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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6102
MFS SERIES TRUST VI
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Kristin V. Collins
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: October 31
Date of reporting period: October 31, 2015
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ITEM 1. | REPORTS TO STOCKHOLDERS. |
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ANNUAL REPORT
October 31, 2015
MFS® GLOBAL EQUITY FUND
LGE-ANN
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MFS® GLOBAL EQUITY FUND
The report is prepared for the general information of shareholders.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
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Dear Shareholders:
The global economy remains vulnerable as central banks continue to play a major role in supporting growth.
Even the resilient U.S. economy has had slower growth, as a strong U.S. dollar and weak overseas markets have hurt exporters. However, robust consumer demand and a recovering housing market have aided the domestic economy, fueled by cheap gasoline and an improving labor market.
China’s transition to a consumer-based, slower-growth economy has weighed on many commodity-exporting nations. And concerns about weakness in China have eroded investor and business confidence around the world. Meanwhile, rising geopolitical concerns will weigh on the eurozone, which is still reliant on the European Central Bank’s support.
As markets have become more focused on short-term trends in recent years, we believe it’s important for investors to lengthen their investment time horizon. At MFS®, we don’t trade on headlines or trends; we invest for the long term.
We believe that this approach, coupled with the professional guidance of a financial advisor, will help you reach your investment goals.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
December 15, 2015
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings | ||||
Walt Disney Co. | 2.9% | |||
Reckitt Benckiser Group PLC | 2.7% | |||
Accenture PLC, “A” | 2.7% | |||
Nestle S.A. | 2.6% | |||
Honeywell International, Inc. | 2.6% | |||
Thermo Fisher Scientific, Inc. | 2.5% | |||
Time Warner, Inc. | 2.5% | |||
Visa, Inc., “A” | 2.4% | |||
Bayer AG | 2.1% | |||
State Street Corp. | 2.0% | |||
Equity sectors | ||||
Consumer Staples | 18.2% | |||
Health Care | 15.4% | |||
Financial Services | 14.7% | |||
Leisure | 11.4% | |||
Industrial Goods & Services | 8.2% | |||
Basic Materials | 6.6% | |||
Retailing | 5.9% | |||
Special Products & Services | 5.8% | |||
Technology | 5.4% | |||
Transportation | 3.9% | |||
Energy | 1.7% | |||
Autos & Housing | 0.9% |
Issuer country weightings (x) | ||||
United States | 56.3% | |||
United Kingdom | 9.9% | |||
Switzerland | 8.3% | |||
France | 7.8% | |||
Germany | 6.2% | |||
Netherlands | 2.5% | |||
Canada | 1.7% | |||
Sweden | 1.6% | |||
Japan | 1.4% | |||
Other Countries | 4.3% | |||
Currency exposure weightings (y) | ||||
United States Dollar | 58.7% | |||
Euro | 17.1% | |||
British Pound Sterling | 9.9% | |||
Swiss Franc | 8.3% | |||
Swedish Krona | 1.6% | |||
Japanese Yen | 1.4% | |||
Danish Krone | 0.8% | |||
Brazilian Real | 0.7% | |||
South Korean Won | 0.6% | |||
Other Currencies | 0.9% |
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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. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents. |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 10/31/15.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended October 31, 2015, Class A shares of the MFS Global Equity Fund (“fund”) provided a total return of 3.94%, at net asset value. This compares with a return of 2.33% for the fund’s benchmark, the MSCI World Index.
Market Environment
Sluggish global growth weighed on both developed and emerging market (“EM”) economies during the reporting period. EM economies have been particularly lackluster. While the US Federal Reserve appears ready to tighten monetary conditions, other large developed economies continued to embrace accommodative monetary policies, particularly the European Central Bank, which instituted a large quantitative easing program in January of 2015. Poor policy management by the Chinese government roiled global markets over the summer, beginning with the poorly executed response to the stock market’s boom and bust and then the confusing decision to devalue the renminbi in August. China subsequently stabilized the currency and ramped up a wide range of monetary and fiscal measures to stimulate the economy and bolster sentiment.
During the second half of the reporting period, the US faced an earnings recession caused primarily by the sharp decline in the prices of oil and other commodities. Earnings contractions were concentrated primarily in the energy, materials and industrial sectors. An additional headwind for earnings was the sharp rise in the US dollar over the period. Exports were crimped by the dollar’s strength and falling demand in emerging markets. Consumer spending held up well during the period amid a modest increase in real wages and a tailwind from falling gasoline prices. Demand for autos reached near-record territory late in the period. In emerging markets, two key factors weighed on economies and asset prices: weaker Chinese growth, and the resulting decline in commodity prices, in addition to prospects for higher US interest rates. Structural factors like floating exchange rates and fiscal buffers partially offset these cyclical headwinds.
Contributors to Performance
An underweight position in the energy sector benefited results relative to the MSCI World Index as share prices remained weak reflecting the decline in the price of oil. However, there were no individual stocks within this sector that were among the fund’s top relative contributors.
An overweight allocation and security selection in the consumer staples sector lifted relative returns. The fund’s overweight positions in household products manufacturer Reckitt Benckiser (United Kingdom), Swedish pulp and paper manufacturer and consumer goods company Svenska Cellulosa Aktiebolaget and brewer Heineken (Netherlands) aided relative performance. Strong organic growth in Reckitt Benckiser’s Consumer Health segment drove shares upwards as the company’s financial results beat expectations during the reporting period.
In other sectors, the fund’s overweight positions in management consulting firm Accenture, media conglomerate Walt Disney, global payments technology company Visa, the world’s largest luxury goods company LVMH Moët Hennessy Louis Vuitton
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Management Review – continued
(France), automotive replacement parts distributor AutoZone, cable and internet services provider Time Warner Cable and advertising and marketing firm WPP Group (United Kingdom) all supported relative results.
Detractors from Performance
Stock selection in the retailing and transportation sectors was a primary factor that detracted from performance relative to the MSCI World Index. Within the retailing sector, not holding internet retailer Amazon.com hurt relative returns. Shares of Amazon.com appreciated during the reporting period as earnings beat market expectations on the back of strong sales, particularly from North America, and favorable guidance from the company. Within the transportation sector, the fund’s overweight position in railroad company Canadian National Railway (Canada) hindered relative results. Shares underperformed the fund’s benchmark as industry-wide railroad traffic remained subdued in the face of weak commodity prices.
Elsewhere, overweight positions in investment management firm Franklin Resources, financial services company American Express, electrical distribution equipment manufacturer Schneider Electric (France), oil and gas drilling equipment manufacturer National Oilwell Varco and oil field services company Schlumberger detracted from relative returns. Not holding internet search giant Alphabet and computer and personal electronics maker Apple also negatively impacted returns. Lastly, holdings of Brazilian bank Itau Unibanco (b) weighed on relative performance as shares underperformed the benchmark during the reporting period.
Respectfully,
David Mannheim | Roger Morley | |
Portfolio Manager | Portfolio Manager |
(b) | Security is not a benchmark constituent. |
The views expressed in this report are those of the portfolio managers only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
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PERFORMANCE SUMMARY THROUGH 10/31/15
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
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Performance Summary – continued
Total Returns through 10/31/15
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 9/07/93 | 3.94% | 10.76% | 8.13% | N/A | |||||||||
B | 12/29/86 | 3.17% | 9.92% | 7.32% | N/A | |||||||||
C | 1/03/94 | 3.17% | 9.93% | 7.32% | N/A | |||||||||
I | 1/02/97 | 4.20% | 11.03% | 8.40% | N/A | |||||||||
R1 | 4/01/05 | 3.14% | 9.94% | 7.30% | N/A | |||||||||
R2 | 10/31/03 | 3.70% | 10.48% | 7.83% | N/A | |||||||||
R3 | 4/01/05 | 3.93% | 10.75% | 8.09% | N/A | |||||||||
R4 | 4/01/05 | 4.20% | 11.03% | 8.37% | N/A | |||||||||
R5 | 6/01/12 | 4.29% | N/A | N/A | 15.08% | |||||||||
Comparative benchmark | ||||||||||||||
MSCI World Index (f) | 2.33% | 9.76% | 6.38% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With initial Sales Charge (5.75%) | (2.04)% | 9.45% | 7.49% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (0.83)% | 9.65% | 7.32% | N/A | ||||||||||
C With CDSC (1% for 12 months) (v) | 2.17% | 9.93% | 7.32% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R5 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
MSCI World Index – a market capitalization-weighted index that is designed to measure equity market performance in the global developed markets.
It is not possible to invest directly in an index.
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.
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Performance Summary – continued
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund’s performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
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Fund expenses borne by the shareholders during the period, May 1, 2015 through October 31, 2015
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 May 1, 2015 through October 31, 2015.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would
have been higher.
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Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value | Ending Account Value | Expenses Paid During Period (p) 5/01/15-10/31/15 | ||||||||||||||
A | Actual | 1.22% | $1,000.00 | $978.13 | $6.08 | |||||||||||||
Hypothetical (h) | 1.22% | $1,000.00 | $1,019.06 | $6.21 | ||||||||||||||
B | Actual | 1.97% | $1,000.00 | $974.41 | $9.80 | |||||||||||||
Hypothetical (h) | 1.97% | $1,000.00 | $1,015.27 | $10.01 | ||||||||||||||
C | Actual | 1.98% | $1,000.00 | $974.57 | $9.85 | |||||||||||||
Hypothetical (h) | 1.98% | $1,000.00 | $1,015.22 | $10.06 | ||||||||||||||
I | Actual | 0.98% | $1,000.00 | $979.17 | $4.89 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,020.27 | $4.99 | ||||||||||||||
R1 | Actual | 1.98% | $1,000.00 | $974.45 | $9.85 | |||||||||||||
Hypothetical (h) | 1.98% | $1,000.00 | $1,015.22 | $10.06 | ||||||||||||||
R2 | Actual | 1.48% | $1,000.00 | $976.96 | $7.37 | |||||||||||||
Hypothetical (h) | 1.48% | $1,000.00 | $1,017.74 | $7.53 | ||||||||||||||
R3 | Actual | 1.23% | $1,000.00 | $978.25 | $6.13 | |||||||||||||
Hypothetical (h) | 1.23% | $1,000.00 | $1,019.00 | $6.26 | ||||||||||||||
R4 | Actual | 0.98% | $1,000.00 | $979.27 | $4.89 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,020.27 | $4.99 | ||||||||||||||
R5 | Actual | 0.87% | $1,000.00 | $979.71 | $4.34 | |||||||||||||
Hypothetical (h) | 0.87% | $1,000.00 | $1,020.82 | $4.43 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
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10/31/15
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Common Stocks - 98.1% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Aerospace - 4.7% | ||||||||
Honeywell International, Inc. | 541,173 | $ | 55,892,346 | |||||
MTU Aero Engines AG | 153,650 | 14,221,466 | ||||||
United Technologies Corp. | 322,784 | 31,765,173 | ||||||
|
| |||||||
$ | 101,878,985 | |||||||
Airlines - 0.2% | ||||||||
Aena S.A. (a) | 47,608 | $ | 5,313,742 | |||||
Alcoholic Beverages - 6.0% | ||||||||
AmBev S.A. | 1,937,978 | $ | 9,593,030 | |||||
Carlsberg Group | 208,254 | 17,072,139 | ||||||
Diageo PLC | 1,524,004 | 44,133,564 | ||||||
Heineken N.V. | 300,173 | 27,436,685 | ||||||
Pernod Ricard S.A. | 274,417 | 32,348,956 | ||||||
|
| |||||||
$ | 130,584,374 | |||||||
Apparel Manufacturers - 3.4% | ||||||||
Burberry Group PLC | 506,508 | $ | 10,369,459 | |||||
Compagnie Financiere Richemont S.A. | 266,236 | 22,840,622 | ||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 222,889 | 41,568,941 | ||||||
|
| |||||||
$ | 74,779,022 | |||||||
Automotive - 0.9% | ||||||||
Delphi Automotive PLC | 192,741 | $ | 16,034,124 | |||||
Harley-Davidson, Inc. | 60,858 | 3,009,428 | ||||||
|
| |||||||
$ | 19,043,552 | |||||||
Broadcasting - 8.0% | ||||||||
Omnicom Group, Inc. | 266,849 | $ | 19,992,327 | |||||
Time Warner, Inc. | 718,962 | 54,166,597 | ||||||
Viacom, Inc., “B” | 92,936 | 4,582,674 | ||||||
Walt Disney Co. | 552,302 | 62,818,829 | ||||||
WPP Group PLC | 1,430,613 | 32,155,213 | ||||||
|
| |||||||
$ | 173,715,640 | |||||||
Brokerage & Asset Managers - 1.6% | ||||||||
Deutsche Boerse AG | 134,642 | $ | 12,399,947 | |||||
Franklin Resources, Inc. | 542,009 | 22,092,287 | ||||||
|
| |||||||
$ | 34,492,234 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Business Services - 5.8% | ||||||||
Accenture PLC, “A” | 543,446 | $ | 58,257,411 | |||||
Adecco S.A. | 259,984 | 19,358,412 | ||||||
Brenntag AG | 164,586 | 9,945,235 | ||||||
Compass Group PLC | 1,537,342 | 26,519,924 | ||||||
NOW, Inc. (a)(l) | 120,610 | 1,991,271 | ||||||
PayPal Holdings, Inc. (a) | 285,279 | 10,272,897 | ||||||
|
| |||||||
$ | 126,345,150 | |||||||
Cable TV - 2.1% | ||||||||
Sky PLC | 1,272,754 | $ | 21,504,370 | |||||
Time Warner Cable, Inc. | 128,477 | 24,333,544 | ||||||
|
| |||||||
$ | 45,837,914 | |||||||
Chemicals - 2.4% | ||||||||
3M Co. | 226,400 | $ | 35,592,344 | |||||
Monsanto Co. | 178,801 | 16,667,829 | ||||||
|
| |||||||
$ | 52,260,173 | |||||||
Computer Software - 2.2% | ||||||||
Check Point Software Technologies Ltd. (a) | 127,522 | $ | 10,831,719 | |||||
Oracle Corp. | 955,113 | 37,096,589 | ||||||
|
| |||||||
$ | 47,928,308 | |||||||
Consumer Products - 6.4% | ||||||||
Colgate-Palmolive Co. | 431,458 | $ | 28,627,238 | |||||
International Flavors & Fragrances, Inc. | 144,102 | 16,724,478 | ||||||
Reckitt Benckiser Group PLC | 607,561 | 59,418,920 | ||||||
Svenska Cellulosa Aktiebolaget | 1,186,510 | 34,997,222 | ||||||
|
| |||||||
$ | 139,767,858 | |||||||
Electrical Equipment - 3.5% | ||||||||
Amphenol Corp., “A” | 272,503 | $ | 14,775,113 | |||||
Legrand S.A. | 370,809 | 20,363,540 | ||||||
Rockwell Automation, Inc. | 46,199 | 5,043,083 | ||||||
Schneider Electric S.A. | 373,101 | 22,598,250 | ||||||
W.W. Grainger, Inc. | 68,716 | 14,430,360 | ||||||
|
| |||||||
$ | 77,210,346 | |||||||
Electronics - 2.1% | ||||||||
Hoya Corp. | 461,800 | $ | 18,980,278 | |||||
Microchip Technology, Inc. | 318,840 | 15,396,784 | ||||||
Samsung Electronics Co. Ltd. | 10,440 | 12,506,047 | ||||||
|
| |||||||
$ | 46,883,109 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Energy - Independent - 0.3% | ||||||||
INPEX Corp. | 730,200 | $ | 6,960,363 | |||||
Food & Beverages - 5.8% | ||||||||
Danone S.A. | 534,263 | $ | 37,253,521 | |||||
Kellogg Co. | 454,982 | 32,085,331 | ||||||
Nestle S.A. | 747,183 | 57,147,084 | ||||||
|
| |||||||
$ | 126,485,936 | |||||||
Food & Drug Stores - 0.2% | ||||||||
Lawson, Inc. | 65,000 | $ | 4,795,622 | |||||
Gaming & Lodging - 0.6% | ||||||||
Sands China Ltd. | 1,094,000 | $ | 3,926,930 | |||||
William Hill PLC | 1,147,208 | 5,608,027 | ||||||
Wynn Resorts Ltd. | 44,146 | 3,088,013 | ||||||
|
| |||||||
$ | 12,622,970 | |||||||
Insurance - 0.4% | ||||||||
Swiss Re Ltd. | 92,331 | $ | 8,584,368 | |||||
Internet - 0.4% | ||||||||
eBay, Inc. (a) | 285,279 | $ | 7,959,284 | |||||
Major Banks - 5.4% | ||||||||
Bank of New York Mellon Corp. | 869,899 | $ | 36,231,293 | |||||
Goldman Sachs Group, Inc. | 136,421 | 25,578,938 | ||||||
Standard Chartered PLC | 1,042,964 | 11,598,909 | ||||||
State Street Corp. | 641,641 | 44,273,229 | ||||||
|
| |||||||
$ | 117,682,369 | |||||||
Medical Equipment - 10.9% | ||||||||
Cooper Cos., Inc. | 73,420 | $ | 11,186,271 | |||||
DENTSPLY International, Inc. | 288,559 | 17,558,815 | ||||||
Medtronic PLC | 474,699 | 35,089,750 | ||||||
Sonova Holding AG | 82,639 | 11,286,626 | ||||||
St. Jude Medical, Inc. | 465,098 | 29,677,903 | ||||||
Stryker Corp. | 319,529 | 30,553,363 | ||||||
Thermo Fisher Scientific, Inc. | 416,547 | 54,476,017 | ||||||
Waters Corp. (a) | 166,324 | 21,256,207 | ||||||
Zimmer Biomet Holdings, Inc. | 267,695 | 27,992,866 | ||||||
|
| |||||||
$ | 239,077,818 | |||||||
Network & Telecom - 0.7% | ||||||||
Cisco Systems, Inc. | 522,835 | $ | 15,083,790 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Oil Services - 1.4% | ||||||||
National Oilwell Varco, Inc. | 206,524 | $ | 7,773,563 | |||||
Schlumberger Ltd. | 287,402 | 22,463,340 | ||||||
|
| |||||||
$ | 30,236,903 | |||||||
Other Banks & Diversified Financials - 7.4% | ||||||||
American Express Co. | 421,177 | $ | 30,855,427 | |||||
Credicorp Ltd. | 31,989 | 3,620,515 | ||||||
Erste Group Bank AG (a) | 317,165 | 9,301,709 | ||||||
Grupo Financiero Banorte S.A. de C.V. | 1,423,828 | 7,667,456 | ||||||
Itau Unibanco Holding S.A., ADR | 825,869 | 5,657,203 | ||||||
Julius Baer Group Ltd. | 261,223 | 12,981,207 | ||||||
Kasikornbank PLC | 977,080 | 4,738,773 | ||||||
Komercni Banka A.S. | 18,036 | 3,732,873 | ||||||
UBS Group AG | 1,526,963 | 30,556,253 | ||||||
Visa, Inc., “A” | 676,082 | 52,450,442 | ||||||
|
| |||||||
$ | 161,561,858 | |||||||
Pharmaceuticals - 4.5% | ||||||||
Bayer AG | 343,622 | $ | 45,853,788 | |||||
Johnson & Johnson | 142,632 | 14,410,111 | ||||||
Merck KGaA | 185,869 | 18,156,039 | ||||||
Roche Holding AG | 71,940 | 19,527,039 | ||||||
|
| |||||||
$ | 97,946,977 | |||||||
Railroad & Shipping - 2.2% | ||||||||
Canadian National Railway Co. | 615,475 | $ | 37,599,368 | |||||
Union Pacific Corp. | 114,435 | 10,224,767 | ||||||
|
| |||||||
$ | 47,824,135 | |||||||
Restaurants - 0.7% | ||||||||
McDonald’s Corp. | 92,682 | $ | 10,403,555 | |||||
Whitbread PLC | 74,395 | 5,695,373 | ||||||
|
| |||||||
$ | 16,098,928 | |||||||
Specialty Chemicals - 4.2% | ||||||||
Akzo Nobel N.V. (l) | 368,510 | $ | 26,117,203 | |||||
L’Air Liquide S.A. | 92,265 | 11,962,040 | ||||||
Linde AG | 198,271 | 34,394,028 | ||||||
Praxair, Inc. | 172,315 | 19,142,473 | ||||||
|
| |||||||
$ | 91,615,744 | |||||||
Specialty Stores - 2.2% | ||||||||
AutoZone, Inc. (a) | 25,370 | $ | 19,900,482 | |||||
Hermes International | 10,870 | 4,187,802 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Specialty Stores - continued | ||||||||
