,712,456 | 55,822,345 |
| Pactiv Evergreen, Inc. | | 2,133,887 | 20,527,993 |
| Silgan Holdings, Inc. | | 882,007 | 36,938,453 |
| | | | | $200,644,882 |
| Electrical Equipment – 3.2% | |
| nVent Electric PLC | | 1,346,655 | $ 45,692,004 |
| TriMas Corp. | | 1,369,350 | 44,517,569 |
| Vertiv Holdings Co. | | 1,174,769 | 15,295,492 |
| WESCO International, Inc. (a) | | 275,124 | 33,490,845 |
| | | | | $138,995,910 |
| Electronics – 2.0% | |
| Cohu, Inc. (a) | | 992,632 | $ 30,950,266 |
| Plexus Corp. (a) | | 652,478 | 53,157,382 |
| | | | | $84,107,648 |
| Energy - Independent – 3.6% | |
| CNX Resources Corp. (a) | | 2,273,502 | $ 37,149,023 |
| Devon Energy Corp. | | 396,703 | 23,623,664 |
| Magnolia Oil & Gas Corp., “A” | | 1,782,132 | 39,830,650 |
| Viper Energy Partners LP | | 1,874,910 | 55,141,103 |
| | | | | $155,744,440 |
| Engineering - Construction – 0.7% | |
| APi Group, Inc. (a) | | 1,401,671 | $ 30,234,043 |
| Food & Beverages – 2.1% | |
| Hostess Brands, Inc. (a) | | 1,854,696 | $ 39,950,152 |
| Nomad Foods Ltd. (a) | | 1,981,938 | 49,905,199 |
| | | | | $89,855,351 |
| Furniture & Appliances – 0.8% | |
| IMAX Corp. (a) | | 1,566,562 | $ 32,396,502 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Gaming & Lodging – 1.7% | |
| International Game Technology PLC | | 2,396,972 | $ 73,395,283 |
| Insurance – 3.8% | |
| CNO Financial Group, Inc. | | 1,731,197 | $ 41,843,032 |
| Everest Re Group Ltd. | | 141,332 | 42,148,029 |
| Hanover Insurance Group, Inc. | | 298,230 | 41,606,067 |
| Selective Insurance Group, Inc. | | 467,480 | 38,889,661 |
| | | | | $164,486,789 |
| Leisure & Toys – 1.0% | |
| Brunswick Corp. | | 288,342 | $ 27,542,428 |
| Funko, Inc., “A” (a) | | 972,829 | 16,985,594 |
| | | | | $44,528,022 |
| Machinery & Tools – 2.8% | |
| Enerpac Tool Group Corp. | | 552,326 | $ 9,527,624 |
| Flowserve Corp. | | 1,296,931 | 39,387,795 |
| Regal Rexnord Corp. | | 278,647 | 44,681,046 |
| Timken Co. | | 424,822 | 27,851,330 |
| | | | | $121,447,795 |
| Medical & Health Technology & Services – 2.8% | |
| ICON PLC (a) | | 132,025 | $ 31,423,270 |
| Premier, Inc., “A” | | 1,159,176 | 41,660,785 |
| Syneos Health, Inc. (a) | | 605,814 | 47,980,469 |
| | | | | $121,064,524 |
| Medical Equipment – 1.8% | |
| Agiliti Health, Inc. (a) | | 1,396,241 | $ 25,146,301 |
| Envista Holdings Corp. (a) | | 774,621 | 37,181,808 |
| Maravai Lifesciences Holdings, Inc., “A” (a) | | 361,503 | 14,123,922 |
| | | | | $76,452,031 |
| Metals & Mining – 1.3% | |
| Arconic Corp. (a) | | 1,207,695 | $ 37,076,236 |
| Kaiser Aluminum Corp. | | 192,915 | 18,616,298 |
| | | | | $55,692,534 |
| Natural Gas - Distribution – 2.7% | |
| New Jersey Resources Corp. | | 1,146,704 | $ 50,019,229 |
| ONE Gas, Inc. | | 488,666 | 40,603,258 |
| South Jersey Industries, Inc. | | 788,453 | 26,752,210 |
| | | | | $117,374,697 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Natural Gas - Pipeline – 1.1% | |
| Plains GP Holdings LP | | 4,002,586 | $ 45,269,248 |
| Oil Services – 1.9% | |
| ChampionX Corp. | | 2,400,097 | $ 51,386,077 |
| Expro Group Holdings N.V. (a) | | 1,907,593 | 30,693,171 |
| | | | | $82,079,248 |
| Other Banks & Diversified Financials – 22.0% | |
| Air Lease Corp. | | 993,228 | $ 41,477,201 |
| Bank of Hawaii Corp. | | 592,001 | 51,018,646 |
| Brookline Bancorp, Inc. | | 2,464,546 | 42,242,318 |
| Cathay General Bancorp, Inc. | | 1,362,642 | 64,085,053 |
| East West Bancorp, Inc. | | 499,078 | 43,699,270 |
| Element Fleet Management Corp. | | 4,135,540 | 40,588,653 |
| Encore Capital Group, Inc. (a) | | 653,505 | 43,124,795 |
| First Hawaiian, Inc. | | 1,778,164 | 51,691,228 |
| First Interstate BancSystem, Inc. | | 1,129,338 | 45,851,123 |
| Hanmi Financial Corp. | | 1,359,189 | 35,502,017 |
| Lakeland Financial Corp. | | 312,276 | 25,047,658 |
| Prosperity Bancshares, Inc. | | 818,628 | 60,955,041 |
| Sandy Spring Bancorp, Inc. | | 620,475 | 29,218,168 |
| SLM Corp. | | 3,574,936 | 70,426,239 |
| Texas Capital Bancshares, Inc. (a) | | 448,862 | 29,894,209 |
| Textainer Group Holdings Ltd. | | 623,518 | 22,141,124 |
| Triton International Ltd. of Bermuda | | 432,393 | 28,399,572 |
| UMB Financial Corp. | | 541,119 | 55,118,381 |
| Umpqua Holdings Corp. | | 3,442,865 | 73,505,168 |
| Wintrust Financial Corp. | | 431,151 | 42,839,163 |
| Zions Bancorp NA | | 682,786 | 48,402,700 |
| | | | | $945,227,727 |
| Pharmaceuticals – 0.6% | |
| Organon & Co. | | 667,492 | $ 24,917,476 |
| Real Estate – 7.5% | |
| Brixmor Property Group, Inc., REIT | | 859,837 | $ 21,599,105 |
| Broadstone Net Lease, Inc., REIT | | 1,753,059 | 37,971,258 |
| Douglas Emmett, Inc., REIT | | 543,390 | 17,225,463 |
| Empire State Realty Trust, REIT, “A” | | 3,530,661 | 33,400,053 |
| Industrial Logistics Properties Trust, REIT | | 1,696,633 | 37,953,680 |
| Life Storage, Inc., REIT | | 205,917 | 26,067,033 |
| LXP Industrial Trust, REIT | | 2,036,149 | 31,478,864 |
| National Storage Affiliates Trust, REIT | | 530,226 | 30,896,269 |
| Phillips Edison & Co., REIT | | 1,374,868 | 44,435,734 |
Portfolio of Investments – continued
| Issuer | | | Shares/Par | Value ($) |
| Common Stocks – continued |
| Real Estate – continued | |
| Two Harbors Investment Corp., REIT | | 8,244,685 | $ 41,718,106 |
| | | | | $322,745,565 |
| Restaurants – 0.9% | |
| Jack in the Box, Inc. | | 448,839 | $ 38,721,340 |
| Specialty Chemicals – 3.9% | |
| Avient Corp. | | 1,022,093 | $ 53,547,452 |
| Axalta Coating Systems Ltd. (a) | | 1,197,325 | 32,375,668 |
| Diversey Holdings Ltd. (a) | | 4,655,973 | 44,557,662 |