Sally Beauty Holdings, Inc. (a) | 525,174 | $ | 12,346,841 | |||||
Urban Outfitters, Inc. (a) | 437,119 | 12,501,603 | ||||||
|
| |||||||
$ | 48,936,728 | |||||||
Trucking - 1.5% | ||||||||
United Parcel Service, Inc., “B” | 324,291 | $ | 33,408,459 | |||||
Total Common Stocks (Identified Cost, $1,591,222,995) | $ | 2,142,922,659 | ||||||
Money Market Funds - 1.6% | ||||||||
MFS Institutional Money Market Portfolio, 0.12%, at Cost and Net Asset Value (v) | 35,213,582 | $ | 35,213,582 | |||||
Collateral for Securities Loaned - 1.0% | ||||||||
JPMorgan Prime Money Market Fund, 0.14%, at Cost and Net Asset Value (j) | 21,864,600 | $ | 21,864,600 | |||||
Total Investments (Identified Cost, $1,648,301,177) | $ | 2,200,000,841 | ||||||
Other Assets, Less Liabilities - (0.7)% | (15,370,047 | ) | ||||||
Net Assets - 100.0% | $ | 2,184,630,794 |
(a) | Non-income producing 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. |
(v) | Underlying affiliated fund 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 |
PLC | Public Limited Company |
See Notes to Financial Statements
15
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/15
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets | ||||
Investments | ||||
Non-affiliated issuers, at value (identified cost, $1,613,087,595) | $2,164,787,259 | |||
Underlying affiliated funds, at cost and value | 35,213,582 | |||
Total investments, at value, including $21,041,185 of securities on loan | $2,200,000,841 | |||
Cash | 1,258 | |||
Receivables for | ||||
Investments sold | 7,553,556 | |||
Fund shares sold | 8,165,097 | |||
Interest and dividends | 3,560,278 | |||
Total assets | $2,219,281,030 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $5,253,331 | |||
Fund shares reacquired | 6,203,549 | |||
Collateral for securities loaned, at value | 21,864,600 | |||
Payable to affiliates | ||||
Investment adviser | 133,955 | |||
Shareholder servicing costs | 888,790 | |||
Distribution and service fees | 32,446 | |||
Payable for independent Trustees’ compensation | 8,988 | |||
Deferred country tax expense payable | 26,009 | |||
Accrued expenses and other liabilities | 238,568 | |||
Total liabilities | $34,650,236 | |||
Net assets | $2,184,630,794 | |||
Net assets consist of | ||||
Paid-in capital | $1,602,328,612 | |||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies (net of $26,009 deferred country tax) | 551,572,519 | |||
Accumulated net realized gain (loss) on investments and foreign currency | 13,429,824 | |||
Undistributed net investment income | 17,299,839 | |||
Net assets | $2,184,630,794 | |||
Shares of beneficial interest outstanding | 60,189,625 |
16
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $677,703,531 | 18,710,008 | $36.22 | |||||||||
Class B | 27,383,876 | 817,131 | 33.51 | |||||||||
Class C | 140,017,931 | 4,350,330 | 32.19 | |||||||||
Class I | 671,086,843 | 18,067,084 | 37.14 | |||||||||
Class R1 | 3,546,010 | 108,099 | 32.80 | |||||||||
Class R2 | 56,977,704 | 1,619,332 | 35.19 | |||||||||
Class R3 | 105,191,580 | 2,923,684 | 35.98 | |||||||||
Class R4 | 118,810,133 | 3,266,594 | 36.37 | |||||||||
Class R5 | 383,913,186 | 10,327,363 | 37.17 |
(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 $38.43 [100 / 94.25 x $36.22]. 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 R5. |
See Notes to Financial Statements
17
Table of Contents
Financial Statements
Year ended 10/31/15
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 | ||||
Income | ||||
Dividends | $45,678,557 | |||
Interest | 668,157 | |||
Dividends from underlying affiliated funds | 26,152 | |||
Foreign taxes withheld | (2,260,735 | ) | ||
Total investment income | $44,112,131 | |||
Expenses | ||||
Management fee | $17,365,524 | |||
Distribution and service fees | 3,714,900 | |||
Shareholder servicing costs | 2,023,700 | |||
Administrative services fee | 348,356 | |||
Independent Trustees’ compensation | 43,574 | |||
Custodian fee | 317,749 | |||
Shareholder communications | 86,511 | |||
Audit and tax fees | 65,839 | |||
Legal fees | 16,667 | |||
Miscellaneous | 240,894 | |||
Total expenses | $24,223,714 | |||
Fees paid indirectly | (7 | ) | ||
Reduction of expenses by investment adviser and distributor | (170,001 | ) | ||
Net expenses | $24,053,706 | |||
Net investment income | $20,058,425 | |||
Realized and unrealized gain (loss) on investments and foreign currency | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments (net of $25,379 country tax) | $28,763,351 | |||
Foreign currency | 100,995 | |||
Net realized gain (loss) on investments and foreign currency | $28,864,346 | |||
Change in unrealized appreciation (depreciation) | ||||
Investments (net of $315,434 decrease in deferred country tax) | $31,815,454 | |||
Translation of assets and liabilities in foreign currencies | (20,819 | ) | ||
Net unrealized gain (loss) on investments and foreign currency translation | $31,794,635 | |||
Net realized and unrealized gain (loss) on investments and foreign currency | $60,658,981 | |||
Change in net assets from operations | $80,717,406 |
See Notes to Financial Statements
18
Table of Contents
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
Years ended 10/31 | ||||||||
2015 | 2014 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $20,058,425 | $16,094,039 | ||||||
Net realized gain (loss) on investments and foreign currency | 28,864,346 | 19,776,308 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 31,794,635 | 82,069,694 | ||||||
Change in net assets from operations | $80,717,406 | $117,940,041 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $(16,366,047 | ) | $(7,871,999 | ) | ||||
From net realized gain on investments | (19,230,066 | ) | (15,876,404 | ) | ||||
Total distributions declared to shareholders | $(35,596,113 | ) | $(23,748,403 | ) | ||||
Change in net assets from fund share transactions | $159,795,174 | $237,877,856 | ||||||
Total change in net assets | $204,916,467 | $332,069,494 | ||||||
Net assets | ||||||||
At beginning of period | 1,979,714,327 | 1,647,644,833 | ||||||
At end of period (including undistributed net investment income of $17,299,839 and $15,521,739, respectively) | $2,184,630,794 | $1,979,714,327 |
See Notes to Financial Statements
19
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which 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 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $35.45 | $33.74 | $26.46 | $23.79 | $23.14 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.30 | $0.26 | $0.22 | $0.23 | $0.20 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.07 | 1.90 | 7.40 | 2.78 | 0.55 | |||||||||||||||
Total from investment operations | $1.37 | $2.16 | $7.62 | $3.01 | $0.75 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.13 | ) | $(0.27 | ) | $(0.19 | ) | $(0.10 | ) | ||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.60 | ) | $(0.45 | ) | $(0.34 | ) | $(0.34 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $36.22 | $35.45 | $33.74 | $26.46 | $23.79 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.94 | 6.50 | 29.12 | 12.96 | 3.23 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.23 | 1.23 | 1.29 | 1.34 | 1.37 | |||||||||||||||
Expenses after expense reductions (f) | 1.22 | 1.22 | 1.29 | 1.34 | 1.37 | |||||||||||||||
Net investment income | 0.84 | 0.75 | 0.71 | 0.93 | 0.82 | |||||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $677,704 | $592,610 | $512,447 | $344,016 | $310,964 |
See Notes to Financial Statements
20
Table of Contents
Financial Highlights – continued
Class B | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $32.84 | $31.40 | $24.64 | $22.13 | $21.61 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $(0.00 | )(w) | $(0.01 | ) | $0.04 | $0.01 | |||||||||||||
Net realized and unrealized gain (loss) | 1.00 | 1.76 | 6.92 | 2.62 | 0.51 | |||||||||||||||
Total from investment operations | $1.03 | $1.76 | $6.91 | $2.66 | $0.52 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.02 | ) | $— | $(0.08 | ) | $— | $— | |||||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.36 | ) | $(0.32 | ) | $(0.15 | ) | $(0.15 | ) | $— | |||||||||||
Net asset value, end of period (x) | $33.51 | $32.84 | $31.40 | $24.64 | $22.13 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.17 | 5.68 | 28.19 | 12.13 | 2.41 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.98 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Expenses after expense reductions (f) | 1.97 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Net investment income (loss) | 0.09 | (0.01 | ) | (0.02 | ) | 0.16 | 0.06 | |||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $27,384 | $26,118 | $24,395 | $18,799 | $20,797 | |||||||||||||||
Class C | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $31.60 | $30.22 | $23.75 | $21.37 | $20.87 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $(0.00 | )(w) | $(0.02 | ) | $0.04 | $0.01 | |||||||||||||
Net realized and unrealized gain (loss) | 0.95 | 1.70 | 6.66 | 2.53 | 0.49 | |||||||||||||||
Total from investment operations | $0.98 | $1.70 | $6.64 | $2.57 | $0.50 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.05 | ) | $— | $(0.10 | ) | $(0.04 | ) | $— | ||||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.39 | ) | $(0.32 | ) | $(0.17 | ) | $(0.19 | ) | $— | |||||||||||
Net asset value, end of period (x) | $32.19 | $31.60 | $30.22 | $23.75 | $21.37 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 3.17 | 5.70 | 28.15 | 12.17 | 2.40 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.98 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Expenses after expense reductions (f) | 1.97 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Net investment income (loss) | 0.08 | (0.00 | ) | (0.06 | ) | 0.17 | 0.07 | |||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $140,018 | $111,902 | $74,448 | $32,071 | $28,756 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class I | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $36.34 | $34.56 | $27.09 | $24.35 | $23.68 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.41 | $0.35 | $0.30 | $0.30 | $0.27 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.07 | 1.95 | 7.58 | 2.85 | 0.55 | |||||||||||||||
Total from investment operations | $1.48 | $2.30 | $7.88 | $3.15 | $0.82 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.20 | ) | $(0.34 | ) | $(0.26 | ) | $(0.15 | ) | ||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.68 | ) | $(0.52 | ) | $(0.41 | ) | $(0.41 | ) | $(0.15 | ) | ||||||||||
Net asset value, end of period (x) | $37.14 | $36.34 | $34.56 | $27.09 | $24.35 | |||||||||||||||
Total return (%) (r)(s)(x) | 4.17 | 6.77 | 29.44 | 13.26 | 3.47 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.98 | 0.98 | 1.04 | 1.09 | 1.12 | |||||||||||||||
Expenses after expense reductions (f) | 0.97 | 0.98 | 1.04 | 1.09 | 1.12 | |||||||||||||||
Net investment income | 1.11 | 0.99 | 0.98 | 1.18 | 1.08 | |||||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $671,087 | $681,259 | $638,111 | $356,027 | $281,561 | |||||||||||||||
Class R1 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $32.17 | $30.76 | $24.13 | $21.67 | $21.16 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.03 | $(0.00 | )(w) | $(0.00 | )(w) | $0.03 | $0.01 | |||||||||||||
Net realized and unrealized gain (loss) | 0.97 | 1.73 | 6.76 | 2.59 | 0.50 | |||||||||||||||
Total from investment operations | $1.00 | $1.73 | $6.76 | $2.62 | $0.51 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.03 | ) | $— | $(0.06 | ) | $(0.01 | ) | $— | ||||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.37 | ) | $(0.32 | ) | $(0.13 | ) | $(0.16 | ) | $— | |||||||||||
Net asset value, end of period (x) | $32.80 | $32.17 | $30.76 | $24.13 | $21.67 | |||||||||||||||
Total return (%) (r)(s)(x) | 3.14 | 5.70 | 28.17 | 12.23 | 2.41 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.98 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Expenses after expense reductions (f) | 1.97 | 1.98 | 2.04 | 2.09 | 2.12 | |||||||||||||||
Net investment income (loss) | 0.10 | (0.01 | ) | (0.01 | ) | 0.15 | 0.03 | |||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $3,546 | $3,776 | $3,718 | $2,968 | $3,581 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class R2 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $34.45 | $32.81 | $25.76 | $23.16 | $22.55 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.21 | $0.17 | $0.14 | $0.16 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.03 | 1.85 | 7.21 | 2.73 | 0.51 | |||||||||||||||
Total from investment operations | $1.24 | $2.02 | $7.35 | $2.89 | $0.65 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.16 | ) | $(0.06 | ) | $(0.23 | ) | $(0.14 | ) | $(0.04 | ) | ||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.50 | ) | $(0.38 | ) | $(0.30 | ) | $(0.29 | ) | $(0.04 | ) | ||||||||||
Net asset value, end of period (x) | $35.19 | $34.45 | $32.81 | $25.76 | $23.16 | |||||||||||||||
Total return (%) (r)(s)(x) | 3.67 | 6.24 | 28.82 | 12.71 | 2.90 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.48 | 1.48 | 1.54 | 1.59 | 1.62 | |||||||||||||||
Expenses after expense reductions (f) | 1.47 | 1.48 | 1.54 | 1.59 | 1.62 | |||||||||||||||
Net investment income | 0.59 | 0.49 | 0.48 | 0.65 | 0.58 | |||||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $56,978 | $57,258 | $54,726 | $30,799 | $21,832 | |||||||||||||||
Class R3 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $35.23 | $33.55 | $26.32 | $23.66 | $23.02 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.30 | $0.26 | $0.21 | $0.22 | $0.20 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.05 | 1.88 | 7.37 | 2.79 | 0.54 | |||||||||||||||
Total from investment operations | $1.35 | $2.14 | $7.58 | $3.01 | $0.74 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.26 | ) | $(0.14 | ) | $(0.28 | ) | $(0.20 | ) | $(0.10 | ) | ||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.60 | ) | $(0.46 | ) | $(0.35 | ) | $(0.35 | ) | $(0.10 | ) | ||||||||||
Net asset value, end of period (x) | $35.98 | $35.23 | $33.55 | $26.32 | $23.66 | |||||||||||||||
Total return (%) (r)(s)(x) | 3.93 | 6.49 | 29.11 | 12.99 | 3.21 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.23 | 1.23 | 1.29 | 1.34 | 1.37 | |||||||||||||||
Expenses after expense reductions (f) | 1.22 | 1.23 | 1.29 | 1.34 | 1.37 | |||||||||||||||
Net investment income | 0.84 | 0.74 | 0.67 | 0.91 | 0.83 | |||||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $105,192 | $90,864 | $62,218 | $21,664 | $13,294 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R4 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $35.59 | $33.87 | $26.55 | $23.88 | $23.22 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.40 | $0.35 | $0.31 | $0.31 | $0.25 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.06 | 1.89 | 7.42 | 2.77 | 0.56 | |||||||||||||||
Total from investment operations | $1.46 | $2.24 | $7.73 | $3.08 | $0.81 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.34 | ) | $(0.20 | ) | $(0.34 | ) | $(0.26 | ) | $(0.15 | ) | ||||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Total distributions declared to shareholders | $(0.68 | ) | $(0.52 | ) | $(0.41 | ) | $(0.41 | ) | $(0.15 | ) | ||||||||||
Net asset value, end of period (x) | $36.37 | $35.59 | $33.87 | $26.55 | $23.88 | |||||||||||||||
Total return (%) (r)(s)(x) | 4.20 | 6.74 | 29.47 | 13.23 | 3.50 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.98 | 0.98 | 1.04 | 1.09 | 1.12 | |||||||||||||||
Expenses after expense reductions (f) | 0.97 | 0.98 | 1.04 | 1.09 | 1.12 | |||||||||||||||
Net investment income | 1.11 | 0.99 | 1.02 | 1.23 | 1.04 | |||||||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | 16 | |||||||||||||||
Net assets at end of period (000 omitted) | $118,810 | $109,067 | $90,239 | $37,929 | $15,009 |
Class R5 | Years ended 10/31 | |||||||||||||||
2015 | 2014 | 2013 | 2012 (i) | |||||||||||||
Net asset value, beginning of period | $36.36 | $34.58 | $27.10 | $24.19 | ||||||||||||
Income (loss) from investment operations | ||||||||||||||||
Net investment income (d) | $0.44 | $0.42 | $0.08 | $0.05 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.08 | 1.90 | 7.81 | 2.86 | ||||||||||||
Total from investment operations | $1.52 | $2.32 | $7.89 | $2.91 | ||||||||||||
Less distributions declared to shareholders | ||||||||||||||||
From net investment income | $(0.37 | ) | $(0.22 | ) | $(0.34 | ) | $— | |||||||||
From net realized gain on investments | (0.34 | ) | (0.32 | ) | (0.07 | ) | — | |||||||||
Total distributions declared to shareholders | $(0.71 | ) | $(0.54 | ) | $(0.41 | ) | $— | |||||||||
Net asset value, end of period (x) | $37.17 | $36.36 | $34.58 | $27.10 | ||||||||||||
Total return (%) (r)(s)(x) | 4.29 | 6.84 | 29.50 | 12.03 | (n) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||
Expenses before expense reductions (f) | 0.88 | 0.90 | 0.95 | 1.04 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.88 | 0.90 | 0.95 | 1.04 | (a) | |||||||||||
Net investment income | 1.19 | 1.16 | 0.24 | 0.50 | (a) | |||||||||||
Portfolio turnover | 8 | 11 | 11 | 13 | ||||||||||||
Net assets at end of period (000 omitted) | $383,913 | $306,861 | $187,343 | $112 |
See Notes to Financial Statements
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Financial Highlights – continued
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(i) | For the period from the class inception, June 1, 2012, through the stated period end. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(t) | Total returns do not include any applicable sales charges. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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(1) Business and Organization
MFS Global Equity Fund (the fund) is a diversified series of MFS Series Trust VI (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) Significant Accounting Policies
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
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 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 as provided by a third-party pricing service on the market or exchange on which they are primarily traded. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. 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
26
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Notes to Financial Statements – continued
broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting 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 on a frequent basis 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
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Notes to Financial Statements – continued
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 October 31, 2015 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,187,534,861 | $— | $— | $1,187,534,861 | ||||||||||||
United Kingdom | 217,003,759 | — | — | 217,003,759 | ||||||||||||
Switzerland | 182,281,610 | — | — | 182,281,610 | ||||||||||||
France | 170,283,050 | — | — | 170,283,050 | ||||||||||||
Germany | 134,970,502 | — | — | 134,970,502 | ||||||||||||
Netherlands | 53,553,888 | — | — | 53,553,888 | ||||||||||||
Canada | 37,599,368 | — | — | 37,599,368 | ||||||||||||
Sweden | 34,997,222 | — | — | 34,997,222 | ||||||||||||