| Univar Solutions, Inc. (a) | | 1,159,568 | 35,610,333 |
| | | | | $166,091,115 |
| Specialty Stores – 2.2% | |
| Urban Outfitters, Inc. (a) | | 1,754,396 | $ 48,263,434 |
| Zumiez, Inc. (a) | | 1,002,306 | 44,592,594 |
| | | | | $92,856,028 |
| Trucking – 1.6% | |
| Schneider National, Inc. | | 1,187,382 | $ 31,014,418 |
| XPO Logistics, Inc. (a) | | 534,461 | 38,844,625 |
| | | | | $69,859,043 |
| Utilities - Electric Power – 2.9% | |
| Black Hills Corp. | | 896,119 | $ 62,719,369 |
| Portland General Electric Co. | | 1,183,923 | 60,107,770 |
| | | | | $122,827,139 |
| Total Common Stocks (Identified Cost, $3,211,636,046) | | $4,262,199,603 |
| Investment Companies (h) – 0.4% |
| Money Market Funds – 0.4% | |
| MFS Institutional Money Market Portfolio, 0.06% (v) (Identified Cost, $17,782,312) | | | 17,782,312 | $ 17,782,312 |
| Collateral for Securities Loaned – 0.0% |
| State Street Navigator Securities Lending Government Money Market Portfolio, 0.06% (j) (Identified Cost, $860,299) | | | 860,299 | $ 860,299 |
|
|
| Other Assets, Less Liabilities – 0.3% | | 11,382,453 |
| Net Assets – 100.0% | $4,292,224,667 |
| (a) | Non-income producing security. | | | |
Portfolio of Investments – continued
| (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 $17,782,312 and $4,263,059,902, respectively. | | | |
| (j) | The rate quoted is the annualized seven-day yield of the fund at period end. | | | |
| (l) | A portion of this security is on loan. See Note 2 for additional information. | | | |
| (v) | Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. | | | |
| The following abbreviations are used in this report and are defined: |
| ADR | American Depositary Receipt |
| REIT | Real Estate Investment Trust |
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
At 2/28/22
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
| Assets | |
| Investments in unaffiliated issuers, at value, including $863,376 of securities on loan (identified cost, $3,212,496,345) | $4,263,059,902 |
| Investments in affiliated issuers, at value (identified cost, $17,782,312) | 17,782,312 |
| Receivables for | |
| Investments sold | 22,898,721 |
| Fund shares sold | 13,986,185 |
| Interest and dividends | 4,198,321 |
| Other assets | 10,629 |
| Total assets | $4,321,936,070 |
| Liabilities | |
| Payables for | |
| Investments purchased | $20,245,646 |
| Fund shares reacquired | 7,271,393 |
| Collateral for securities loaned, at value | 860,299 |
| Payable to affiliates | |
| Investment adviser | 363,742 |
| Administrative services fee | 6,304 |
| Shareholder servicing costs | 723,345 |
| Distribution and service fees | 17,743 |
| Payable for independent Trustees' compensation | 11 |
| Accrued expenses and other liabilities | 222,920 |
| Total liabilities | $29,711,403 |
| Net assets | $4,292,224,667 |
| Net assets consist of | |
| Paid-in capital | $3,147,502,507 |
| Total distributable earnings (loss) | 1,144,722,160 |
| Net assets | $4,292,224,667 |
| Shares of beneficial interest outstanding | 212,343,645 |
Statement of Assets and Liabilities – continued
| | Net assets | Shares
outstanding | Net asset value
per share (a) |
| Class A | $361,164,685 | 18,026,694 | $20.03 |
| Class B | 6,016,203 | 320,484 | 18.77 |
| Class C | 37,588,466 | 2,014,073 | 18.66 |
| Class I | 1,795,671,079 | 88,801,365 | 20.22 |
| Class R1 | 2,223,791 | 118,439 | 18.78 |
| Class R2 | 6,251,315 | 315,035 | 19.84 |
| Class R3 | 104,164,042 | 5,187,062 | 20.08 |
| Class R4 | 103,464,401 | 5,108,687 | 20.25 |
| Class R6 | 1,875,680,685 | 92,451,806 | 20.29 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $21.25 [100 / 94.25 x $20.03]. On sales of $50,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
Financial Statements
Statement of Operations
Year ended 2/28/22
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net investment income (loss) | |
| Income | |
| Dividends | $58,592,292 |
| Other | 315,469 |
| Income on securities loaned | 249,507 |
| Dividends from affiliated issuers | 14,040 |
| Foreign taxes withheld | (158,449) |
| Total investment income | $59,012,859 |
| Expenses | |
| Management fee | $33,380,766 |
| Distribution and service fees | 1,678,772 |
| Shareholder servicing costs | 2,536,406 |
| Administrative services fee | 551,778 |
| Independent Trustees' compensation | 48,901 |
| Custodian fee | 123,286 |
| Shareholder communications | 261,557 |
| Audit and tax fees | 61,424 |
| Legal fees | 19,150 |
| Miscellaneous | 250,951 |
| Total expenses | $38,912,991 |
| Reduction of expenses by investment adviser and distributor | (545,677) |
| Net expenses | $38,367,314 |
| Net investment income (loss) | $20,645,545 |
| Realized and unrealized gain (loss) |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers | $515,826,555 |
| Foreign currency | 86,372 |
| Net realized gain (loss) | $515,912,927 |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers | $147,863,386 |
| Net realized and unrealized gain (loss) | $663,776,313 |
| Change in net assets from operations | $684,421,858 |
See Notes to Financial Statements
Financial Statements
Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| | Year ended |
| | 2/28/22 | 2/28/21 |
| Change in net assets | | |
| From operations | | |
| Net investment income (loss) | $20,645,545 | $23,018,760 |
| Net realized gain (loss) | 515,912,927 | (33,509,403) |
| Net unrealized gain (loss) | 147,863,386 | 992,232,798 |
| Change in net assets from operations | $684,421,858 | $981,742,155 |
| Total distributions to shareholders | $(372,836,514) | $(67,363,256) |