Japan | — | 30,736,263 | — | 30,736,263 | ||||||||||||
Other Countries | 77,529,159 | 16,432,977 | — | 93,962,136 | ||||||||||||
Mutual Funds | 57,078,182 | — | — | 57,078,182 | ||||||||||||
Total Investments | $2,152,831,601 | $47,169,240 | $— | $2,200,000,841 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $3,926,930 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $4,738,773 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co. (“Chase”), 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
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Notes to Financial Statements – continued
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. Chase provides the fund with indemnification against Borrower default. In the event of Borrower default, Chase 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, Chase assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, Chase 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 $21,041,185. The fair value of the fund’s investment securities on loan and a related liability of $21,864,600 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The collateral received 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 included in “Interest” income in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized
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Notes to Financial Statements – continued
gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the credit, for the year ended October 31, 2015, 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. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
10/31/15 | 10/31/14 | |||||||
Ordinary income (including any short-term capital gains) | $19,176,569 | $11,159,040 | ||||||
Long-term capital gains | 16,419,544 | 12,589,363 | ||||||
Total distributions | $35,596,113 | $23,748,403 |
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Notes to Financial Statements – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 10/31/15 | ||||
Cost of investments | $1,657,851,114 | |||
Gross appreciation | 595,997,641 | |||
Gross depreciation | (53,847,914 | ) | ||
Net unrealized appreciation (depreciation) | $542,149,727 | |||
Undistributed ordinary income | 17,308,747 | |||
Undistributed long-term capital gains | 22,979,761 | |||
Other temporary differences | (136,053 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Year ended 10/31/15 | Year ended 10/31/14 | Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||
Class A | $4,419,567 | $2,004,335 | $5,807,888 | $4,940,235 | ||||||||||||
Class B | 12,870 | — | 271,683 | 254,927 | ||||||||||||
Class C | 194,048 | — | 1,216,615 | 855,561 | ||||||||||||
Class I | 6,434,392 | 3,750,145 | 6,405,144 | 6,042,277 | ||||||||||||
Class R1 | 3,128 | — | 40,113 | 38,715 | ||||||||||||
Class R2 | 264,732 | 100,419 | 553,092 | 534,211 | ||||||||||||
Class R3 | 689,540 | 274,464 | 883,803 | 611,539 | ||||||||||||
Class R4 | 1,036,630 | 548,426 | 1,029,021 | 874,936 | ||||||||||||
Class R5 | 3,311,140 | 1,194,210 | 3,022,707 | 1,724,003 | ||||||||||||
Total | $16,366,047 | $7,871,999 | $19,230,066 | $15,876,404 |
(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:
First $1 billion of average daily net assets | 0.90 | % | ||
Next $1 billion of average daily net assets | 0.75 | % | ||
Average daily net assets in excess of $2 billion | 0.65 | % |
The investment adviser has agreed in writing to reduce its management fee to 0.60% of average daily net assets in excess of $5 billion. This written agreement will continue
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until modified by the fund’s Board of Trustees, but such agreement will continue at least until February 28, 2017. For the year ended October 31, 2015, the fund’s average daily net assets did not exceed $5 billion and therefore, the management fee was not reduced in accordance with this agreement. MFS has also agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended October 31, 2015, this management fee reduction amounted to $144,009, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended October 31, 2015 was equivalent to an annual effective rate of 0.81% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $300,509 for the year ended October 31, 2015, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Distribution Plan Fee Table:
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
Class A | — | 0.25% | 0.25% | 0.25% | $1,611,734 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 271,331 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 1,258,177 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 37,395 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 285,536 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 250,727 | |||||||||||||||
Total Distribution and Service Fees | $3,714,900 |
(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 October 31, 2015 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 MFD retains the 0.25% service fee except for accounts attributable to MFS or its affiliates’ seed money. For the year ended October 31, 2015, this rebate amounted to $25,236, $422, and $334 for Class A, Class B, and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder
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Notes to Financial Statements – continued
redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended October 31, 2015 were as follows:
Amount | ||||
Class A | $3,787 | |||
Class B | 29,125 | |||
Class C | 25,845 |
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 October 31, 2015, the fee was $210,497, which equated to 0.0099% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R5 shares do not incur sub-accounting fees. For the year ended October 31, 2015, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $1,813,203.
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 October 31, 2015 was equivalent to an annual effective rate of 0.0163% 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 for their services to the fund from MFS. 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 $1,151 and is included in “Independent Trustees’ compensation” in the Statement of Operations for the year ended October 31, 2015. The liability for deferred retirement benefits payable to certain independent Trustees under the DB plan amounted to $8,908 at October 31, 2015, and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and
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is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended October 31, 2015, the fee paid by the fund under this agreement was $8,245 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) Portfolio Securities
For the year ended October 31, 2015, purchases and sales of investments, other than short-term obligations, aggregated $282,329,842 and $161,293,354, respectively.
(5) Shares of Beneficial Interest
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 5,059,843 | $183,341,369 | 4,663,605 | $162,562,958 | ||||||||||||
Class B | 176,260 | 5,940,310 | 187,923 | 6,088,188 | ||||||||||||
Class C | 1,396,694 | 45,041,674 | 1,576,926 | 49,090,760 | ||||||||||||
Class I | 4,387,013 | 162,167,233 | 5,274,884 | 188,189,049 | ||||||||||||
Class R1 | 25,495 | 828,427 | 22,034 | 703,196 | ||||||||||||
Class R2 | 447,313 | 15,830,932 | 450,121 | 15,325,142 | ||||||||||||
Class R3 | 1,276,547 | 45,540,398 | 1,401,952 | 48,487,960 | ||||||||||||
Class R4 | 1,105,519 | 40,307,486 | 995,971 | 34,908,235 | ||||||||||||
Class R5 | 2,173,827 | 79,508,499 | 3,603,836 | 124,805,012 | ||||||||||||
16,048,511 | $578,506,328 | 18,177,252 | $630,160,500 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 268,489 | $9,270,927 | 189,505 | $6,263,145 | ||||||||||||
Class B | 8,395 | 269,968 | 7,859 | 242,225 | ||||||||||||
Class C | 34,793 | 1,074,416 | 22,188 | 657,882 | ||||||||||||
Class I | 313,226 | 11,066,278 | 257,058 | 8,688,558 | ||||||||||||
Class R1 | 1,374 | 43,241 | 1,282 | 38,715 | ||||||||||||
Class R2 | 22,548 | 758,050 | 18,364 | 590,958 | ||||||||||||
Class R3 | 45,870 | 1,573,343 | 26,979 | 886,003 | ||||||||||||
Class R4 | 58,602 | 2,027,616 | 42,989 | 1,423,362 | ||||||||||||
Class R5 | 179,277 | 6,333,847 | 86,338 | 2,918,213 | ||||||||||||
932,574 | $32,417,686 | 652,562 | $21,709,061 |
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Notes to Financial Statements – continued
Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (3,334,108 | ) | $(119,978,256 | ) | (3,323,643 | ) | $(116,412,180 | ) | ||||||||
Class B | (162,704 | ) | (5,462,671 | ) | (177,551 | ) | (5,757,489 | ) | ||||||||
Class C | (622,612 | ) | (19,989,473 | ) | (521,323 | ) | (16,241,826 | ) | ||||||||
Class I | (5,382,286 | ) | (199,648,172 | ) | (5,247,078 | ) | (188,139,144 | ) | ||||||||
Class R1 | (36,157 | ) | (1,189,480 | ) | (26,792 | ) | (853,045 | ) | ||||||||
Class R2 | (512,799 | ) | (18,082,643 | ) | (474,131 | ) | (16,153,925 | ) | ||||||||
Class R3 | (978,111 | ) | (34,488,970 | ) | (704,159 | ) | (24,438,381 | ) | ||||||||
Class R4 | (961,652 | ) | (35,050,080 | ) | (639,341 | ) | (22,390,341 | ) | ||||||||
Class R5 | (464,819 | ) | (17,239,095 | ) | (668,591 | ) | (23,605,374 | ) | ||||||||
(12,455,248 | ) | $(451,128,840 | ) | (11,782,609 | ) | $(413,991,705 | ) | |||||||||
Net change | ||||||||||||||||
Class A | 1,994,224 | $72,634,040 | 1,529,467 | $52,413,923 | ||||||||||||
Class B | 21,951 | 747,607 | 18,231 | 572,924 | ||||||||||||
Class C | 808,875 | 26,126,617 | 1,077,791 | 33,506,816 | ||||||||||||
Class I | (682,047 | ) | (26,414,661 | ) | 284,864 | 8,738,463 | ||||||||||
Class R1 | (9,288 | ) | (317,812 | ) | (3,476 | ) | (111,134 | ) | ||||||||
Class R2 | (42,938 | ) | (1,493,661 | ) | (5,646 | ) | (237,825 | ) | ||||||||
Class R3 | 344,306 | 12,624,771 | 724,772 | 24,935,582 | ||||||||||||
Class R4 | 202,469 | 7,285,022 | 399,619 | 13,941,256 | ||||||||||||
Class R5 | 1,888,285 | 68,603,251 | 3,021,583 | 104,117,851 | ||||||||||||
4,525,837 | $159,795,174 | 7,047,205 | $237,877,856 |
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication 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 higher of the Overnight Federal Reserve funds rate or daily one month LIBOR 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 at the end of each calendar quarter. 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 a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended October 31, 2015, the fund’s commitment fee and interest expense were $7,049 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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Notes to Financial Statements – continued
(7) Transactions in Underlying Affiliated Funds-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 fund assumes the following to be an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 15,193,238 | 246,740,593 | (226,720,249 | ) | 35,213,582 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $26,152 | $35,213,582 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust VI and Shareholders of MFS Global Equity Fund:
We have audited the accompanying statement of assets and liabilities of MFS Global Equity Fund (the Fund) (one of the series constituting MFS Series Trust VI), including the portfolio of investments, as of October 31, 2015, 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 and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2015, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of MFS Global Equity Fund (one of the series constituting MFS Series Trust VI) at October 31, 2015, 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 periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 15, 2015
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of December 1, 2015, 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) | Principal the Past Five Years | Other Directorships (j) | ||||
INTERESTED TRUSTEES | ||||||||
Robert J. Manning (k) (age 52) | Trustee | February 2004 | Massachusetts Financial Services Company, Chairman, Co-Chief Executive Officer and Director; Chief Investment Officer (until 2010) | N/A | ||||
Robin A. Stelmach (k) (age 54) | Trustee and President | January 2014 | Massachusetts Financial Services Company, Executive Vice President and Chief Operating Officer | N/A | ||||
INDEPENDENT TRUSTEES | ||||||||
David H. Gunning (age 73) | Trustee and Chair of Trustees | January 2004 | Private investor | Lincoln Electric Holdings, Inc., Director; Development Alternatives, Inc., Director/Non-Executive Chairman | ||||
Steven E. Buller (age 64) | Trustee | February 2014 | Chairman, Financial Accounting Standards Advisory Council; Standing Advisory Group, Public Company Accounting Oversight Board, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A | ||||
Robert E. Butler (age 74) | Trustee | January 2006 | Consultant – investment company industry regulatory and compliance matters | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Maureen R. Goldfarb (age 60) | Trustee | January 2009 | Private investor | N/A | ||||
William R. Gutow (age 74) | Trustee | December 1993 | Private investor and real estate consultant; Capitol Entertainment Management Company (video franchise), Vice Chairman | Texas Donuts, Vice Chairman (until 2010) | ||||
Michael Hegarty (age 70) | Trustee | December 2004 | Private investor | Rouse Properties Inc., Director; Capmark Financial Group Inc., Director | ||||
John P. Kavanaugh (age 61) | Trustee | January 2009 | Private investor | N/A | ||||
Maryanne L. Roepke (age 59) | Trustee | May 2014 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | ||||
Laurie J. Thomsen (age 58) | Trustee | March 2005 | Private investor; New Profit, Inc. (venture philanthropy), Executive Partner (until 2010) | The Travelers Companies, Director; Dycom Industries, Inc. | ||||
Robert W. Uek (age 74) | Trustee | January 2006 | Consultant to investment company industry | N/A | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 41) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Kino Clark (k) (age 47) | Assistant Treasurer | January 2012 | Massachusetts Financial Services Company, Vice President | N/A | ||||
Kristin V. Collins (k) (age 42) | Assistant Secretary and Assistant Clerk | September 2015 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Thomas H. Connors (k) (age 56) | Assistant Secretary and Assistant Clerk | September 2012 | Massachusetts Financial Services Company, Vice President and Senior Counsel; Deutsche Investment Management Americas Inc. (financial service provider), Director and Senior Counsel (until 2012) | N/A | ||||
Ethan D. Corey (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
David L. DiLorenzo (k) (age 47) | Treasurer | July 2005 | Massachusetts Financial Services Company, Senior Vice President | N/A | ||||
Brian E. Langenfeld (k) (age 42) | Assistant Secretary and Assistant Clerk | June 2006 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kenneth Paek (k) (age 41) | Assistant Treasurer | February 2015 | Massachusetts Financial Services Company, Vice President; Cohen & Steers, Vice President/Head of Fund Administration (until 2014) | N/A | ||||
Susan A. Pereira (k) (age 45) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kasey L. Phillips (k) (age 44) | Assistant Treasurer | September 2012 | Massachusetts Financial Services Company, Vice President; Wells Fargo Funds Management, LLC, Senior Vice President, Fund Treasurer (until 2012) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Mark N. Polebaum (k) (age 63) | Secretary and Clerk | January 2006 | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary | N/A | ||||
Matthew A. Stowe (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2014 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Frank L. Tarantino (age 71) | Independent Senior Officer | June 2004 | Tarantino LLC (provider of compliance services), Principal | N/A | ||||
Richard S. Weitzel (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2007 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
Martin J. Wolin (k) (age 48) | Chief Compliance Officer | July 2015 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) | N/A | ||||
James O. Yost (k) (age 55) | Deputy Treasurer | September 1990 | Massachusetts Financial Services Company, Senior Vice President | N/A |
(h) | Date first appointed to serve as Trustee/officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. Prior to January 2012, Messrs. DiLorenzo and Yost served as Assistant Treasurers of the Funds. Ms. Stelmach was appointed as President of the Funds as of October 1, 2014. |
(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
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Trustees and Officers – continued
Each Trustee (except Ms. Stelmach, Mr. Buller and Ms. Roepke) 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. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Messrs. Butler, Kavanaugh, Uek and Mses. Thomsen and Roepke are members of the Trust’s Audit Committee.
Each of the Fund’s Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of December 1, 2015, the Trustees served as board members of 138 funds within the MFS Family of Funds.
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 Managers | ||
David Mannheim Roger Morley |
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2015 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by the MFS Funds’ Independent Senior Officer, a senior officer appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Lipper Inc., an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2014 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Lipper Inc. on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Lipper Inc. (the “Lipper expense group”), (iii) information provided by MFS on the advisory fees of comparable portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to
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Board Review of Investment Advisory Agreement – continued
the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Lipper Inc. was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Class A shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2014, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class A shares was in the 1st quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class A shares was in the 2nd quintile for the one-year period and the 1st quintile for the five-year period ended December 31, 2014 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class A shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Lipper Inc. The Trustees considered that, according to the Lipper data (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate was approximately at the Lipper expense group median and the Fund’s total expense ratio was lower than the Lipper expense group median.
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Board Review of Investment Advisory Agreement – continued
The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is subject to contractual breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $1 billion and $2 billion, and that MFS has agreed in writing to further reduce its advisory fee rate on the Fund’s average daily net assets over $5 billion, which may not be changed without the Trustees’ approval. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoints and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.
The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
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Board Review of Investment Advisory Agreement – continued
The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund’s portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2015.
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com 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 without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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 by visiting the “Market Commentary” and “Announcements” sub sections in the “Market Outlooks” section of mfs.com or by clicking on the fund’s name under “Mutual Funds” in the “Products” section of mfs.com.
FEDERAL TAX INFORMATION (unaudited)
The fund will notify shareholders of amounts for use in preparing 2015 income tax forms in January 2016. 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 $23,205,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 76.80% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
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rev. 3/11
| WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
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 and 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 | ||
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• MFS does not share with nonaffiliates so they can market to you. | |
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• MFS doesn’t jointly market. |
Other important information | ||
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Table of Contents
ANNUAL REPORT
October 31, 2015
MFS® GLOBAL TOTAL RETURN FUND
MWT-ANN
Table of Contents
MFS® GLOBAL TOTAL RETURN FUND
The report is prepared for the general information of shareholders.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Table of Contents
Dear Shareholders:
The global economy remains vulnerable as central banks continue to play a major role in supporting growth.
Even the resilient U.S. economy has had slower growth, as a strong U.S. dollar and weak overseas markets have hurt exporters. However, robust consumer demand and a recovering housing market have aided the domestic economy, fueled by cheap gasoline and an improving labor market.
China’s transition to a consumer-based, slower-growth economy has weighed on many commodity-exporting nations. And concerns about weakness in China have eroded investor and business confidence around the world. Meanwhile, rising geopolitical concerns will weigh on the eurozone, which is still reliant on the European Central Bank’s support.
As markets have become more focused on short-term trends in recent years, we believe it’s important for investors to lengthen their investment time horizon. At MFS®, we don’t trade on headlines or trends; we invest for the long term.
We believe that this approach, coupled with the professional guidance of a financial advisor, will help you reach your investment goals.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
December 15, 2015
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure (i)
Top ten holdings (i) | ||||
Government of Japan, 1.1%, 6/20/20 | 1.9% | |||
Novartis AG | 1.5% | |||
Philip Morris International, Inc. | 1.1% | |||
Nestle S.A. | 1.1% | |||
Johnson & Johnson | 1.0% | |||
KDDI Corp. | 1.0% | |||
Verizon Communications, Inc. | 0.9% | |||
Republic of Italy, 3.75%, 3/01/21 | 0.9% | |||
3M Co. | 0.9% | |||
U.S. Treasury Note 2 yr Future - Dec 31 15 | (1.0)% | |||
Composition including fixed income credit quality (a)(i) | ||||
AAA | 4.5% | |||
AA | 4.2% | |||
A | 9.0% | |||
BBB | 13.4% | |||
U.S. Government | 1.7% | |||
Federal Agencies | 2.3% | |||
Not Rated | (0.9)% | |||
Non-Fixed Income | 59.4% | |||
Cash & Cash Equivalents | 5.5% | |||
Other | 0.9% |
Equity sectors | ||||
Financial Services | 11.1% | |||
Consumer Staples | 10.7% | |||
Health Care | 8.4% | |||
Utilities & Communications | 5.1% | |||
Energy | 3.9% | |||
Industrial Goods & Services | 3.9% | |||
Basic Materials | 3.7% | |||
Technology | 3.7% | |||
Special Products & Services | 2.7% | |||
Leisure | 2.1% | |||
Retailing | 1.8% | |||
Autos & Housing | 1.2% | |||
Transportation | 1.1% | |||
Fixed income sectors (i) | ||||
Non-U.S. Government Bonds | 16.2% | |||
Investment Grade Corporates | 11.6% | |||
Mortgage-Backed Securities | 2.2% | |||
Emerging Markets Bonds | 2.0% | |||
Commercial Mortgage-Backed Securities | 1.1% | |||
Collateralized Debt Obligations | 0.4% | |||
U.S. Treasury Securities | 0.4% | |||
Asset-Backed Securities | 0.2% | |||
U.S. Government Agencies | 0.1% | |||
High Yield Corporates (o) | 0.0% |
2
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Portfolio Composition – continued
Issuer country weightings (i)(x) | ||||
United States | 48.5% | |||
Japan | 10.0% | |||
United Kingdom | 9.0% | |||
Switzerland | 4.6% | |||
Germany | 3.7% | |||
France | 3.7% | |||
Italy | 2.8% | |||
Canada | 2.7% | |||
Spain | 2.3% | |||
Other Countries | 12.7% |
Currency exposure weightings (i)(y) | ||||
United States Dollar | 49.8% | |||
Euro | 16.0% | |||
Japanese Yen | 10.9% | |||
British Pound Sterling | 8.8% | |||
Swiss Franc | 4.7% | |||
Canadian Dollar | 2.8% | |||
Hong Kong Dollar | 1.2% | |||
Australian Dollar | 1.2% | |||
Swedish Krona | 1.1% | |||
Other Currencies | 3.5% |
(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. 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, including fixed income futures contracts, which have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and commodities. The fund may not hold all of these instruments. The fund is not rated by these agencies. |
(i) | For purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts. |
(o) | Less than 0.1%. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents and Other. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents and Other. |
Where the fund holds convertible bonds, these 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 currency derivatives and/or any offsets to derivative positions.
Percentages are based on net assets as of 10/31/15.
The portfolio is actively managed and current holdings may be different.
3
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Summary of Results
For the twelve months ended October 31, 2015, Class A shares of the MFS Global Total Return Fund (“fund”) provided a total return of 0.20%, at net asset value. This compares with returns of 2.33% and –3.07% for the fund’s benchmarks, the MSCI World Index and the Barclays Global Aggregate Bond Index (“Barclays Index”), respectively. The fund’s other benchmark, the MFS Global Total Return Blended Index (“Blended Index”), generated a total return of 0.36%. The Blended Index reflects the blended returns of the equity and fixed income market indices, with percentage allocations to each index designed to resemble the equity and fixed income allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.
Market Environment
Sluggish global growth weighed on both developed and emerging market (“EM”) economies during the reporting period. EM economies have been particularly lackluster. While the US Federal Reserve appears ready to tighten monetary conditions, other large developed economies continued to embrace accommodative monetary policies, particularly the European Central Bank, which instituted a large quantitative easing program in January of 2015. Poor policy management by the Chinese government roiled global markets over the summer, beginning with the poorly executed response to the stock market’s boom and bust and then the confusing decision to devalue the renminbi in August. China subsequently stabilized the currency and ramped up a wide range of monetary and fiscal measures to stimulate the economy and bolster sentiment.
During the second half of the reporting period, the US faced an earnings recession caused primarily by the sharp decline in the prices of oil and other commodities. Earnings contractions were concentrated primarily in the energy, materials and industrial sectors. An additional headwind for earnings was the sharp rise in the US dollar over the period. Exports were crimped by the dollar’s strength and falling demand in emerging markets. Consumer spending held up well during the period amid a modest increase in real wages and a tailwind from falling gasoline prices. Demand for autos reached near-record territory late in the period. In emerging markets, two key factors weighed on economies and asset prices: weaker Chinese growth, and the resulting decline in commodity prices, in addition to prospects for higher US interest rates. Structural factors like floating exchange rates and fiscal buffers partially offset these cyclical headwinds.
Detractors from Performance
Within the equity portion of the fund, an underweight position and to a lesser extent stock selection in the technology sector detracted from performance relative to the MSCI World Index. Not holding shares of multinational conglomerate Alphabet, personal electronics maker Apple and software company Microsoft hampered relative performance during the reporting period. Shares of Alphabet spiked during the third quarter of 2015 after the company reported earnings results that were above consensus estimates. YouTube and mobile search were among key top-line growth
4
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Management Review – continued
drivers while tight expense discipline also aided the results. An overweight position in telecommunications equipment provider LM Ericsson Telephone Co. (h) (Sweden) and an underweight position in social networking service provider Facebook (h) also weakened relative returns.
An underweight position and stock selection in the retailing sector also held back relative performance. Not holding shares of internet retailer Amazon.com hurt relative results. The company reported strong quarterly results supported by improved growth in its remote computing segment (Amazon Web Services).
Elsewhere, overweight positions in global energy and petrochemicals company Royal Dutch Shell (United Kingdom), communications and entertainment solutions provider TDC (Denmark) and financial services firm DNB NOR ASA (h) (Norway), and holding mailroom equipment company Neopost (b) (France), detracted from relative performance.
Within the fixed income portion of the fund, greater exposure to bonds in the “BBB” rated (r) credit quality segments were primary detractors from performance relative to the Barclays Index. Additionally, yield curve (y) positioning in the US, particularly the fund’s lesser exposures to shifts in the long end (centered around maturities of 10 or more years) of the yield curve, hurt relative performance.
Contributors to Performance
Within the equity portion of the fund, the combination of strong stock selection and an overweight position in the consumer staples sector contributed to performance relative to the MSCI World Index. An overweight position in household and industrial products manufacturer Kao (Japan), Japan-based cosmetic products manufacturer Kose and cigarette manufacturer Reynolds American supported relative returns. Shares of Kao appreciated as the company reported record profits early in the period driven by its Beauty Care and Human Health Care segments.
The combination of stock selection and an underweight position in the energy sector was another positive factor for relative results. However, there were no individual stocks within this sector that were among the largest relative contributors during the reporting period.
Elsewhere, overweight positions in management consulting firm Accenture, German real estate company Deutsche Wohnen, telecommunications company KDDI (Japan), retailer Target Corporation, IT services firm Nomura Research Institute (Japan), drugstore retailer CVS Health and pharmaceutical giant Pfizer also bolstered relative performance. Shares of Accenture reacted positively to strong quarterly results throughout the period which demonstrated revenue growth and margin improvement. The company’s revenue strength was broad-based and was bolstered by market share gains.
5
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Management Review – continued
Within the fixed income portion of the fund, the return from yield, which was greater than that of the Barclays Index, was a key contributor to relative performance. The fund’s greater exposure to the finance sector further benefited relative returns.
Respectfully,
Nevin Chitkara | Pablo De La Mata | Pilar Gomez-Bravo | Steven Gorham | |||
Portfolio Manager | Portfolio Manager | Portfolio Manager | Portfolio Manager | |||
Richard Hawkins | Robert Persons | Jonathan Sage | Robert Spector | |||
Portfolio Manager | Portfolio Manager | Portfolio Manager | Portfolio Manager | |||
Benjamin Stone | Erik Weisman | |||||
Portfolio Manager | Portfolio Manager |
(b) | Security is not a benchmark constituent. |
(h) | Security was not held in the portfolio at period end |
(r) | Bonds rated “BBB”, “Baa”, or higher are considered investment grade; bonds rated “BB”, “Ba”, or below are considered non-investment grade. The source for bond quality ratings is Moody’s Investors Service, Standard & Poor’s and Fitch, Inc. and are applied using 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. Ratings are shown in the S&P and Fitch scale (e.g., AAA). For securities which are not rated by any of the three agencies, the security is considered Not Rated. |
(y) | A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type. A normal yield curve is upward-sloping, with short term-rates lower than long term rates. |
Note to Shareholders: Effective December 1, 2014, Jonathan Sage replaced Barnaby Wiener as a Portfolio Manager of the Fund. Effective October 31, 2015, Robert Spector is also a Portfolio Manager of the Fund.
The views expressed in this report are those of the portfolio managers only through the end
of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
6
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PERFORMANCE SUMMARY THROUGH 10/31/15
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
7
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Performance Summary – continued
Total Returns through 10/31/15
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 9/04/90 | 0.20% | 6.73% | 6.31% | N/A | |||||||||
B | 9/07/93 | (0.53)% | 5.94% | 5.55% | N/A | |||||||||
C | 1/03/94 | (0.53)% | 5.94% | 5.55% | N/A | |||||||||
I | 1/02/97 | 0.45% | 7.00% | 6.61% | N/A | |||||||||
R1 | 4/01/05 | (0.55)% | 5.95% | 5.52% | N/A | |||||||||
R2 | 10/31/03 | (0.03)% | 6.47% | 6.04% | N/A | |||||||||
R3 | 4/01/05 | 0.19% | 6.74% | 6.31% | N/A | |||||||||
R4 | 4/01/05 | 0.45% | 7.01% | 6.59% | N/A | |||||||||
R5 | 6/01/12 | 0.56% | N/A | N/A | 8.66% | |||||||||
Comparative benchmarks | ||||||||||||||
MSCI World Index (f) | 2.33% | 9.76% | 6.38% | N/A | ||||||||||
MFS Global Total Return Blended Index (f)(w) | 0.36% | 6.19% | 5.67% | N/A | ||||||||||
Barclays Global Aggregate Bond Index (f) | (3.07)% | 0.61% | 3.89% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With initial Sales Charge (5.75%) | (5.56)% | 5.48% | 5.68% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (4.44)% | 5.62% | 5.55% | N/A | ||||||||||
C With CDSC (1% for 12 months) (v) | (1.51)% | 5.94% | 5.55% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R5 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. |
(w) | As of October 31, 2015, the MFS Global Total Return Blended Index was comprised of 60% MSCI World Index and 40% Barclays Global Aggregate Bond Index. |
Benchmark Definitions
Barclays Global Aggregate Bond Index – provides a broad-based measure of the global investment-grade fixed income markets. The three major components of this index are the U.S. Aggregate, the Pan-European Aggregate, and the Asian-Pacific Aggregate
8
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Performance Summary – continued
Indices. The index also includes Eurodollar and Euro-Yen corporate bonds, Canadian government, agency and corporate securities, and USD investment grade 144A securities.
MSCI World Index – a market capitalization-weighted index that is designed to measure equity market performance in the global developed markets.
It is not possible to invest directly in an index.
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.