| Change in net assets from fund share transactions | $249,455,580 | $(147,791,280) |
| Total change in net assets | $561,040,924 | $766,587,619 |
| Net assets | | |
| At beginning of period | 3,731,183,743 | 2,964,596,124 |
| At end of period | $4,292,224,667 | $3,731,183,743 |
See Notes to Financial Statements
Financial Statements
Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.53 | $14.12 | $15.16 | $14.92 | $14.99 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.05 | $0.07 | $0.10 | $0.05 | $0.02 |
| Net realized and unrealized gain (loss) | 3.32 | 4.66 | (0.38) | 1.21 | 0.72 |
| Total from investment operations | $3.37 | $4.73 | $(0.28) | $1.26 | $0.74 |
| Less distributions declared to shareholders |
| From net investment income | $(0.15) | $— | $(0.10) | $(0.04) | $(0.00)(w) |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.87) | $(0.32) | $(0.76) | $(1.02) | $(0.81) |
| Net asset value, end of period (x) | $20.03 | $18.53 | $14.12 | $15.16 | $14.92 |
| Total return (%) (r)(s)(t)(x) | 18.34 | 34.47 | (2.41) | 8.90 | 4.98 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.19 | 1.23 | 1.23 | 1.29 | 1.33 |
| Expenses after expense reductions | 1.18 | 1.22 | 1.22 | 1.28 | 1.32 |
| Net investment income (loss) | 0.25 | 0.53 | 0.64 | 0.31 | 0.12 |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $361,165 | $333,743 | $331,255 | $318,067 | $250,525 |
See Notes to Financial Statements
Financial Highlights – continued
| Class B | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $17.54 | $13.48 | $14.52 | $14.40 | $14.60 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.09) | $(0.03) | $(0.02) | $(0.07) | $(0.09) |
| Net realized and unrealized gain (loss) | 3.13 | 4.41 | (0.36) | 1.17 | 0.70 |
| Total from investment operations | $3.04 | $4.38 | $(0.38) | $1.10 | $0.61 |
| Less distributions declared to shareholders |
| From net investment income | $(0.09) | $— | $— | $— | $— |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.81) | $(0.32) | $(0.66) | $(0.98) | $(0.81) |
| Net asset value, end of period (x) | $18.77 | $17.54 | $13.48 | $14.52 | $14.40 |
| Total return (%) (r)(s)(t)(x) | 17.45 | 33.50 | (3.11) | 8.05 | 4.21 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.94 | 1.98 | 1.98 | 2.04 | 2.08 |
| Expenses after expense reductions | 1.93 | 1.97 | 1.97 | 2.03 | 2.07 |
| Net investment income (loss) | (0.49) | (0.21) | (0.12) | (0.48) | (0.63) |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $6,016 | $6,032 | $6,207 | $7,198 | $6,329 |
See Notes to Financial Statements
Financial Highlights – continued
| Class C | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $17.45 | $13.41 | $14.45 | $14.33 | $14.54 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.09) | $(0.03) | $(0.02) | $(0.08) | $(0.09) |
| Net realized and unrealized gain (loss) | 3.11 | 4.39 | (0.36) | 1.18 | 0.69 |
| Total from investment operations | $3.02 | $4.36 | $(0.38) | $1.10 | $0.60 |
| Less distributions declared to shareholders |
| From net investment income | $(0.09) | $— | $— | $— | $— |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.81) | $(0.32) | $(0.66) | $(0.98) | $(0.81) |
| Net asset value, end of period (x) | $18.66 | $17.45 | $13.41 | $14.45 | $14.33 |
| Total return (%) (r)(s)(t)(x) | 17.42 | 33.52 | (3.12) | 8.09 | 4.15 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.94 | 1.98 | 1.98 | 2.04 | 2.08 |
| Expenses after expense reductions | 1.93 | 1.97 | 1.97 | 2.03 | 2.07 |
| Net investment income (loss) | (0.48) | (0.21) | (0.11) | (0.56) | (0.64) |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $37,588 | $39,061 | $38,477 | $41,046 | $52,616 |
See Notes to Financial Statements
Financial Highlights – continued
| Class I | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.69 | $14.21 | $15.25 | $15.00 | $15.06 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.10 | $0.11 | $0.14 | $0.12 | $0.06 |
| Net realized and unrealized gain (loss) | 3.35 | 4.70 | (0.39) | 1.19 | 0.73 |
| Total from investment operations | $3.45 | $4.81 | $(0.25) | $1.31 | $0.79 |
| Less distributions declared to shareholders |
| From net investment income | $(0.20) | $(0.01) | $(0.13) | $(0.08) | $(0.04) |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.92) | $(0.33) | $(0.79) | $(1.06) | $(0.85) |
| Net asset value, end of period (x) | $20.22 | $18.69 | $14.21 | $15.25 | $15.00 |
| Total return (%) (r)(s)(t)(x) | 18.64 | 34.82 | (2.17) | 9.19 | 5.26 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 0.94 | 0.98 | 0.98 | 1.04 | 1.08 |
| Expenses after expense reductions | 0.93 | 0.97 | 0.97 | 1.03 | 1.07 |
| Net investment income (loss) | 0.46 | 0.78 | 0.89 | 0.77 | 0.37 |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $1,795,671 | $1,430,510 | $1,119,891 | $917,167 | $351,939 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R1 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $17.55 | $13.49 | $14.53 | $14.41 | $14.61 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $(0.10) | $(0.03) | $(0.02) | $(0.06) | $(0.09) |
| Net realized and unrealized gain (loss) | 3.14 | 4.41 | (0.36) | 1.16 | 0.70 |
| Total from investment operations | $3.04 | $4.38 | $(0.38) | $1.10 | $0.61 |
| Less distributions declared to shareholders |
| From net investment income | $(0.09) | $— | $(0.00)(w) | $— | $— |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.81) | $(0.32) | $(0.66) | $(0.98) | $(0.81) |
| Net asset value, end of period (x) | $18.78 | $17.55 | $13.49 | $14.53 | $14.41 |