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Fund expenses borne by the shareholders during the period,
May 1, 2015 through October 31, 2015
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 May 1, 2015 through October 31, 2015.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
10
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Expense Table – continued
Share Class | Annualized Ratio | Beginning Account Value 5/01/15 | Ending Account Value | Expenses Paid During Period (p) 5/01/15-10/31/15 | ||||||||||||||
A | Actual | 1.13% | $1,000.00 | $977.56 | $5.63 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.51 | $5.75 | ||||||||||||||
B | Actual | 1.88% | $1,000.00 | $973.94 | $9.35 | |||||||||||||
Hypothetical (h) | 1.88% | $1,000.00 | $1,015.73 | $9.55 | ||||||||||||||
C | Actual | 1.88% | $1,000.00 | $973.61 | $9.35 | |||||||||||||
Hypothetical (h) | 1.88% | $1,000.00 | $1,015.73 | $9.55 | ||||||||||||||
I | Actual | 0.88% | $1,000.00 | $978.63 | $4.39 | |||||||||||||
Hypothetical (h) | 0.88% | $1,000.00 | $1,020.77 | $4.48 | ||||||||||||||
R1 | Actual | 1.88% | $1,000.00 | $973.51 | $9.35 | |||||||||||||
Hypothetical (h) | 1.88% | $1,000.00 | $1,015.73 | $9.55 | ||||||||||||||
R2 | Actual | 1.38% | $1,000.00 | $976.12 | $6.87 | |||||||||||||
Hypothetical (h) | 1.38% | $1,000.00 | $1,018.25 | $7.02 | ||||||||||||||
R3 | Actual | 1.13% | $1,000.00 | $977.41 | $5.63 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.51 | $5.75 | ||||||||||||||
R4 | Actual | 0.88% | $1,000.00 | $978.86 | $4.39 | |||||||||||||
Hypothetical (h) | 0.88% | $1,000.00 | $1,020.77 | $4.48 | ||||||||||||||
R5 | Actual | 0.77% | $1,000.00 | $979.17 | $3.84 | |||||||||||||
Hypothetical (h) | 0.77% | $1,000.00 | $1,021.32 | $3.92 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
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10/31/15
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Common Stocks - 58.5% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Aerospace - 2.0% | ||||||||
Cobham PLC | 604,154 | $ | 2,584,516 | |||||
Honeywell International, Inc. | 91,325 | 9,432,046 | ||||||
Lockheed Martin Corp. | 51,811 | 11,389,612 | ||||||
United Technologies Corp. | 67,183 | 6,611,479 | ||||||
|
| |||||||
$ | 30,017,653 | |||||||
Airlines - 0.1% | ||||||||
Air Canada (a) | 253,241 | $ | 2,083,874 | |||||
Alcoholic Beverages - 1.3% | ||||||||
AmBev S.A., ADR | 455,858 | $ | 2,220,028 | |||||
Heineken N.V. | 104,421 | 9,544,383 | ||||||
Pernod Ricard S.A. | 68,116 | 8,029,683 | ||||||
|
| |||||||
$ | 19,794,094 | |||||||
Apparel Manufacturers - 0.2% | ||||||||
Li & Fung Ltd. | 3,990,000 | $ | 3,221,020 | |||||
Automotive - 1.0% | ||||||||
General Motors Co. | 84,259 | $ | 2,941,482 | |||||
Johnson Controls, Inc. | 75,522 | 3,412,084 | ||||||
Magna International, Inc. | 100,362 | 5,292,875 | ||||||
USS Co. Ltd. | 195,500 | 3,445,344 | ||||||
|
| |||||||
$ | 15,091,785 | |||||||
Biotechnology - 0.1% | ||||||||
Gilead Sciences, Inc. | 15,381 | $ | 1,663,148 | |||||
Broadcasting - 1.2% | ||||||||
Fuji Television Network, Inc. | 66,600 | $ | 791,207 | |||||
Nippon Television Holdings, Inc. | 120,300 | 2,079,343 | ||||||
Omnicom Group, Inc. | 83,127 | 6,227,875 | ||||||
ProSiebenSat.1 Media SE | 72,756 | 3,935,502 | ||||||
Time Warner, Inc. | 45,521 | 3,429,552 | ||||||
Viacom, Inc., “B” | 34,970 | 1,724,371 | ||||||
|
| |||||||
$ | 18,187,850 | |||||||
Brokerage & Asset Managers - 0.6% | ||||||||
BlackRock, Inc. | 13,843 | $ | 4,872,321 | |||||
Computershare Ltd. | 142,215 | 1,096,280 |
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Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Brokerage & Asset Managers - continued | ||||||||
Daiwa Securities Group, Inc. | 265,000 | $ | 1,807,269 | |||||
Franklin Resources, Inc. | 42,240 | 1,721,702 | ||||||
|
| |||||||
$ | 9,497,572 | |||||||
Business Services - 2.7% | ||||||||
Accenture PLC, “A” | 109,728 | $ | 11,762,842 | |||||
Amadeus IT Holding S.A. | 128,756 | 5,487,894 | ||||||
Ashtead Group PLC | 162,692 | 2,508,060 | ||||||
Bunzl PLC | 173,593 | 4,974,888 | ||||||
Compass Group PLC | 426,352 | 7,354,787 | ||||||
Nomura Research Institute Ltd. | 164,890 | 6,720,722 | ||||||
SGS S.A. | 1,439 | 2,742,755 | ||||||
|
| |||||||
$ | 41,551,948 | |||||||
Cable TV - 0.6% | ||||||||
Comcast Corp., “Special A” | 134,262 | $ | 8,419,570 | |||||
Chemicals - 2.6% | ||||||||
3M Co. | 82,903 | $ | 13,033,181 | |||||
Givaudan S.A. | 2,173 | 3,891,153 | ||||||
LyondellBasell Industries N.V., “A” | 89,844 | 8,347,406 | ||||||
Monsanto Co. | 18,305 | 1,706,392 | ||||||
Orica Ltd. | 127,574 | 1,499,235 | ||||||
PPG Industries, Inc. | 84,029 | 8,760,864 | ||||||
Yara International ASA | 45,500 | 2,065,419 | ||||||
|
| |||||||
$ | 39,303,650 | |||||||
Computer Software - 0.6% | ||||||||
Aspen Technology, Inc. (a) | 34,999 | $ | 1,448,609 | |||||
Cadence Design Systems, Inc. (a) | 107,992 | 2,399,582 | ||||||
Oracle Corp. | 123,148 | 4,783,068 | ||||||
|
| |||||||
$ | 8,631,259 | |||||||
Computer Software - Systems - 0.4% | ||||||||
International Business Machines Corp. | 38,347 | $ | 5,371,648 | |||||
Construction - 0.3% | ||||||||
Geberit AG | 7,515 | $ | 2,427,578 | |||||
Stanley Black & Decker, Inc. | 13,387 | 1,418,754 | ||||||
|
| |||||||
$ | 3,846,332 | |||||||
Consumer Products - 2.6% | ||||||||
Kao Corp. | 218,900 | $ | 11,180,625 | |||||
Kobayashi Pharmaceutical Co. Ltd. | 41,100 | 3,183,696 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Consumer Products - continued | ||||||||
Kose Corp. | 23,600 | $ | 2,289,851 | |||||
Procter & Gamble Co. | 120,896 | 9,234,036 | ||||||
Reckitt Benckiser Group PLC | 77,916 | 7,620,115 | ||||||
Svenska Cellulosa Aktiebolaget | 215,046 | 6,342,983 | ||||||
|
| |||||||
$ | 39,851,306 | |||||||
Containers - 0.5% | ||||||||
Brambles Ltd. | 749,575 | $ | 5,548,337 | |||||
Crown Holdings, Inc. (a) | 24,549 | 1,302,079 | ||||||
|
| |||||||
$ | 6,850,416 | |||||||
Electrical Equipment - 1.5% | ||||||||
Danaher Corp. | 50,434 | $ | 4,705,997 | |||||
Legrand S.A. | 68,568 | 3,765,516 | ||||||
Pentair PLC | 24,165 | 1,351,307 | ||||||
Siemens AG | 79,255 | 7,974,478 | ||||||
Spectris PLC | 81,525 | 2,095,068 | ||||||
Tyco International PLC | 92,216 | 3,360,351 | ||||||
|
| |||||||
$ | 23,252,717 | |||||||
Electronics - 2.2% | ||||||||
Analog Devices, Inc. | 33,367 | $ | 2,006,024 | |||||
Halma PLC | 218,980 | 2,577,420 | ||||||
Hirose Electric Co. Ltd. | 24,445 | 2,949,167 | ||||||
NVIDIA Corp. | 106,110 | 3,010,341 | ||||||
Samsung Electronics Co. Ltd. | 3,964 | 4,748,465 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 395,170 | 8,677,933 | ||||||
Texas Instruments, Inc. | 174,906 | 9,920,668 | ||||||
|
| |||||||
$ | 33,890,018 | |||||||
Energy - Independent - 1.0% | ||||||||
Cairn Energy PLC (a) | 382,784 | $ | 885,150 | |||||
EOG Resources, Inc. | 23,681 | 2,033,014 | ||||||
Occidental Petroleum Corp. | 47,494 | 3,540,203 | ||||||
Valero Energy Corp. | 124,339 | 8,196,427 | ||||||
|
| |||||||
$ | 14,654,794 | |||||||
Energy - Integrated - 2.5% | ||||||||
Chevron Corp. | 37,479 | $ | 3,406,092 | |||||
China Petroleum & Chemical Corp. | 5,864,000 | 4,229,247 | ||||||
Exxon Mobil Corp. | 130,448 | 10,793,268 | ||||||
OAO Gazprom, ADR | 359,856 | 1,514,994 | ||||||
Royal Dutch Shell PLC, “A” | 340,857 | 8,880,361 | ||||||
Royal Dutch Shell PLC, “B” | 169,991 | 4,454,988 |
14
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Energy - Integrated - continued | ||||||||
Suncor Energy, Inc. | 87,874 | $ | 2,614,850 | |||||
TOTAL S.A. | 51,231 | 2,486,960 | ||||||
|
| |||||||
$ | 38,380,760 | |||||||
Engineering - Construction - 0.1% | ||||||||
Bouygues | 38,930 | $ | 1,475,425 | |||||
Food & Beverages - 3.0% | ||||||||
Bunge Ltd. | 34,156 | $ | 2,492,022 | |||||
Danone S.A. | 155,813 | 10,864,654 | ||||||
General Mills, Inc. | 202,861 | 11,788,253 | ||||||
Nestle S.A. | 209,323 | 16,009,731 | ||||||
Tyson Foods, Inc., “A” | 107,812 | 4,782,540 | ||||||
|
| |||||||
$ | 45,937,200 | |||||||
Food & Drug Stores - 1.0% | ||||||||
Alimentation Couche-Tard, Inc. | 51,564 | $ | 2,218,167 | |||||
CVS Health Corp. | 114,548 | 11,315,051 | ||||||
Empire Co. Ltd., “A” | 55,257 | 1,157,456 | ||||||
|
| |||||||
$ | 14,690,674 | |||||||
Gaming & Lodging - 0.1% | ||||||||
Sands China Ltd. | 293,600 | $ | 1,053,882 | |||||
General Merchandise - 0.5% | ||||||||
Target Corp. | 107,437 | $ | 8,291,988 | |||||
Health Maintenance Organizations - 0.2% | ||||||||
Anthem, Inc. | 20,242 | $ | 2,816,674 | |||||
Insurance - 3.7% | ||||||||
ACE Ltd. | 29,274 | $ | 3,323,770 | |||||
Aon PLC | 55,542 | 5,182,624 | ||||||
Delta Lloyd N.V. | 46,484 | 367,014 | ||||||
Everest Re Group Ltd. | 10,802 | 1,922,432 | ||||||
Fairfax Financial Holdings Ltd. | 13,300 | 6,549,507 | ||||||
Hiscox Ltd. | 145,940 | 2,176,692 | ||||||
MetLife, Inc. | 167,824 | 8,454,973 | ||||||
Prudential Financial, Inc. | 104,525 | 8,623,313 | ||||||
Suncorp Group Ltd. | 229,765 | 2,131,053 | ||||||
Swiss Re Ltd. | 38,338 | 3,564,431 | ||||||
Travelers Cos., Inc. | 80,688 | 9,108,868 | ||||||
Validus Holdings Ltd. | 60,138 | 2,664,113 | ||||||
Zurich Insurance Group AG | 8,569 | 2,265,243 | ||||||
|
| |||||||
$ | 56,334,033 |
15
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Machinery & Tools - 0.3% | ||||||||
Illinois Tool Works, Inc. | 35,245 | $ | 3,240,425 | |||||
Neopost S.A. | 21,690 | 539,757 | ||||||
|
| |||||||
$ | 3,780,182 | |||||||
Major Banks - 3.8% | ||||||||
Bank of New York Mellon Corp. | 151,532 | $ | 6,311,308 | |||||
BNP Paribas | 22,338 | 1,357,406 | ||||||
BOC Hong Kong Holdings Ltd. | 1,136,000 | 3,624,671 | ||||||
Goldman Sachs Group, Inc. | 25,692 | 4,817,250 | ||||||
HSBC Holdings PLC | 1,077,116 | 8,428,607 | ||||||
JPMorgan Chase & Co. | 185,776 | 11,936,108 | ||||||
State Street Corp. | 68,335 | 4,715,115 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 42,800 | 1,701,591 | ||||||
Toronto-Dominion Bank | 44,367 | 1,821,368 | ||||||
Wells Fargo & Co. | 230,561 | 12,482,573 | ||||||
|
| |||||||
$ | 57,195,997 | |||||||
Medical Equipment - 0.9% | ||||||||
Abbott Laboratories | 115,816 | $ | 5,188,557 | |||||
Medtronic PLC | 83,524 | 6,174,094 | ||||||
St. Jude Medical, Inc. | 39,661 | 2,530,768 | ||||||
|
| |||||||
$ | 13,893,419 | |||||||
Metals & Mining - 0.4% | ||||||||
Grupo Mexico S.A.B. de C.V. | 235,949 | $ | 574,809 | |||||
Rio Tinto PLC | 157,431 | 5,723,976 | ||||||
|
| |||||||
$ | 6,298,785 | |||||||
Natural Gas - Distribution - 0.7% | ||||||||
Centrica PLC | 1,217,032 | $ | 4,242,035 | |||||
Engie | 339,280 | 5,952,639 | ||||||
|
| |||||||
$ | 10,194,674 | |||||||
Network & Telecom - 0.5% | ||||||||
LM Ericsson Telephone Co., “B” | 798,724 | $ | 7,792,270 | |||||
Oil Services - 0.4% | ||||||||
Schlumberger Ltd. | 49,471 | $ | 3,866,653 | |||||
Technip | 52,170 | 2,725,302 | ||||||
|
| |||||||
$ | 6,591,955 | |||||||
Other Banks & Diversified Financials - 2.3% | ||||||||
Agricultural Bank of China | 2,438,000 | $ | 994,769 | |||||
American Express Co. | 42,715 | 3,129,301 |
16
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Other Banks & Diversified Financials - continued | ||||||||
China Construction Bank | 5,819,000 | $ | 4,195,649 | |||||
DBS Group Holdings Ltd. | 372,700 | 4,594,567 | ||||||
DNB A.S.A. | 275,734 | 3,511,274 | ||||||
Hachijuni Bank Ltd. | 138,000 | 935,140 | ||||||
ING Groep N.V. | 381,957 | 5,558,952 | ||||||
North Pacific Ltd. | 128,000 | 488,309 | ||||||
Sberbank of Russia, ADR | 289,699 | 1,776,724 | ||||||
U.S. Bancorp | 175,357 | 7,396,558 | ||||||
UBS Group AG | 119,240 | 2,386,127 | ||||||
|
| |||||||
$ | 34,967,370 | |||||||
Pharmaceuticals - 7.2% | ||||||||
Bayer AG | 68,868 | $ | 9,189,920 | |||||
Bristol-Myers Squibb Co. | 119,456 | 7,878,123 | ||||||
Eli Lilly & Co. | 128,823 | 10,508,092 | ||||||
GlaxoSmithKline PLC | 408,271 | 8,842,937 | ||||||
Johnson & Johnson | 148,210 | 14,973,656 | ||||||
Merck & Co., Inc. | 146,330 | 7,998,398 | ||||||
Novartis AG | 244,661 | 22,239,659 | ||||||
Pfizer, Inc. | 349,114 | 11,807,035 | ||||||
Roche Holding AG | 37,744 | 10,245,045 | ||||||
Santen Pharmaceutical Co. Ltd. | 215,500 | 2,914,531 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 44,499 | 2,633,896 | ||||||
|
| |||||||
$ | 109,231,292 | |||||||
Printing & Publishing - 0.1% | ||||||||
RELX N.V. | 105,671 | $ | 1,806,927 | |||||
Railroad & Shipping - 0.2% | ||||||||
Canadian National Railway Co. | 27,494 | $ | 1,679,608 | |||||
Union Pacific Corp. | 19,463 | 1,739,019 | ||||||
|
| |||||||
$ | 3,418,627 | |||||||
Real Estate - 0.7% | ||||||||
Deutsche Wohnen AG | 315,920 | $ | 8,912,584 | |||||
Medical Properties Trust, Inc., REIT | 179,286 | 2,025,932 | ||||||
|
| |||||||
$ | 10,938,516 | |||||||
Restaurants - 0.1% | ||||||||
Greggs PLC | 93,025 | $ | 1,703,679 | |||||
Specialty Chemicals - 0.3% | ||||||||
PTT Global Chemical PLC | 2,842,100 | $ | 4,454,827 |
17
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Specialty Stores - 0.1% | ||||||||
Esprit Holdings Ltd. | 996,050 | $ | 1,115,891 | |||||
Telecommunications - Wireless - 1.3% | ||||||||
Advanced Info Service PLC | 181,900 | $ | 1,191,613 | |||||
KDDI Corp. | 606,900 | 14,660,175 | ||||||
Vodafone Group PLC | 1,309,897 | 4,326,430 | ||||||
|
| |||||||
$ | 20,178,218 | |||||||
Telephone Services - 1.9% | ||||||||
Bezeq - The Israel Telecommunication Corp. Ltd. | 463,033 | $ | 995,560 | |||||
British Telecom Group, PLC | 1,166,412 | 8,361,354 | ||||||
Nippon Telegraph & Telephone Corp. | 45,200 | 1,659,887 | ||||||
TDC A.S. | 877,993 | 4,602,041 | ||||||
Verizon Communications, Inc. | 291,260 | 13,654,269 | ||||||
|
| |||||||
$ | 29,273,111 | |||||||
Tobacco - 3.2% | ||||||||
Altria Group, Inc. | 138,416 | $ | 8,370,016 | |||||
British American Tobacco PLC | 121,598 | 7,234,844 | ||||||
Imperial Tobacco Group PLC | 43,850 | 2,365,295 | ||||||
Japan Tobacco, Inc. | 251,800 | 8,698,957 | ||||||
Philip Morris International, Inc. | 193,932 | 17,143,589 | ||||||
Reynolds American, Inc. | 112,592 | 5,440,445 | ||||||
|
| |||||||
$ | 49,253,146 | |||||||
Trucking - 0.7% | ||||||||
United Parcel Service, Inc., “B” | 46,539 | $ | 4,794,448 | |||||
Yamato Holdings Co. Ltd. | 317,100 | 6,217,924 | ||||||
|
| |||||||
$ | 11,012,372 | |||||||
Utilities - Electric Power - 0.8% | ||||||||
American Electric Power Co., Inc. | 147,958 | $ | 8,381,821 | |||||
Endesa S.A. | 57,201 | 1,273,747 | ||||||
Korea Electric Power Corp. | 57,109 | 2,571,215 | ||||||
|
| |||||||
$ | 12,226,783 | |||||||
Total Common Stocks (Identified Cost, $686,082,127) | $ | 889,489,331 | ||||||
Bonds - 34.9% | ||||||||
Airlines - 0.0% | ||||||||
Ryanair Ltd., 1.125%, 3/10/23 | EUR | 475,000 | $ | 501,809 | ||||
Asset-Backed & Securitized - 1.7% | ||||||||
Cent LP, 2013-17A, “A1”, CLO, FRN, 1.622%, 1/30/25 (z) | $ | 1,216,000 | $ | 1,204,966 | ||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 12/11/49 | 1,489,068 | 1,525,529 |
18
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Asset-Backed & Securitized - continued | ||||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 5.306%, 12/10/46 | $ | 949,482 | $ | 975,471 | ||||
Commercial Mortgage Trust, 2015-LC21, “A4”, 3.708%, 7/10/48 | 1,995,691 | 2,070,194 | ||||||
Dryden Senior Loan Fund, 2013-26A, “A”, CLO, FRN, 1.42%, 7/15/25 (z) | 1,563,000 | 1,533,112 | ||||||
GS Mortgage Securities Trust, 2015-GC30, “A4”, 3.382%, 5/10/50 | 2,298,421 | 2,327,526 | ||||||
Gulf Stream Sextant CLO Ltd., 2007-1A, “A1A”, FRN, 0.559%, 6/17/21 (z) | 1,019,657 | 1,012,650 | ||||||
Hyundai Auto Lease Securitization Trust, 2015-A, “A2”, 1%, 10/16/17 (n) | 465,000 | 464,895 | ||||||
ING Investment Management Ltd., 2013-2A, “A1”, CLO, FRN, 1.47%, 4/25/25 (z) | 1,419,000 | 1,396,644 | ||||||
JPMBB Commercial Mortgage Securities Trust, 2014-C26, 3.494%, 1/15/48 | 2,620,000 | 2,688,311 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 5.774%, 6/15/49 | 838,625 | 843,750 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 5.937%, 2/15/51 | 75,400 | 75,427 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 5.774%, 6/15/49 | 1,040,000 | 1,075,776 | ||||||
KKR Financial CLO Ltd., 2007-1A, “A”, FRN, 0.67%, 5/15/21 (z) | 1,401,596 | 1,395,207 | ||||||
Merrill Lynch Mortgage Trust, “A3”, FRN, 5.837%, 6/12/50 | 29,659 | 29,686 | ||||||
Merrill Lynch Mortgage Trust, FRN, 5.837%, 6/12/50 | 1,040,000 | 1,081,306 | ||||||
Volvo Financial Equipment LLC, 2015-1A, “A2”, 0.95%, 11/15/17 (n) | 1,970,000 | 1,969,360 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 5.952%, 2/15/51 | 485,860 | 505,981 | ||||||
Wells Fargo Commercial Mortgage Trust, 2015-C28, “A4”, 3.54%, 5/15/48 | 2,322,687 | 2,382,734 | ||||||
Wells Fargo Commercial Mortgage Trust, 2015-NXS1, “A5”, 3.148%, 5/15/48 | 1,013,505 | 1,009,433 | ||||||
|
| |||||||
$ | 25,567,958 | |||||||
Automotive - 0.8% | ||||||||
American Honda Finance Corp., 1.375%, 11/10/22 | EUR | 1,000,000 | $ | 1,116,470 | ||||
Delphi Automotive PLC, 1.5%, 3/10/25 | EUR | 575,000 | 590,721 | |||||
FCA Capital Ireland PLC, 2%, 10/23/19 | EUR | 875,000 | 974,294 | |||||
Ford Motor Credit Co. LLC, 1.7%, 5/09/16 | $ | 853,000 | 854,958 | |||||
Ford Motor Credit Co. LLC, 1.461%, 3/27/17 | 1,362,000 | 1,352,824 | ||||||
Ford Motor Credit Co. LLC, 3.157%, 8/04/20 | 2,533,000 | 2,560,187 | ||||||
Hyundai Capital America, 2.4%, 10/30/18 (z) | 1,234,000 | 1,234,273 |
19
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Automotive - continued | ||||||||
RCI Banque S.A., 4.25%, 4/27/17 | EUR | 550,000 | $ | 637,033 | ||||
RCI Banque S.A., 1.25%, 6/08/22 | EUR | 450,000 | 482,628 | |||||
Volkswagen International Finance N.V., 3.75% to 3/24/21, FRN to 3/29/49 | EUR | 600,000 | 609,481 | |||||
Volkswagen International Finance N.V., 1.15%, 11/20/15 (n) | $ | 1,810,000 | 1,808,867 | |||||
Volkswagen International Finance N.V., 3.875% to 9/04/18, FRN to 9/29/49 | EUR | 450,000 | 479,509 | |||||
|
| |||||||
$ | 12,701,245 | |||||||
Biotechnology - 0.0% | ||||||||
Life Technologies Corp., 6%, 3/01/20 | $ | 432,000 | $ | 488,494 | ||||
Broadcasting - 0.2% | ||||||||
Discovery Communications, Inc., 1.9%, 3/19/27 | EUR | 1,300,000 | $ | 1,259,286 | ||||
Myriad International Holdings B.V., 5.5%, 7/21/25 (n) | $ | 314,000 | 307,613 | |||||
Omnicom Group, Inc., 3.65%, 11/01/24 | 210,000 | 208,425 | ||||||
ProSiebenSat.1 Media SE, 2.625%, 4/15/21 | EUR | 725,000 | 824,048 | |||||
SES S.A., 3.6%, 4/04/23 (n) | $ | 635,000 | 632,297 | |||||
|
| |||||||
$ | 3,231,669 | |||||||
Brokerage & Asset Managers - 0.1% | ||||||||
CME Group, Inc., 3%, 3/15/25 | $ | 991,000 | $ | 985,332 | ||||
TD Ameritrade Holding Corp., 2.95%, 4/01/22 | 715,000 | 712,166 | ||||||
|
| |||||||
$ | 1,697,498 | |||||||
Building - 0.2% | ||||||||
CRH Finance Ltd., 3.125%, 4/03/23 | EUR | 750,000 | $ | 895,309 | ||||
Martin Marietta Materials, Inc., 4.25%, 7/02/24 | $ | 400,000 | 395,831 | |||||
Mohawk Industries, Inc., 6.125%, 1/15/16 | 376,000 | 379,707 | ||||||
Mohawk Industries, Inc., 2%, 1/14/22 | EUR | 800,000 | 901,569 | |||||
Owens Corning, Inc., 4.2%, 12/15/22 | $ | 190,000 | 192,112 | |||||
|
| |||||||
$ | 2,764,528 | |||||||
Business Services - 0.4% | ||||||||
Fidelity National Information Services, Inc., 5%, 3/15/22 | $ | 483,000 | $ | 496,479 | ||||
Fidelity National Information Services, Inc., 3.875%, 6/05/24 | 1,180,000 | 1,130,064 | ||||||
Fidelity National Information Services, Inc., 5%, 10/15/25 | 646,000 | 667,910 | ||||||
Fiserv, Inc., 2.7%, 6/01/20 | 1,580,000 | 1,581,689 | ||||||
Tencent Holdings Ltd., 3.8%, 2/11/25 (n) | 1,490,000 | 1,480,214 | ||||||
|
| |||||||
$ | 5,356,356 | |||||||
Cable TV - 0.4% | ||||||||
CCO Safari II LLC, 6.384%, 10/23/35 (n) | $ | 630,000 | $ | 648,955 | ||||
Comcast Corp., 4.65%, 7/15/42 | 300,000 | 310,418 |
20
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Cable TV - continued | ||||||||
Cox Communications, Inc., 3.25%, 12/15/22 (n) | $ | 595,000 | $ | 547,612 | ||||
NBCUniversal Enterprise, Inc., 1.974%, 4/15/19 (n) | 895,000 | 897,610 | ||||||
NBCUniversal Media LLC, 5.15%, 4/30/20 | 728,000 | 822,224 | ||||||
Shaw Communications, 5.65%, 10/01/19 | CAD | 718,000 | 612,727 | |||||
Sky PLC, 2.5%, 9/15/26 | EUR | 900,000 | 1,021,141 | |||||
Time Warner Cable Inc., 5.25%, 7/15/42 | GBP | 100,000 | 136,140 | |||||
Time Warner Cable, Inc., 5.75%, 6/02/31 | GBP | 250,000 | 382,523 | |||||
Time Warner Cable, Inc., 4.5%, 9/15/42 | $ | 75,000 | 60,748 | |||||
|
| |||||||
$ | 5,440,098 | |||||||
Chemicals - 0.1% | ||||||||
CF Industries, Inc., 5.15%, 3/15/34 | $ | 424,000 | $ | 417,831 | ||||
LYB International Finance B.V., 4%, 7/15/23 | 336,000 | 340,853 | ||||||
LyondellBasell Industries N.V., 5%, 4/15/19 | 597,000 | 642,304 | ||||||
LyondellBasell Industries N.V., 4.625%, 2/26/55 | 420,000 | 363,475 | ||||||
|
| |||||||
$ | 1,764,463 | |||||||
Computer Software - 0.1% | ||||||||
Oracle Corp., 3.4%, 7/08/24 | $ | 837,000 | $ | 854,174 | ||||
Computer Software - Systems - 0.2% | ||||||||
Apple, Inc., 2.7%, 5/13/22 | $ | 1,598,000 | $ | 1,612,332 | ||||
Apple, Inc., 3.6%, 7/31/42 | GBP | 730,000 | 1,100,243 | |||||
|
| |||||||
$ | 2,712,575 | |||||||
Conglomerates - 0.2% | ||||||||
DH Europe Finance S.A., 1%, 7/08/19 | EUR | 450,000 | $ | 501,308 | ||||
General Electric Co., 1.25%, 5/26/23 | EUR | 325,000 | 357,684 | |||||
Smiths Group PLC, 1.25%, 4/28/23 | EUR | 900,000 | 947,008 | |||||
Tyco International Finance S.A., 1.375%, 2/25/25 | EUR | 575,000 | 595,183 | |||||
|
| |||||||
$ | 2,401,183 | |||||||
Consumer Products - 0.1% | ||||||||
Reckitt Benckiser Treasury Services PLC, 3.625%, 9/21/23 (n) | $ | 731,000 | $ | 751,823 | ||||
Whirlpool Corp., 0.625%, 3/12/20 | EUR | 400,000 | 432,382 | |||||
|
| |||||||
$ | 1,184,205 | |||||||
Consumer Services - 0.1% | ||||||||
Priceline Group, Inc., 3.65%, 3/15/25 | $ | 429,000 | $ | 427,308 | ||||
Priceline Group, Inc., 1.8%, 3/03/27 | EUR | 450,000 | 447,531 | |||||
|
| |||||||
$ | 874,839 | |||||||
Defense Electronics - 0.0% | ||||||||
BAE Systems, 4.125%, 6/08/22 | GBP | 350,000 | $ | 569,689 |
21
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Electronics - 0.0% | ||||||||
Tyco Electronics Group S.A., 2.375%, 12/17/18 | $ | 522,000 | $ | 525,954 | ||||
Tyco Electronics Group S.A., 1.1%, 3/01/23 | EUR | 125,000 | 134,012 | |||||
|
| |||||||
$ | 659,966 | |||||||
Emerging Market Quasi-Sovereign - 0.5% | ||||||||
CNPC General Capital Ltd., 3.4%, 4/16/23 (n) | $ | 1,511,000 | $ | 1,476,687 | ||||
Comision Federal De Electricidad, 4.875%, 1/15/24 | 535,000 | 547,038 | ||||||
Comision Federal de Electricidad, 5.75%, 2/14/42 (n) | 677,000 | 635,534 | ||||||
Empresa Nacional del Petroleo, 6.25%, 7/08/19 | 265,000 | 290,019 | ||||||
Office Cherifien des Phosphates, 6.875%, 4/25/44 (n) | 1,590,000 | 1,653,600 | ||||||
Pemex Project Funding Master Trust, 5.75%, 3/01/18 | 523,000 | 555,504 | ||||||
Petroleos Mexicanos, 5.5%, 1/21/21 | 232,000 | 247,660 | ||||||
Petroleos Mexicanos, 4.25%, 1/15/25 (n) | 10,000 | 9,515 | ||||||
State Grid Overseas Investment (2014) Ltd., 4.125%, 5/07/24 (n) | 2,200,000 | 2,338,926 | ||||||
|
| |||||||
$ | 7,754,483 | |||||||
Emerging Market Sovereign - 0.7% | ||||||||
Republic of Indonesia, 2.875%, 7/08/21 (z) | EUR | 400,000 | $ | 437,100 | ||||
Republic of Peru, 7.35%, 7/21/25 | $ | 1,805,000 | 2,328,450 | |||||
United Mexican States, 6.5%, 6/10/21 | MXN | 98,800,000 | 6,300,870 | |||||
United Mexican States, 3.625%, 3/15/22 | $ | 1,140,000 | 1,167,360 | |||||
United Mexican States, 1.625%, 3/06/24 | EUR | 250,000 | 263,366 | |||||
|
| |||||||
$ | 10,497,146 | |||||||
Energy - Independent - 0.0% | ||||||||
Pioneer Natural Resources Co., 7.5%, 1/15/20 | $ | 185,000 | $ | 211,540 | ||||
Energy - Integrated - 0.1% | ||||||||
Shell International Finance B.V., 2.125%, 5/11/20 | $ | 1,738,000 | $ | 1,741,353 | ||||
TOTAL S.A., 2.625% to 2/26/25, FRN to 12/29/49 | EUR | 500,000 | 507,901 | |||||
|
| |||||||
$ | 2,249,254 | |||||||
Entertainment - 0.1% | ||||||||
Carnival Corp., 1.875%, 11/07/22 | EUR | 700,000 | $ | 767,453 | ||||
Financial Institutions - 0.0% | ||||||||
International Lease Finance Corp., 7.125%, 9/01/18 (n) | $ | 569,000 | $ | 630,168 | ||||
Food & Beverages - 0.8% | ||||||||
Anheuser-Busch InBev S.A., 5.375%, 1/15/20 | $ | 1,008,000 | $ | 1,121,786 | ||||
Coca-Cola Co., 0.75%, 3/09/23 | EUR | 425,000 | 455,237 | |||||
Coca-Cola Co., 1.125%, 3/09/27 | EUR | 400,000 | 412,921 | |||||
Coca-Cola Enterprises, Inc., 1.875%, 3/18/30 | EUR | 600,000 | 596,667 |
22
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Food & Beverages - continued | ||||||||
J.M. Smucker Co., 2.5%, 3/15/20 | $ | 1,414,000 | $ | 1,413,111 | ||||
J.M. Smucker Co., 4.375%, 3/15/45 | 271,000 | 264,235 | ||||||
Kraft Heinz Co., 5%, 7/15/35 (n) | 305,000 | 318,155 | ||||||
Kraft Heinz Foods Co., 3.5%, 7/15/22 (n) | 600,000 | 611,481 | ||||||
Mead Johnson Nutrition Co., 3%, 11/15/20 | 849,000 | 852,433 | ||||||
Mondelez International, Inc., 2.375%, 3/06/35 | EUR | 175,000 | 172,724 | |||||
PepsiCo, Inc., 2.15%, 10/14/20 | $ | 2,276,000 | 2,274,748 | |||||
PepsiCo, Inc., 3.1%, 7/17/22 | 1,651,000 | 1,693,766 | ||||||
Tyson Foods, Inc., 6.6%, 4/01/16 | 1,200,000 | 1,226,526 | ||||||
Tyson Foods, Inc., 5.15%, 8/15/44 | 191,000 | 200,132 | ||||||
Wm. Wrigley Jr. Co., 2.9%, 10/21/19 (n) | 277,000 | 283,144 | ||||||
Wm. Wrigley Jr. Co., 3.375%, 10/21/20 (n) | 300,000 | 310,936 | ||||||
|
| |||||||
$ | 12,208,002 | |||||||
Food & Drug Stores - 0.2% | ||||||||
CVS Health Corp., 3.375%, 8/12/24 | $ | 1,214,000 | $ | 1,215,576 | ||||
CVS Health Corp., 4.875%, 7/20/35 | 357,000 | 375,801 | ||||||
CVS Health Corp., 5.75%, 6/01/17 | 189,000 | 202,051 | ||||||
Walgreens Boots Alliance, Inc., 2.7%, 11/18/19 | 1,042,000 | 1,046,188 | ||||||
|
| |||||||
$ | 2,839,616 | |||||||
Forest & Paper Products - 0.1% | ||||||||
Georgia-Pacific LLC, 5.4%, 11/01/20 (n) | $ | 793,000 | $ | 881,417 | ||||
Gaming & Lodging - 0.2% | ||||||||
InterContinental Hotels Group PLC, 3.75%, 8/14/25 | GBP | 510,000 | $ | 779,399 | ||||
Whitbread Group PLC, 3.375%, 10/16/25 | GBP | 550,000 | 842,090 | |||||
Wyndham Worldwide Corp., 2.5%, 3/01/18 | $ | 500,000 | 500,706 | |||||
Wyndham Worldwide Corp., 5.625%, 3/01/21 | 350,000 | 377,420 | ||||||
|
| |||||||
$ | 2,499,615 | |||||||
Insurance - 0.4% | ||||||||
AIA Group Ltd., 3.2%, 3/11/25 (n) | $ | 564,000 | $ | 543,850 | ||||
American International Group, Inc., 3.75%, 7/10/25 | 1,106,000 | 1,123,681 | ||||||
American International Group, Inc., 4.875%, 6/01/22 | 926,000 | 1,029,794 | ||||||
Aviva PLC, 3.375% to 12/04/25, FRN to 12/04/45 | EUR | 740,000 | 778,333 | |||||
CNP Assurances S.A., 6% to 2020, FRN to 9/14/40 | EUR | 450,000 | 559,805 | |||||
Delta Lloyd Levensverzek, FRN, 9%, 8/29/42 | EUR | 450,000 | 578,180 | |||||
UnumProvident Corp., 6.85%, 11/15/15 (n) | $ | 697,000 | 698,284 | |||||
|
| |||||||
$ | 5,311,927 | |||||||
Insurance - Health - 0.1% | ||||||||
Aetna, Inc., 1.5%, 11/15/17 | $ | 528,000 | $ | 528,836 | ||||