| Total return (%) (r)(s)(t)(x) | 17.45 | 33.47 | (3.08) | 8.04 | 4.20 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.94 | 1.98 | 1.98 | 2.04 | 2.08 |
| Expenses after expense reductions | 1.93 | 1.96 | 1.97 | 2.03 | 2.07 |
| Net investment income (loss) | (0.51) | (0.22) | (0.11) | (0.42) | (0.64) |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $2,224 | $2,320 | $1,453 | $1,581 | $1,228 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R2 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.38 | $14.04 | $15.09 | $14.87 | $14.97 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.01 | $0.04 | $0.06 | $0.02 | $(0.02) |
| Net realized and unrealized gain (loss) | 3.28 | 4.62 | (0.38) | 1.19 | 0.73 |
| Total from investment operations | $3.29 | $4.66 | $(0.32) | $1.21 | $0.71 |
| Less distributions declared to shareholders |
| From net investment income | $(0.11) | $— | $(0.07) | $(0.01) | $— |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.83) | $(0.32) | $(0.73) | $(0.99) | $(0.81) |
| Net asset value, end of period (x) | $19.84 | $18.38 | $14.04 | $15.09 | $14.87 |
| Total return (%) (r)(s)(t)(x) | 18.02 | 34.16 | (2.64) | 8.59 | 4.78 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.44 | 1.48 | 1.47 | 1.54 | 1.58 |
| Expenses after expense reductions | 1.43 | 1.47 | 1.47 | 1.53 | 1.57 |
| Net investment income (loss) | 0.05 | 0.29 | 0.40 | 0.16 | (0.13) |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $6,251 | $4,779 | $5,054 | $3,719 | $2,349 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R3 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.57 | $14.15 | $15.20 | $14.96 | $15.03 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.05 | $0.07 | $0.10 | $0.06 | $0.02 |
| Net realized and unrealized gain (loss) | 3.33 | 4.67 | (0.38) | 1.20 | 0.73 |
| Total from investment operations | $3.38 | $4.74 | $(0.28) | $1.26 | $0.75 |
| Less distributions declared to shareholders |
| From net investment income | $(0.15) | $(0.00)(w) | $(0.11) | $(0.04) | $(0.01) |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.87) | $(0.32) | $(0.77) | $(1.02) | $(0.82) |
| Net asset value, end of period (x) | $20.08 | $18.57 | $14.15 | $15.20 | $14.96 |
| Total return (%) (r)(s)(t)(x) | 18.36 | 34.47 | (2.41) | 8.88 | 5.04 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 1.19 | 1.23 | 1.22 | 1.29 | 1.33 |
| Expenses after expense reductions | 1.18 | 1.22 | 1.21 | 1.28 | 1.32 |
| Net investment income (loss) | 0.24 | 0.53 | 0.64 | 0.40 | 0.11 |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $104,164 | $88,963 | $76,069 | $45,355 | $26,095 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R4 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.72 | $14.23 | $15.27 | $15.02 | $15.08 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.09 | $0.11 | $0.14 | $0.10 | $0.06 |
| Net realized and unrealized gain (loss) | 3.36 | 4.71 | (0.38) | 1.21 | 0.73 |
| Total from investment operations | $3.45 | $4.82 | $(0.24) | $1.31 | $0.79 |
| Less distributions declared to shareholders |
| From net investment income | $(0.20) | $(0.01) | $(0.14) | $(0.08) | $(0.04) |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.92) | $(0.33) | $(0.80) | $(1.06) | $(0.85) |
| Net asset value, end of period (x) | $20.25 | $18.72 | $14.23 | $15.27 | $15.02 |
| Total return (%) (r)(s)(t)(x) | 18.60 | 34.84 | (2.16) | 9.19 | 5.28 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 0.94 | 0.98 | 0.98 | 1.03 | 1.08 |
| Expenses after expense reductions | 0.93 | 0.97 | 0.97 | 1.03 | 1.07 |
| Net investment income (loss) | 0.45 | 0.78 | 0.89 | 0.66 | 0.36 |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $103,464 | $104,206 | $82,613 | $71,765 | $5,469 |
See Notes to Financial Statements
Financial Highlights – continued
| Class R6 | Year ended |
| | 2/28/22 | 2/28/21 | 2/29/20 | 2/28/19
| 2/28/18 |
| Net asset value, beginning of period | $18.75 | $14.24 | $15.27 | $15.02 | $15.08 |
| Income (loss) from investment operations |
| Net investment income (loss) (d) | $0.13 | $0.13 | $0.16 | $0.12 | $0.07 |
| Net realized and unrealized gain (loss) | 3.35 | 4.71 | (0.38) | 1.20 | 0.73 |
| Total from investment operations | $3.48 | $4.84 | $(0.22) | $1.32 | $0.80 |
| Less distributions declared to shareholders |
| From net investment income | $(0.22) | $(0.01) | $(0.15) | $(0.09) | $(0.05) |
| From net realized gain | (1.72) | (0.32) | (0.66) | (0.98) | (0.81) |
| Total distributions declared to shareholders | $(1.94) | $(0.33) | $(0.81) | $(1.07) | $(0.86) |
| Net asset value, end of period (x) | $20.29 | $18.75 | $14.24 | $15.27 | $15.02 |
| Total return (%) (r)(s)(t)(x) | 18.75 | 34.98 | (2.02) | 9.28 | 5.36 |
Ratios (%) (to average net assets)
and Supplemental data: |
| Expenses before expense reductions | 0.84 | 0.87 | 0.87 | 0.92 | 0.97 |
| Expenses after expense reductions | 0.83 | 0.86 | 0.86 | 0.92 | 0.96 |
| Net investment income (loss) | 0.62 | 0.89 | 0.99 | 0.78 | 0.47 |
| Portfolio turnover | 44 | 48 | 44 | 57 | 60 |
| Net assets at end of period (000 omitted) | $1,875,681 | $1,721,570 | $1,303,575 | $938,134 | $599,845 |
| (d) | Per share data is based on average shares outstanding. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (w) | Per share amount was less than $0.01. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
Notes to Financial Statements
(1) Business and Organization
MFS New Discovery Value Fund (the fund) is a diversified series of MFS Series Trust XIII (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(2) Significant Accounting Policies
General — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund will generally focus on securities of small size companies which may be more volatile than those of larger companies.
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. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
Notes to Financial Statements - continued
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. The following is a summary of the levels used as of February 28, 2022 in valuing the fund's assets and liabilities:
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Equity Securities | $4,262,199,603 | $— | $— | $4,262,199,603 |
| Mutual Funds | 18,642,611 | — | — | 18,642,611 |
| Total | $4,280,842,214 | $— | $— | $4,280,842,214 |
Notes to Financial Statements - continued
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation — Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans — Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund's Portfolio of Investments, with a fair value of $863,376. The fair value of the fund's investment securities on loan and a related liability of $860,299 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The value of the fund's securities on loan is marked to market daily and daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. The value of the fund's securities on loan net of the related collateral is $3,077 at period end. This collateral shortfall was adjusted for the following business day. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Notes to Financial Statements - continued
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income — Investment transactions are recorded on the trade date. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily relate to passive foreign investment companies, wash sale loss deferrals, and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
Notes to Financial Statements - continued
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
| | Year ended
2/28/22 | Year ended
2/28/21 |
| Ordinary income (including any short-term capital gains) | $165,834,643 | $34,305,697 |
| Long-term capital gains | 207,001,871 | 33,057,559 |
| Total distributions | $372,836,514 | $67,363,256 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
| As of 2/28/22 | |
| Cost of investments | $3,277,881,184 |
| Gross appreciation | 1,129,833,017 |
| Gross depreciation | (126,871,987) |
| Net unrealized appreciation (depreciation) | $1,002,961,030 |
| Undistributed ordinary income | 55,369,411 |
| Undistributed long-term capital gain | 86,391,719 |
| Total distributable earnings (loss) | $1,144,722,160 |
Multiple Classes of Shares of Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B and Class C shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
| | Year
ended
2/28/22 | | Year
ended
2/28/21 |
| Class A | $31,886,235 | | $6,297,483 |
| Class B | 572,192 | | 130,336 |
| Class C | 3,520,445 | | 807,766 |
| Class I | 151,035,934 | | 24,173,641 |
| Class R1 | 226,208 | | 35,695 |
| Class R2 | 501,000 | | 98,960 |
| Class R3 | 8,905,282 | | 1,755,065 |
| Class R4 | 8,957,807 | | 1,948,117 |
| Class R6 | 167,231,411 | | 32,116,193 |
| Total | $372,836,514 | | $67,363,256 |
Notes to Financial Statements - continued
(3) Transactions with Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $1 billion | 0.90% |
| In excess of $1 billion and up to $2.5 billion | 0.80% |
| In excess of $2.5 billion and up to $5 billion | 0.75% |
| In excess of $5 billion | 0.70% |
MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. For the year ended February 28, 2022, this management fee reduction amounted to $545,381, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended February 28, 2022 was equivalent to an annual effective rate of 0.79% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
| Classes |
| A | B | C | I | R1 | R2 | R3 | R4 | R6 |
| 1.39% | 2.14% | 2.14% | 1.14% | 2.14% | 1.64% | 1.39% | 1.14% | 1.10% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until June 30, 2023. For the year ended February 28, 2022, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $19,551 for the year ended February 28, 2022, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Notes to Financial Statements - continued
Distribution Plan Fee Table:
| | Distribution
Fee Rate (d) | Service
Fee Rate (d) | Total
Distribution
Plan (d) | Annual
Effective
Rate (e) | Distribution
and Service
Fee |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 908,926 |
| Class B | 0.75% | 0.25% | 1.00% | 1.00% | 64,351 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 402,602 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 24,778 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 27,492 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 250,623 |
| Total Distribution and Service Fees | | | | | $1,678,772 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended February 28, 2022 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended February 28, 2022, this rebate amounted to $296 for Class A and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended February 28, 2022, were as follows:
| | Amount |
| Class A | $907 |
| Class B | 3,411 |
| Class C | 471 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended February 28, 2022, the fee was $117,072, which equated to 0.0028% annually of the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R6 shares do not incur sub-accounting fees. For the year ended February 28, 2022, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $2,419,334.