UnitedHealth Group, Inc., 2.7%, 7/15/20 | 1,536,000 | 1,568,658 | ||||||
|
| |||||||
$ | 2,097,494 |
23
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Insurance - Property & Casualty - 0.2% | ||||||||
ACE INA Holdings, Inc., 2.3%, 11/03/20 | $ | 284,000 | $ | 284,170 | ||||
Amlin PLC, 6.5% to 12/19/16, FRN to 12/19/26 | GBP | 200,000 | 314,486 | |||||
Berkshire Hathaway, Inc., 1.625%, 3/16/35 | EUR | 450,000 | 420,510 | |||||
Chubb Corp., 6.375% to 4/15/17, FRN to 3/29/67 | $ | 730,000 | 700,800 | |||||
Marsh & McLennan Cos., Inc., 2.55%, 10/15/18 | 293,000 | 298,427 | ||||||
Marsh & McLennan Cos., Inc., 3.5%, 6/03/24 | 500,000 | 499,311 | ||||||
QBE Capital Funding IV LP, 7.5% to 2021, FRN to 5/24/41 | GBP | 300,000 | 501,597 | |||||
ZFS Finance USA Trust II, 6.45% to 6/15/16, FRN to 12/15/65 (n) | $ | 759,000 | 770,006 | |||||
|
| |||||||
$ | 3,789,307 | |||||||
International Market Quasi-Sovereign - 0.3% | ||||||||
Electricite de France, 6% to 1/29/26, FRN to 12/29/49 | GBP | 300,000 | $ | 462,480 | ||||
Israel Electric Corp. Ltd., 5.625%, 6/21/18 (n) | $ | 735,000 | 783,334 | |||||
Statoil A.S.A., 4.25%, 11/23/41 | 660,000 | 650,777 | ||||||
Statoil A.S.A., FRN, 0.61%, 5/15/18 | 477,000 | 471,759 | ||||||
Temasek Financial I Ltd., 2.375%, 1/23/23 (n) | 1,450,000 | 1,425,681 | ||||||
|
| |||||||
$ | 3,794,031 | |||||||
International Market Sovereign - 15.4% | ||||||||
Federal Republic of Germany, 2.5%, 7/04/44 | EUR | 1,867,000 | $ | 2,688,933 | ||||
Federal Republic of Germany, 6.25%, 1/04/30 | EUR | 1,500,000 | 2,856,746 | |||||
Government of Australia, 5.75%, 5/15/21 | AUD | 13,737,000 | 11,636,887 | |||||
Government of Canada, 4.25%, 6/01/18 | CAD | 7,496,000 | 6,266,750 | |||||
Government of Canada, 5.75%, 6/01/33 | CAD | 4,267,000 | 4,968,138 | |||||
Government of Canada, 4%, 6/01/41 | CAD | 890,000 | 898,705 | |||||
Government of Japan, 1.8%, 3/20/43 | JPY | 516,800,000 | 4,769,661 | |||||
Government of Japan, 1.1%, 6/20/20 | JPY | 3,257,200,000 | 28,313,104 | |||||
Government of Japan, 0.7%, 12/20/22 | JPY | 701,000,000 | 6,059,145 | |||||
Government of Japan, 2.1%, 9/20/24 | JPY | 1,321,800,000 | 12,753,995 | |||||
Government of Japan, 2.2%, 9/20/27 | JPY | 1,256,700,000 | 12,507,117 | |||||
Government of Japan, 1.5%, 3/20/34 | JPY | 1,169,000,000 | 10,561,882 | |||||
Government of Japan, 2.4%, 3/20/37 | JPY | 325,150,000 | 3,321,262 | |||||
Government of Japan, 2%, 3/20/52 | JPY | 127,000,000 | 1,218,945 | |||||
Government of New Zealand, 5.5%, 4/15/23 | NZD | 5,651,000 | 4,453,646 | |||||
Kingdom of Belgium, 4%, 3/28/32 | EUR | 1,615,000 | 2,455,636 | |||||
Kingdom of Denmark, 1.5%, 11/15/23 | DKK | 9,449,000 | 1,493,021 | |||||
Kingdom of Norway, 3.75%, 5/25/21 | NOK | 38,483,000 | 5,167,753 | |||||
Kingdom of Norway, 3%, 3/14/24 | NOK | 23,630,000 | 3,106,426 | |||||
Kingdom of Spain, 5.4%, 1/31/23 | EUR | 6,381,000 | 9,027,199 | |||||
Kingdom of Spain, 5.5%, 7/30/17 | EUR | 7,315,000 | 8,808,806 | |||||
Kingdom of Spain, 4.6%, 7/30/19 | EUR | 4,313,000 | 5,481,195 | |||||
Kingdom of Spain, 5.15%, 10/31/28 | EUR | 2,202,000 | 3,266,963 | |||||
Kingdom of Sweden, 3.5%, 6/01/22 | SEK | 10,830,000 | 1,536,017 |
24
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
International Market Sovereign - continued | ||||||||
Kingdom of the Netherlands, 5.5%, 1/15/28 | EUR | 596,000 | $ | 1,006,144 | ||||
Republic of Austria, 1.75%, 10/20/23 | EUR | 2,820,000 | 3,412,187 | |||||
Republic of France, 6%, 10/25/25 | EUR | 3,683,000 | 6,078,159 | |||||
Republic of France, 4.75%, 4/25/35 | EUR | 1,858,000 | 3,164,308 | |||||
Republic of France, 4.5%, 4/25/41 | EUR | 1,791,000 | 3,127,878 | |||||
Republic of Iceland, 4.875%, 6/16/16 (n) | $ | 910,000 | 932,750 | |||||
Republic of Ireland, 5.4%, 3/13/25 | EUR | 504,000 | 763,232 | |||||
Republic of Italy, 5.5%, 9/01/22 | EUR | 7,248,000 | 10,306,347 | |||||
Republic of Italy, 5.25%, 8/01/17 | EUR | 7,852,000 | 9,419,254 | |||||
Republic of Italy, 3.75%, 3/01/21 | EUR | 10,240,000 | 13,050,980 | |||||
Republic of Italy, 4.75%, 9/01/28 | EUR | 2,202,000 | 3,210,251 | |||||
United Kingdom Treasury, 5%, 3/07/18 | GBP | 3,229,000 | 5,486,560 | |||||
United Kingdom Treasury, 8%, 6/07/21 | GBP | 3,724,000 | 7,794,054 | |||||
United Kingdom Treasury, 4.25%, 12/07/27 | GBP | 1,523,000 | 2,902,568 | |||||
United Kingdom Treasury, 4.25%, 3/07/36 | GBP | 1,318,000 | 2,591,854 | |||||
United Kingdom Treasury, 3.25%, 1/22/44 | GBP | 2,264,000 | 3,927,666 | |||||
United Kingdom Treasury, 3.75%, 7/22/52 | GBP | 711,000 | 1,408,621 | |||||
United Kingdom Treasury, 4%, 1/22/60 | GBP | 700,000 | 1,509,724 | |||||
|
| |||||||
$ | 233,710,469 | |||||||
Local Authorities - 0.1% | ||||||||
Province of Alberta, 1.25%, 6/01/20 | CAD | 521,000 | $ | 395,396 | ||||
Province of Manitoba, 4.15%, 6/03/20 | CAD | 458,000 | 391,941 | |||||
|
| |||||||
$ | 787,337 | |||||||
Major Banks - 1.8% | ||||||||
ABN AMRO Bank N.V., 1.8%, 6/04/18 (n) | $ | 1,530,000 | $ | 1,524,270 | ||||
ABN AMRO Bank N.V., 7.125%, 7/06/22 | EUR | 300,000 | 415,954 | |||||
Bank of America Corp., 1.75%, 6/05/18 | $ | 750,000 | 749,123 | |||||
Bank of America Corp., 4.125%, 1/22/24 | 1,184,000 | 1,232,951 | ||||||
Bank of America Corp., 3.95%, 4/21/25 | 1,941,000 | 1,909,894 | ||||||
Barclays Bank PLC, 6%, 1/14/21 | EUR | 342,000 | 450,786 | |||||
Barclays Bank PLC, 6.75% to 1/16/18, FRN to 1/16/23 | GBP | 250,000 | 413,035 | |||||
Credit Agricole S.A., 7.375%, 12/18/23 | GBP | 200,000 | 379,707 | |||||
Credit Suisse Group AG, 6.5%, 8/08/23 (n) | $ | 1,261,000 | 1,380,795 | |||||
Goldman Sachs Group, Inc., 5.75%, 1/24/22 | 1,181,000 | 1,353,317 | ||||||
Goldman Sachs Group, Inc., 3.5%, 1/23/25 | 833,000 | 823,490 | ||||||
HSBC Bank PLC, FRN, 0.961%, 5/15/18 (n) | 1,116,000 | 1,113,476 | ||||||
Huntington National Bank, 2.4%, 4/01/20 | 418,000 | 415,032 | ||||||
ING Bank N.V., 5.8%, 9/25/23 (n) | 809,000 | 889,368 | ||||||
ING Bank N.V., FRN, 3.5%, 11/21/23 | EUR | 550,000 | 638,771 | |||||
JPMorgan Chase & Co., 4.25%, 10/15/20 | $ | 634,000 | 679,035 | |||||
JPMorgan Chase & Co., 3.125%, 1/23/25 | 1,434,000 | 1,393,122 | ||||||
JPMorgan Chase & Co., 6.75% to 2/01/24, FRN to 1/29/49 | 515,000 | 558,775 |
25
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Major Banks - continued | ||||||||
Morgan Stanley, 2.2%, 12/07/18 | $ | 720,000 | $ | 725,414 | ||||
Morgan Stanley, 5.5%, 7/28/21 | 490,000 | 554,638 | ||||||
Morgan Stanley, 3.95%, 4/23/27 | 1,588,000 | 1,544,659 | ||||||
Morgan Stanley, 4.3%, 1/27/45 | 241,000 | 230,975 | ||||||
Nationwide Building Society, 1.25%, 3/03/25 | EUR | 710,000 | 758,202 | |||||
Nordea Bank AB, FRN, 0.774%, 5/13/16 (n) | $ | 2,050,000 | 2,052,977 | |||||
PNC Bank N.A., 2.6%, 7/21/20 | 857,000 | 866,358 | ||||||
PNC Financial Services Group, Inc., FRN, 6.75%, 12/31/49 | 640,000 | 689,734 | ||||||
Regions Financial Corp., 2%, 5/15/18 | 602,000 | 601,542 | ||||||
Royal Bank of Scotland Group PLC, 5.5%, 3/23/20 | EUR | 300,000 | 395,429 | |||||
Wells Fargo & Co., 3.3%, 9/09/24 | $ | 500,000 | 499,416 | |||||
Wells Fargo & Co., 3%, 2/19/25 | 642,000 | 620,691 | ||||||
Wells Fargo & Co., 4.1%, 6/03/26 | 649,000 | 661,380 | ||||||
Wells Fargo & Co., 5.875% to 6/15/25, FRN to 12/31/49 | 317,000 | 335,291 | ||||||
Wells Fargo & Co., 5.9% to 6/15/24, FRN to 12/29/49 | 650,000 | 666,250 | ||||||
|
| |||||||
$ | 27,523,857 | |||||||
Medical & Health Technology & Services - 0.1% | ||||||||
Becton, Dickinson and Co., 3.734%, 12/15/24 | $ | 417,000 | $ | 426,656 | ||||
Laboratory Corp. of America Holdings, 3.2%, 2/01/22 | 1,034,000 | 1,020,912 | ||||||
Laboratory Corp. of America Holdings, 4.7%, 2/01/45 | 242,000 | 222,444 | ||||||
|
| |||||||
$ | 1,670,012 | |||||||
Medical Equipment - 0.1% | ||||||||
Medtronic, Inc., 3.5%, 3/15/25 | $ | 1,751,000 | $ | 1,793,017 | ||||
Zimmer Holdings, Inc., 4.25%, 8/15/35 | 376,000 | 355,291 | ||||||
|
| |||||||
$ | 2,148,308 | |||||||
Metals & Mining - 0.4% | ||||||||
Cameco Corp., 5.67%, 9/02/19 | CAD | 724,000 | $ | 616,773 | ||||
Glencore Finance Europe, 6.5%, 2/27/19 | GBP | 200,000 | 290,592 | |||||
Glencore Finance Europe S.A., 1.25%, 3/17/21 | EUR | 1,210,000 | 1,017,891 | |||||
Kinross Gold Corp., 5.95%, 3/15/24 | $ | 718,000 | 589,606 | |||||
Plains Exploration & Production Co., 6.875%, 2/15/23 | 681,000 | 599,280 | ||||||
Southern Copper Corp., 6.75%, 4/16/40 | 359,000 | 342,507 | ||||||
Southern Copper Corp., 5.25%, 11/08/42 | 821,000 | 664,607 | ||||||
Southern Copper Corp., 5.875%, 4/23/45 | 1,538,000 | 1,344,455 | ||||||
Xstrata Finance Canada Ltd., 5.25%, 6/13/17 | EUR | 300,000 | 324,106 | |||||
|
| |||||||
$ | 5,789,817 | |||||||
Midstream - 0.5% | ||||||||
APT Pipelines Ltd., 5%, 3/23/35 (n) | $ | 685,000 | $ | 633,682 | ||||
Energy Transfer Partners LP, 3.6%, 2/01/23 | 399,000 | 352,781 | ||||||
Energy Transfer Partners LP, 5.15%, 3/15/45 | 681,000 | 543,501 |
26
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Midstream - continued | ||||||||
Enterprise Products Operating LLC, 1.65%, 5/07/18 | $ | 1,350,000 | $ | 1,339,571 | ||||
Enterprise Products Operating LLC, 3.9%, 2/15/24 | 346,000 | 342,231 | ||||||
Enterprise Products Operating LLC, 4.85%, 3/15/44 | 198,000 | 180,189 | ||||||
Kinder Morgan Energy Partners LP, 5.4%, 9/01/44 | 925,000 | 759,969 | ||||||
Kinder Morgan, Inc., 2.25%, 3/16/27 | EUR | 425,000 | 378,919 | |||||
Pembina Pipeline Corp., 4.81%, 3/25/44 | CAD | 847,000 | 604,365 | |||||
Spectra Energy Partners LP, 4.75%, 3/15/24 | $ | 1,158,000 | 1,191,092 | |||||
Sunoco Logistics Partners LP, 5.3%, 4/01/44 | 571,000 | 452,522 | ||||||
Williams Cos., Inc., 3.7%, 1/15/23 | 1,694,000 | 1,382,711 | ||||||
|
| |||||||
$ | 8,161,533 | |||||||
Mortgage-Backed - 2.2% | ||||||||
Fannie Mae, 5.401%, 2/01/16 | $ | 52,490 | $ | 52,721 | ||||
Fannie Mae, 5.05%, 1/01/17 | 302,157 | 311,159 | ||||||
Fannie Mae, 5.6%, 1/01/17 | 667 | 666 | ||||||
Fannie Mae, 5.389%, 1/01/18 | 232,608 | 241,644 | ||||||
Fannie Mae, 3.854%, 7/01/18 | 349,188 | 369,532 | ||||||
Fannie Mae, 2.578%, 9/25/18 | 900,000 | 924,145 | ||||||
Fannie Mae, 5.1%, 3/01/19 | 315,101 | 348,285 | ||||||
Fannie Mae, 5.18%, 3/01/19 | 315,554 | 341,279 | ||||||
Fannie Mae, 4.57%, 5/01/19 | 225,539 | 245,531 | ||||||
Fannie Mae, 5%, 12/01/20 - 8/01/40 | 3,127,889 | 3,476,827 | ||||||
Fannie Mae, 4.5%, 3/01/25 - 4/01/44 | 1,873,335 | 2,030,483 | ||||||
Fannie Mae, 5.5%, 1/01/37 | 69,482 | 78,356 | ||||||
Fannie Mae, 6%, 9/01/37 - 6/01/38 | 557,553 | 636,264 | ||||||
Fannie Mae, 4%, 2/01/41 | 1,054,276 | 1,124,896 | ||||||
Fannie Mae, 3.5%, 5/01/43 | 3,124,712 | 3,279,483 | ||||||
Freddie Mac, 4%, 9/01/44 | 4,654,582 | 4,947,103 | ||||||
Freddie Mac, 1.426%, 8/25/17 | 927,000 | 930,727 | ||||||
Freddie Mac, 3.882%, 11/25/17 | 733,000 | 767,853 | ||||||
Freddie Mac, 2.412%, 8/25/18 | 802,000 | 820,415 | ||||||
Freddie Mac, 5.085%, 3/25/19 | 589,000 | 652,797 | ||||||
Freddie Mac, 1.883%, 5/25/19 | 1,250,000 | 1,256,111 | ||||||
Freddie Mac, 3.32%, 7/25/20 | 300,206 | 311,352 | ||||||
Freddie Mac, 5.5%, 7/01/37 | 158,639 | 176,910 | ||||||
Freddie Mac, 4.5%, 5/01/40 | 2,623,604 | 2,844,930 | ||||||
Ginnie Mae, 5%, 5/15/40 | 950,921 | 1,055,179 | ||||||
Ginnie Mae, 3.5%, 6/20/43 | 2,613,654 | 2,745,586 | ||||||
Ginnie Mae, TBA, 3.5%, 12/15/45 | 2,674,000 | 2,795,218 | ||||||
|
| |||||||
$ | 32,765,452 | |||||||
Natural Gas - Distribution - 0.1% | ||||||||
Engie, 3.00% to 6/02/19, FRN to 6/29/49 | EUR | 400,000 | $ | 443,040 | ||||
GNL Quintero S.A., 4.634%, 7/31/29 (n) | $ | 1,440,000 | 1,433,343 | |||||
|
| |||||||
$ | 1,876,383 |
27
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Network & Telecom - 0.5% | ||||||||
AT&T, Inc., 2.45%, 6/30/20 | $ | 717,000 | $ | 709,993 | ||||
AT&T, Inc., 4.75%, 5/15/46 | 728,000 | 668,418 | ||||||
British Telecommunications PLC, 5.75%, 12/07/28 | GBP | 165,000 | 303,928 | |||||
Empresa Nacional de Telecomunicaciones S.A., 4.75%, 8/01/26 (n) | $ | 1,730,000 | 1,682,525 | |||||
Orange S.A., 4% to 10/01/21, FRN to 10/29/49 | EUR | 900,000 | 1,015,051 | |||||
Verizon Communications, Inc., 4.5%, 9/15/20 | $ | 999,000 | 1,083,157 | |||||
Verizon Communications, Inc., 2.625%, 12/01/31 | EUR | 550,000 | 618,260 | |||||
Verizon Communications, Inc., 6.4%, 9/15/33 | $ | 725,000 | 837,927 | |||||
Verizon Communications, Inc., 5.05%, 3/15/34 | 395,000 | 398,317 | ||||||
Verizon Communications, Inc., 6.55%, 9/15/43 | 403,000 | 482,402 | ||||||
|
| |||||||
$ | 7,799,978 | |||||||
Oils - 0.1% | ||||||||
Marathon Petroleum Corp., 3.625%, 9/15/24 | $ | 480,000 | $ | 467,410 | ||||
Valero Energy Corp., 4.9%, 3/15/45 | 601,000 | 555,292 | ||||||
|
| |||||||
$ | 1,022,702 | |||||||
Other Banks & Diversified Financials - 0.8% | ||||||||
Banco de Credito del Peru, 6.125% to 4/24/22, FRN to 4/24/27 (n) | $ | 840,000 | $ | 898,800 | ||||
Banque Federative du Credit Mutuel S.A., 3%, 5/21/24 | EUR | 600,000 | 689,345 | |||||
BBVA Bancomer S.A. de C.V., 6.75%, 9/30/22 (n) | $ | 901,000 | 1,010,922 | |||||
BBVA Subordinated Capital S.A.U., 3.50% to 4/11/19, FRN to 4/11/24 | EUR | 500,000 | 571,323 | |||||
BPCE S.A., 4.5%, 3/15/25 (n) | $ | 300,000 | 295,385 | |||||
Capital One Bank (USA) N.A., 3.375%, 2/15/23 | 900,000 | 880,674 | ||||||
Citigroup, Inc., 3.75%, 6/16/24 | 753,000 | 768,123 | ||||||
Discover Bank, 7%, 4/15/20 | 1,065,000 | 1,226,327 | ||||||
Discover Bank, 3.1%, 6/04/20 | 480,000 | 485,610 | ||||||
Intesa Sanpaolo S.p.A., 5.25%, 1/28/22 | GBP | 300,000 | 507,979 | |||||