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
Notes to Financial Statements - continued
services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the year ended February 28, 2022 was equivalent to an annual effective rate of 0.0133% of the fund's average daily net assets.
Trustees’ and Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other — 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 February 28, 2022, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $2,467,195 and $3,540,351, respectively. The sales transactions resulted in net realized gains (losses) of $144,120.
The adviser has voluntarily undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time. For the year ended February 28, 2022, this reimbursement amounted to $315,132, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended February 28, 2022, purchases and sales of investments, other than short-term obligations, aggregated $1,811,801,927 and $1,886,329,968, respectively.
Notes to Financial Statements - continued
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Shares sold | | | | | |
| Class A | 1,098,623 | $22,440,858 | | 2,019,337 | $26,327,639 |
| Class B | 4,693 | 88,671 | | 976 | 13,070 |
| Class C | 73,653 | 1,430,370 | | 169,412 | 2,108,802 |
| Class I | 23,172,755 | 478,577,848 | | 31,316,292 | 433,769,956 |
| Class R1 | 44,355 | 850,624 | | 32,645 | 482,002 |
| Class R2 | 150,541 | 3,094,638 | | 71,753 | 972,777 |
| Class R3 | 1,796,008 | 37,157,318 | | 1,577,907 | 21,718,615 |
| Class R4 | 1,451,743 | 30,146,067 | | 1,417,123 | 19,335,999 |
| Class R6 | 19,041,746 | 396,650,999 | | 31,239,089 | 414,302,831 |
| | 46,834,117 | $970,437,393 | | 67,844,534 | $919,031,691 |
Shares issued to shareholders
in reinvestment of distributions | | | | | |
| Class A | 1,604,212 | $31,851,630 | | 486,139 | $6,285,772 |
| Class B | 30,529 | 568,762 | | 10,527 | 129,382 |
| Class C | 190,074 | 3,520,261 | | 66,035 | 806,943 |
| Class I | 7,437,596 | 148,948,456 | | 1,807,969 | 23,539,760 |
| Class R1 | 12,144 | 226,208 | | 2,904 | 35,695 |
| Class R2 | 25,476 | 501,000 | | 7,707 | 98,960 |
| Class R3 | 447,641 | 8,905,282 | | 135,422 | 1,755,065 |
| Class R4 | 446,689 | 8,957,807 | | 149,395 | 1,948,117 |
| Class R6 | 7,443,689 | 149,542,988 | | 2,195,048 | 28,645,381 |
| | 17,638,050 | $353,022,394 | | 4,861,146 | $63,245,075 |
| Shares reacquired | | | | | |
| Class A | (2,683,483) | $(54,860,923) | | (7,951,911) | $(102,359,961) |
| Class B | (58,640) | (1,130,466) | | (127,934) | (1,696,929) |
| Class C | (488,417) | (9,439,974) | | (864,947) | (10,878,824) |
| Class I | (18,342,265) | (381,438,542) | | (35,383,231) | (472,821,255) |
| Class R1 | (70,268) | (1,327,926) | | (11,060) | (151,491) |
| Class R2 | (121,020) | (2,477,181) | | (179,347) | (2,429,696) |
| Class R3 | (1,846,089) | (37,845,051) | | (2,298,084) | (34,272,909) |
| Class R4 | (2,357,189) | (49,091,085) | | (1,803,699) | (25,628,339) |
| Class R6 | (25,868,519) | (536,393,059) | | (33,135,986) | (479,828,642) |
| | (51,835,890) | $(1,074,004,207) | | (81,756,199) | $(1,130,068,046) |
Notes to Financial Statements - continued
| | Year ended
2/28/22 | | Year ended
2/28/21 |
| | Shares | Amount | | Shares | Amount |
| Net change | | | | | |
| Class A | 19,352 | $(568,435) | | (5,446,435) | $(69,746,550) |
| Class B | (23,418) | (473,033) | | (116,431) | (1,554,477) |
| Class C | (224,690) | (4,489,343) | | (629,500) | (7,963,079) |
| Class I | 12,268,086 | 246,087,762 | | (2,258,970) | (15,511,539) |
| Class R1 | (13,769) | (251,094) | | 24,489 | 366,206 |
| Class R2 | 54,997 | 1,118,457 | | (99,887) | (1,357,959) |
| Class R3 | 397,560 | 8,217,549 | | (584,755) | (10,799,229) |
| Class R4 | (458,757) | (9,987,211) | | (237,181) | (4,344,223) |
| Class R6 | 616,916 | 9,800,928 | | 298,151 | (36,880,430) |
| | 12,636,277 | $249,455,580 | | (9,050,519) | $(147,791,280) |
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Effective at the close of business on August 14, 2019, the fund is closed to new investors subject to certain exceptions. Please see the fund’s prospectus for details.
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Growth Allocation Fund, the MFS Moderate Allocation Fund, the MFS Aggressive Growth Allocation Fund, and the MFS Conservative Allocation Fund were the owners of record of approximately 3%, 3%, 2%, and 1%, respectively, of the value of outstanding voting shares of the fund.
In addition, the MFS Lifetime 2020 Fund, the MFS Lifetime 2025 Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime 2055 Fund, the MFS Lifetime 2060 Fund, the MFS Lifetime 2065 Fund, and the MFS Lifetime Income Fund were each the owners of record of less than 1% of the value of outstanding voting shares of the fund.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit of which $1 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings,
Notes to Financial Statements - continued
at rates equal to customary reference rates plus an agreed upon spread. For the year ended February 28, 2022, the fund’s commitment fee and interest expense were $14,365 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning
Value | Purchases | Sales
Proceeds | Realized
Gain
(Loss) | Change in
Unrealized
Appreciation or
Depreciation | Ending
Value |
| MFS Institutional Money Market Portfolio | $51,206,243 | $707,250,919 | $740,674,850 | $— | $— | $17,782,312 |
| Affiliated Issuers | Dividend
Income | Capital Gain
Distributions |
| MFS Institutional Money Market Portfolio | $14,040 | $— |
(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 investments in certain debt instruments and derivatives (if any), as well as borrowings by the fund and certain other contractual arrangements of the fund, may be based on 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 investments in certain debt instruments and derivatives, as well as borrowings by the fund and any 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
Notes to Financial Statements - continued
to account for those modified contracts as a continuation of the existing contracts. 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.
(10) Russia and Ukraine Conflict
The market disruptions, which began in late February 2022, associated with geopolitical events related to the conflict between Russia and Ukraine may adversely affect the value of the fund’s assets and thus the fund’s performance. Management continues to monitor these events and to evaluate the related impacts, if any, to the fund.
Report of Independent Registered Public Accounting Firm
To the Shareholders of MFS New Discovery Value Fund and the Board of Trustees of MFS Series Trust XIII
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS New Discovery Value Fund (the “Fund”) (one of the funds constituting MFS Series Trust XIII (the “Trust”)), including the portfolio of investments, as of February 28, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting MFS Series Trust XIII) at February 28, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
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 February 28, 2022, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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
April 14, 2022
Trustees and Officers — Identification and Background
The Trustees and Officers of the Trust, as of April 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) | | 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 | | 136 | | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | | N/A |
| INDEPENDENT TRUSTEES | | | | | | | | | | |
John P. Kavanaugh
(age 67) | | Trustee and Chair of Trustees | | January 2009 | | 136 | | Private investor | | N/A |
Steven E. Buller
(age 70) | | Trustee | | February 2014 | | 136 | | Private investor | | N/A |
John A. Caroselli
(age 67) | | Trustee | | March 2017 | | 136 | | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | | N/A |
Maureen R. Goldfarb
(age 66) | | Trustee | | January 2009 | | 136 | | Private investor | | N/A |
Peter D. Jones
(age 66) | | Trustee | | January 2019 | | 136 | | Private investor | | N/A |
James W. Kilman, Jr.
(age 60) | | Trustee | | January 2019 | | 136 | | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | | Alpha-En Corporation, Director (2016-2019) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with Fund | | Trustee/Officer Since(h) | | Number of MFS Funds overseen by the Trustee | | Principal Occupations During
the Past Five Years | | Other Directorships During
the Past Five Years (j) |
Clarence Otis, Jr.
(age 65) | | Trustee | | March 2017 | | 136 | | Private investor | | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director |
Maryanne L. Roepke
(age 66) | | Trustee | | May 2014 | | 136 | | Private investor | | N/A |
Laurie J. Thomsen
(age 64) | | Trustee | | March 2005 | | 136 | | Private investor | | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
| OFFICERS | | | | | | | | |
Christopher R. Bohane (k)
(age 48) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel |
Kino Clark (k)
(age 53) | | Assistant Treasurer | | January 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
John W. Clark, Jr. (k)
(age 55) | | Assistant Treasurer | | April 2017 | | 136 | | 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 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
David L. DiLorenzo (k)
(age 53) | | President | | July 2005 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
Heidi W. Hardin (k)
(age 54) | | Secretary and Clerk | | April 2017 | | 136 | | Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (until January 2017) |
Trustees and Officers - continued
| Name, Age | | Position(s) Held with
Fund | | Trustee/Officer Since(h) | | Number of MFS Funds for which the Person is an Officer | | Principal Occupations During
the Past Five Years |
Brian E. Langenfeld (k)
(age 49) | | Assistant Secretary and Assistant Clerk | | June 2006 | | 136 | | Massachusetts Financial Services Company, Vice President and Senior Counsel |
Rosa E. Licea-Mailloux(k)
(age 45) | | Chief Compliance Officer | | March 2022 | | 136 | | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) |
Amanda S. Mooradian (k)
(age 43) | | Assistant Secretary and Assistant Clerk | | September 2018 | | 136 | | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel |
Susan A. Pereira (k)
(age 51) | | Assistant Secretary and Assistant Clerk | | July 2005 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
Kasey L. Phillips (k)
(age 51) | | Assistant Treasurer | | September 2012 | | 136 | | Massachusetts Financial Services Company, Vice President |
Matthew A. Stowe (k)
(age 47) | | Assistant Secretary and Assistant Clerk | | October 2014 | | 136 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel |
James O. Yost (k)
(age 61) | | Treasurer | | September 1990 | | 136 | | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
Trustees and Officers - continued
Each Trustee (other than Messrs. Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of 75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618 | State Street Bank and Trust Company
1 Lincoln Street
Boston, MA 02111-2900 |
| Distributor | Independent Registered Public Accounting Firm |
MFS Fund Distributors, Inc.
111 Huntington Avenue
Boston, MA 02199-7618 | Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116 |
| Portfolio Manager(s) | |
Richard Offen
Kevin Schmitz | |
Proxy Voting Policies and Information
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund Contracts and Legal Claims
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Federal Tax Information (unaudited)
The fund will notify shareholders of amounts for use in preparing 2022 income tax forms in January 2023. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund designates $262,745,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 33.59% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
Federal Tax Information (unaudited) - continued
The fund designates the maximum amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances |
| • Account transactions and transaction history |
| • Checking account information and wire transfer instructions |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your
personal information | Does MFS share? | Can you limit
this sharing? |
For our everyday business purposes –
such as to process your transactions, maintain your
account(s), respond to court orders and legal
investigations, or report to credit bureaus | Yes | No |
For our marketing purposes –
to offer our products and services to you | No | We don't share |
For joint marketing with other
financial companies | No | We don't share |
For our affiliates' everyday business purposes –
information about your transactions and experiences | No | We don't share |
For our affiliates' everyday business purposes –
information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
| Who we are |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do |
How does MFS
protect my personal
information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
How does MFS
collect my personal
information? | We collect your personal information, for example, when you |
| • open an account or provide account information |
| • direct us to buy securities or direct us to sell your securities |
| • make a wire transfer |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness |
| • affiliates from using your information to market to you |
| • sharing for nonaffiliates to market to you |
| State laws and individual companies may give you additional rights to limit sharing. |
| Definitions |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 219341
Kansas City, MO 64121-9341
OVERNIGHT MAIL
MFS Service Center, Inc.
Suite 219341
430 W 7th Street
Kansas City, MO 64105-1407
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 Deloitte & Touche LLP (“Deloitte”) to serve as independent accountants to certain series of the Registrant and Ernst & Young LLP (“E&Y”) to serve in the same capacity to certain other series of the Registrant (each a “Fund” and collectively the “Funds”). The tables below set forth the audit fees billed to each Fund as well as fees for non-audit services provided to each Fund and/or to each Fund’s investment adviser, Massachusetts Financial Services Company (“MFS”), and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Funds (“MFS Related Entities”).
For the fiscal years ended February 28, 2022 and 2021, respectively, audit fees billed to each Fund by Deloitte and E&Y were as follows:
| | | | | | | | |
| | | Audit Fees | |
| | 2022 | | | 2021 | |
Fees billed by Deloitte: | | | | | | | | |
MFS Government Securities Fund | | | 59,613 | | | | 56,600 | |
| | | | | | | | |
| | | Audit Fees | |
| | 2022 | | | 2021 | |
Fees billed by E&Y: | | | | | | | | |
MFS Diversified Income Fund | | | 63,826 | | | | 60,597 | |
MFS New Discovery Value Fund | | | 50,312 | | | | 47,775 | |
| | | | | | | | |
Total | | | 114,138 | | | | 108,372 | |
For the fiscal years ended February 28, 2022 and 2021, respectively, fees billed by Deloitte and E&Y for audit-related, tax and other services provided to each Fund and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Audit-Related Fees1 | | | Tax Fees2 | | | All Other Fees3 | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Fees billed by Deloitte: | | | | | | | | | | | | | | | | | | | | | | | | |
To MFS Government Securities Fund | | | 0 | | | | 0 | | | | 8,231 | | | | 7,830 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Audit-Related Fees1 | | | Tax Fees2 | | | All Other Fees3 | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Fees billed by Deloitte: | | | | | | | | | | | | | | | | | | | | | | | | |
To MFS and MFS Related Entities of MFS Government Securities Fund * | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 5,390 | | | | 5,390 | |
| | | | | | | | |
| | | Aggregate fees for non-audit services | |
| | 2022 | | | 2021 | |
Fees billed by Deloitte: | | | | | | | | |
To MFS Government Securities Fund, MFS and MFS Related Entities# | | | 13,621 | | | | 556,970 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Audit-Related Fees1 | | | Tax Fees2 | | | All Other Fees4 | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Fees billed by E&Y: | | | | | | | | | | | | | | | | | | | | | | | | |
To MFS Diversified Income Fund | | | 0 | | | | 0 | | | | 9,338 | | | | 8,885 | | | | 1,680 | | | | 1,913 | |
To MFS New Discovery Value Fund | | | 0 | | | | 0 | | | | 9,396 | | | | 8,939 | | | | 1,740 | | | | 1,715 | |
Total fees billed by E&Y To above Funds | | | 0 | | | | 0 | | | | 18,734 | | | | 17,824 | | | | 3,420 | | | | 3,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Audit-Related Fees1 | | | Tax Fees2 | | | All Other Fees4 | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Fees billed by E&Y: | | | | | | | | | | | | | | | | | | | | | | | | |
To MFS and MFS Related Entities of MFS Diversified Income Fund* | | | 1,795,090 | | | | 1,783,260 | | | | 0 | | | | 0 | | | | 111,720 | | | | 107,150 | |
To MFS and MFS Related Entities of MFS New Discovery Value Fund* | | | 1,795,090 | | | | 1,783,260 | | | | 0 | | | | 0 | | | | 111,720 | | | | 107,150 | |
| | | | | | | | |
| | | Aggregate fees for non-audit
services | |
| | | 2022 | | | 2021 | |
Fees billed by E&Y: | | | | | | | | |
To MFS Diversified Income Fund, MFS and MFS Related Entities# | | | 2,172,458 | | | | 2,143,438 | |
To MFS New Discovery Value Fund, MFS and MFS Related Entities# | | | 2,172,576 | | | | 2,143,294 | |
| * | This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Funds (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex). |
| # | This amount reflects the aggregate fees billed by Deloitte or E&Y, as the case may be, for non-audit services rendered to the Funds and for non-audit services rendered to MFS and the MFS Related Entities. |
| 1 | The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under ‘‘Audit Fees,’’ including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews. |
| 2 | The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis. |
| 3 | The fees included under “All Other Fees” are fees for products and services provided by Deloitte other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees”. |
| 4 | The fees included under “All Other Fees” are fees for products and services provided by E&Y other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to reviews 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 Funds and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 in each period between regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting.
Item 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).
Item 4(f):
Not applicable.
Item 4(h):
The Registrant’s Audit Committee has considered whether the provision by a Registrant’s independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant’s principal auditors.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
A schedule of investments of each series of the Registrant is included as part of the report to shareholders of such series under Item 1(a) of this Form N-CSR.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the Registrant.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.
| ITEM 11. | CONTROLS AND PROCEDURES. |
| (a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
| (b) | There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
| (a) | File the exhibits listed below as part of this form. Letter or number the exhibits in the sequence indicated. |
| | (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: Code of Ethics attached hereto as EX-99.COE. |
| | (2) | A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto as EX-99.302CERT. |
| | (3) | Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. |
| | (4) | Change in the registrant’s independent public accountant. Not applicable. |
| (b) | If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 |
| | U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Attached hereto as EX-99.906CERT. |
Notice
A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST XIII
| | |
| By (Signature and Title)* | | /S/ DAVID L. DILORENZO |
| | David L. DiLorenzo, President |
Date: April 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: April 14, 2022
| | |
| By (Signature and Title)* | | /S/ JAMES O. YOST |
| | James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: April 14, 2022
| * | Print name and title of each signing officer under his or her signature. |