Intesa Sanpaolo S.p.A., 1.125%, 3/04/22 | EUR | 1,150,000 | 1,232,537 | |||||
KBC Groep N.V., 1.875% to 3/11/22, FRN to 3/11/27 | EUR | 300,000 | 319,980 | |||||
KBC Group N.V., FRN, 2.375%, 11/25/24 | EUR | 600,000 | 675,878 | |||||
Macquarie Group Ltd., 3%, 12/03/18 (n) | $ | 111,000 | 112,594 | |||||
Rabobank Nederland N.V., 4%, 9/19/22 | GBP | 250,000 | 412,927 | |||||
Svenska Handelsbanken AB, FRN, 0.795%, 3/21/16 | $ | 1,210,000 | 1,211,395 | |||||
Swedbank AB, 1.75%, 3/12/18 (n) | 728,000 | 729,170 | ||||||
|
| |||||||
$ | 12,028,969 | |||||||
Personal Computers & Peripherals - 0.0% | ||||||||
Equifax, Inc., 3.3%, 12/15/22 | $ | 483,000 | $ | 483,729 | ||||
Pharmaceuticals - 0.7% | ||||||||
AbbVie, Inc., 1.75%, 11/06/17 | $ | 528,000 | $ | 533,009 | ||||
AbbVie, Inc., 2.5%, 5/14/20 | 2,055,000 | 2,031,898 |
28
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Pharmaceuticals - continued | ||||||||
Actavis Funding SCS, 3.8%, 3/15/25 | $ | 403,000 | $ | 399,348 | ||||
Actavis Funding SCS, 4.85%, 6/15/44 | 111,000 | 106,696 | ||||||
Bayer AG, 2.375% to 10/02/22, FRN to 4/02/75 | EUR | 475,000 | 496,462 | |||||
Bayer AG, 3.00% to 7/01/20, FRN to 7/01/75 | EUR | 595,000 | 660,835 | |||||
Biogen, Inc., 5.2%, 9/15/45 | $ | 755,000 | 761,415 | |||||
Celgene Corp., 1.9%, 8/15/17 | 483,000 | 486,937 | ||||||
Celgene Corp., 2.875%, 8/15/20 | 1,545,000 | 1,554,803 | ||||||
Forest Laboratories, Inc., 4.375%, 2/01/19 (n) | 911,000 | 958,431 | ||||||
Gilead Sciences, Inc., 2.35%, 2/01/20 | 450,000 | 453,882 | ||||||
Gilead Sciences, Inc., 3.7%, 4/01/24 | 988,000 | 1,020,839 | ||||||
Gilead Sciences, Inc., 4.5%, 2/01/45 | 326,000 | 316,276 | ||||||
Gilead Sciences, Inc., 4.75%, 3/01/46 | 584,000 | 590,761 | ||||||
Mylan, Inc., 2.55%, 3/28/19 | 216,000 | 211,616 | ||||||
Watson Pharmaceuticals, Inc., 1.875%, 10/01/17 | 531,000 | 530,021 | ||||||
|
| |||||||
$ | 11,113,229 | |||||||
Printing & Publishing - 0.0% | ||||||||
Moody’s Corp., 4.875%, 2/15/24 | $ | 670,000 | $ | 713,529 | ||||
Railroad & Shipping - 0.0% | ||||||||
Union Pacific Corp., 3.875%, 2/01/55 | $ | 300,000 | $ | 264,049 | ||||
Real Estate - Apartment - 0.1% | ||||||||
Deutsche Annington Finance B.V., 2.125%, 7/09/22 | EUR | 500,000 | $ | 564,369 | ||||
Deutsche Annington Finance B.V., FRN, 4%, 12/29/49 | EUR | 500,000 | 538,828 | |||||
Deutsche Wohnen AG, 1.375%, 7/24/20 | EUR | 700,000 | 774,546 | |||||
|
| |||||||
$ | 1,877,743 | |||||||
Real Estate - Office - 0.0% | ||||||||
Boston Properties, Inc., REIT, 3.125%, 9/01/23 | $ | 669,000 | $ | 649,643 | ||||
Real Estate - Retail - 0.1% | ||||||||
Hammerson PLC, 2.75%, 9/26/19 | EUR | 300,000 | $ | 351,618 | ||||
Simon Property Group, Inc., REIT, 5.65%, 2/01/20 | $ | 640,000 | 724,023 | |||||
|
| |||||||
$ | 1,075,641 | |||||||
Retailers - 0.3% | ||||||||
Dollar General Corp., 4.125%, 7/15/17 | $ | 500,000 | $ | 512,770 | ||||
Dollar General Corp., 3.25%, 4/15/23 | 206,000 | 196,784 | ||||||
Dollar General Corp., 4.15%, 11/01/25 | 454,000 | 451,021 | ||||||
Gap, Inc., 5.95%, 4/12/21 | 738,000 | 784,700 | ||||||
Home Depot, Inc., 2.625%, 6/01/22 | 1,400,000 | 1,408,786 | ||||||
Marks & Spencer PLC, 4.75%, 6/12/25 | GBP | 300,000 | 497,368 | |||||
|
| |||||||
$ | 3,851,429 |
29
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
Specialty Chemicals - 0.0% | ||||||||
Ecolab, Inc., 2.625%, 7/08/25 | EUR | 325,000 | $ | 379,638 | ||||
Supermarkets - 0.1% | ||||||||
Carrefour S.A., 1.75%, 7/15/22 | EUR | 425,000 | $ | 484,317 | ||||
Loblaw Cos. Ltd., 4.86%, 9/12/23 | CAD | 725,000 | 614,215 | |||||
Morrison (WM) Supermarkets, 3.5%, 7/27/26 | GBP | 200,000 | 276,739 | |||||
|
| |||||||
$ | 1,375,271 | |||||||
Supranational - 0.1% | ||||||||
International Bank for Reconstruction and Development, 4.25%, 6/24/25 | AUD | 440,000 | $ | 343,770 | ||||
International Finance Corp., 3.25%, 7/22/19 | AUD | 635,000 | 466,203 | |||||
|
| |||||||
$ | 809,973 | |||||||
Telecommunications - Wireless - 0.2% | ||||||||
America Movil S.A.B. de C.V., 1%, 6/04/18 | EUR | 200,000 | $ | 221,885 | ||||
America Movil S.A.B. de C.V., 4.75%, 6/28/22 | EUR | 500,000 | 661,951 | |||||
American Tower Corp., REIT, 4.7%, 3/15/22 | $ | 167,000 | 175,354 | |||||
American Tower Corp., REIT, 3.5%, 1/31/23 | 502,000 | 486,386 | ||||||
American Tower Corp., REIT, 4%, 6/01/25 | 1,250,000 | 1,235,275 | ||||||
Bharti Airtel International B.V., 3.375%, 5/20/21 (n) | EUR | 266,000 | 305,553 | |||||
SBA Tower Trust, 2.898%, 10/15/44 (n) | $ | 588,000 | 584,596 | |||||
|
| |||||||
$ | 3,671,000 | |||||||
Telephone Services - 0.1% | ||||||||
TDC A/S Callable Medium Term Note Fixed, 1.75%, 2/27/27 | EUR | 600,000 | $ | 573,113 | ||||
TELUS Corp., 5.05%, 7/23/20 | CAD | 734,000 | 624,276 | |||||
|
| |||||||
$ | 1,197,389 | |||||||
Tobacco - 0.5% | ||||||||
Altria Group, Inc., 2.85%, 8/09/22 | $ | 1,460,000 | $ | 1,443,216 | ||||
B.A.T. International Finance PLC, 0.875%, 10/13/23 | EUR | 750,000 | 795,459 | |||||
B.A.T. International Finance PLC, 2%, 3/13/45 | EUR | 450,000 | 431,243 | |||||
Imperial Tobacco Finance PLC, 4.25%, 7/21/25 (n) | $ | 1,324,000 | 1,355,110 | |||||
Reynolds American, Inc., 8.125%, 6/23/19 (n) | 434,000 | 513,176 | ||||||
Reynolds American, Inc., 3.25%, 6/12/20 | 2,454,000 | 2,514,081 | ||||||
Reynolds American, Inc., 4.45%, 6/12/25 | 255,000 | 266,090 | ||||||
Reynolds American, Inc., 5.7%, 8/15/35 | 359,000 | 392,720 | ||||||
|
| |||||||
$ | 7,711,095 | |||||||
Transportation - Services - 0.1% | ||||||||
ERAC USA Finance Co., 2.75%, 3/15/17 (n) | $ | 192,000 | $ | 195,431 | ||||
ERAC USA Finance LLC, 7%, 10/15/37 (n) | 627,000 | 770,815 | ||||||
Heathrow Funding Ltd., 4.625%, 10/31/48 | GBP | 225,000 | 369,406 | |||||
Hit Finance B.V., 4.875%, 10/27/21 | EUR | 300,000 | 393,700 | |||||
|
| |||||||
$ | 1,729,352 |
30
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Bonds - continued | ||||||||
U.S. Government Agencies and Equivalents - 0.1% | ||||||||
Small Business Administration, 5.09%, 10/01/25 | $ | 41,803 | $ | 45,569 | ||||
Small Business Administration, 5.21%, 1/01/26 | 607,063 | 659,154 | ||||||
Small Business Administration, 5.31%, 5/01/27 | 419,517 | 467,310 | ||||||
Small Business Administration, 2.22%, 3/01/33 | 1,093,936 | 1,089,322 | ||||||
|
| |||||||
$ | 2,261,355 | |||||||
U.S. Treasury Obligations - 1.7% | ||||||||
U.S. Treasury Bonds, 4.5%, 8/15/39 | $ | 8,763,600 | $ | 11,374,311 | ||||
U.S. Treasury Bonds, 3.625%, 2/15/44 | 2,895,000 | 3,304,709 | ||||||
U.S. Treasury Notes, 4.75%, 8/15/17 (f) | 3,896,000 | 4,175,265 | ||||||
U.S. Treasury Notes, 3.5%, 5/15/20 (f) | 5,542,000 | 6,027,862 | ||||||
U.S. Treasury Notes, 2.75%, 2/15/24 | 530,000 | 558,805 | ||||||
|
| |||||||
$ | 25,440,952 | |||||||
Utilities - Electric Power - 0.4% | ||||||||
American Electric Power Co., Inc., 1.65%, 12/15/17 | $ | 528,000 | $ | 526,466 | ||||
CMS Energy Corp., 5.05%, 3/15/22 | 631,000 | 700,127 | ||||||
DTE Electric Co., 3.7%, 3/15/45 | 700,000 | 654,793 | ||||||
E.On International Finance, 6.375%, 6/07/32 | GBP | 250,000 | 470,530 | |||||
EDP Finance B.V., 4.125%, 1/20/21 | EUR | 500,000 | 603,242 | |||||
Enel Finance International N.V., 5.625%, 8/14/24 | GBP | 250,000 | 448,034 | |||||
Enel Finance International N.V., 4.875%, 3/11/20 | EUR | 350,000 | 452,011 | |||||
Enel Finance International N.V., 1.966%, 1/27/25 | EUR | 600,000 | 679,742 | |||||
Enel S.p.A., 6.25%, 6/20/19 | GBP | 300,000 | 524,569 | |||||
PPL Capital Funding, Inc., 5%, 3/15/44 | $ | 331,000 | 350,853 | |||||
PPL WEM Holdings PLC, 5.375%, 5/01/21 (n) | 189,000 | 208,978 | ||||||
Progress Energy, Inc., 7.05%, 3/15/19 | 460,000 | 528,881 | ||||||
|
| |||||||
$ | 6,148,226 | |||||||
Total Bonds (Identified Cost, $553,652,560) | $ | 530,340,262 | ||||||
Convertible Preferred Stocks - 0.2% | ||||||||
Pharmaceuticals - 0.0% | ||||||||
Allergan PLC, 5.5% | 640 | $ | 669,843 | |||||
Telephone Services - 0.1% | ||||||||
Frontier Communications Corp., 11.125% | 10,610 | $ | 1,051,769 | |||||
Utilities - Electric Power - 0.1% | ||||||||
Exelon Corp., 6.5% | 48,140 | $ | 2,010,326 | |||||
Total Convertible Preferred Stocks (Identified Cost, $3,887,134) | $ | 3,731,938 |
31
Table of Contents
Portfolio of Investments – continued
Preferred Stocks - 0.7% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Consumer Products - 0.5% | ||||||||
Henkel AG & Co. KGaA | 73,507 | $ | 7,978,116 | |||||
Telephone Services - 0.2% | ||||||||
Telecom Italia S.p.A. | 1,721,693 | $ | 1,936,805 | |||||
Total Preferred Stocks (Identified Cost, $4,367,929) | $ | 9,914,921 | ||||||
Money Market Funds - 5.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.12%, at Cost and Net Asset Value (v) | 83,946,356 | $ | 83,946,356 | |||||
Total Investments (Identified Cost, $1,331,936,106) | $ | 1,517,422,808 | ||||||
Other Assets, Less Liabilities - 0.2% | 3,481,233 | |||||||
Net Assets - 100.0% | $ | 1,520,904,041 |
(a) | Non-income producing security. |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
(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 $42,462,111 representing 2.8% of net assets. |
(v) | Underlying affiliated fund 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 | |||||||
Cent LP, 2013-17A, “A1”, CLO, FRN, 1.622%, 1/30/25 | 9/26/14 | $1,209,140 | $1,204,966 | |||||||
Dryden Senior Loan Fund, 2013-26A, “A”, CLO, FRN, 1.42%, 7/15/25 | 9/26/14 | 1,542,171 | 1,533,112 | |||||||
Gulf Stream Sextant CLO Ltd., 2007-1A, “A1A”, FRN, 0.559%, 6/17/21 | 4/08/15 | 1,013,144 | 1,012,650 | |||||||
Hyundai Capital America, 2.4%, 10/30/18 | 10/27/15 | 1,233,852 | 1,234,273 | |||||||
ING Investment Management Ltd., 2013-2A, “A1”, CLO, FRN, 1.47%, 4/25/25 | 9/26/14 | 1,403,598 | 1,396,644 | |||||||
KKR Financial CLO Ltd., 2007-1A, “A”, FRN, 0.67%, 5/15/21 | 4/08/15 | 1,393,015 | 1,395,207 | |||||||
Republic of Indonesia, 2.875%, 7/08/21 | 7/02/14 | 543,251 | 437,100 | |||||||
Total Restricted Securities | $8,213,952 | |||||||||
% of Net assets | 0.5% |
32
Table of Contents
Portfolio of Investments – continued
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
CLO | Collateralized Loan Obligation |
FRN | Floating Rate Note. Interest rate resets periodically and the current rate may not be the rate reported at period end. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
TBA | To Be Announced |
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:
AUD | Australian Dollar |
CAD | Canadian Dollar |
CHF | Swiss Franc |
CZK | Czech Koruna |
DKK | Danish Krone |
EUR | Euro |
GBP | British Pound |
ILS | Israeli Sheqel |
JPY | Japanese Yen |
KRW | Korean Won |
MXN | Mexican Peso |
MYR | Malaysian Ringgit |
NOK | Norwegian Krone |
NZD | New Zealand Dollar |
PLN | Polish Zloty |
SEK | Swedish Krona |
SGD | Singapore Dollar |
THB | Thailand Baht |
TRY | Turkish Lira |
ZAR | South African Rand |
Derivative Contracts at 10/31/15
Forward Foreign Currency Exchange Contracts at 10/31/15
Type | Currency | Counter- party | Contracts Deliver/ | Settlement Date Range | In Exchange For | Contracts at Value | Net (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | CAD | Goldman Sachs International | 78,486 | 1/15/16 | $59,587 | $60,000 | $413 | |||||||||||||||||
BUY | CAD | Merrill Lynch International | 7,839,000 | 1/15/16 | 5,948,361 | 5,992,691 | 44,330 | |||||||||||||||||
SELL | DKK | Goldman Sachs International | 1,768,553 | 1/15/16 | 267,718 | 261,358 | 6,360 | |||||||||||||||||
SELL | EUR | Goldman Sachs International | 8,138,880 | 1/15/16 | 9,197,998 | 8,962,556 | 235,442 |
33
Table of Contents
Portfolio of Investments – continued
Forward Foreign Currency Exchange Contracts at 10/31/15 - continued
Type | Currency | Counter- party | Contracts Deliver/ | Settlement Date Range | In Exchange For | Contracts at Value | Net (Depreciation) | |||||||||||||||||
Asset Derivatives - continued | ||||||||||||||||||||||||
SELL | EUR | Merrill Lynch International | 1,050,000 | 1/15/16 | $1,161,764 | $1,156,263 | $5,501 | |||||||||||||||||
BUY | GBP | BNP Paribas S.A. | 3,593,488 | 1/15/16 | 5,468,110 | 5,538,292 | 70,182 | |||||||||||||||||
BUY | GBP | Citibank N.A. | 290,000 | 1/15/16 | 445,368 | 446,948 | 1,580 | |||||||||||||||||
BUY | KRW | JPMorgan Chase Bank | 8,060,587,000 | 1/13/16 | 6,962,767 | 7,053,771 | 91,004 | |||||||||||||||||
SELL | NOK | Goldman Sachs International | 66,375,850 | 1/15/16 | 7,976,975 | 7,803,073 | 173,902 | |||||||||||||||||
BUY | NZD | Goldman Sachs International | 4,236,228 | 1/15/16 | 2,739,600 | 2,852,993 | 113,393 | |||||||||||||||||
BUY | NZD | Westpac Banking Corp. | 6,061,013 | 1/15/16 | 3,935,597 | 4,081,940 | 146,343 | |||||||||||||||||
BUY | SGD | Barclays Bank PLC | 1,036,000 | 1/15/16 | 727,201 | 737,706 | 10,505 | |||||||||||||||||
BUY | TRY | JPMorgan Chase Bank | 2,489,000 | 1/15/16 | 815,317 | 835,454 | 20,137 | |||||||||||||||||
|
| |||||||||||||||||||||||
$919,092 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
SELL | AUD | Westpac Banking Corp. | 7,380,574 | 1/15/16 | $5,235,166 | $5,243,603 | $(8,437 | ) | ||||||||||||||||
BUY | CAD | Goldman Sachs International | 4,998,662 | 1/15/16 | 3,828,669 | 3,821,334 | (7,335 | ) | ||||||||||||||||
SELL | CAD | Merrill Lynch International | 6,780,255 | 1/15/16 | 5,171,799 | 5,183,310 | (11,511 | ) | ||||||||||||||||
BUY | CHF | UBS AG | 4,766,000 | 1/15/16 | 4,910,086 | 4,834,897 | (75,189 | ) | ||||||||||||||||
BUY | CZK | Morgan Stanley Capital Services | 12,895,000 | 1/15/16 | 537,987 | 524,599 | (13,388 | ) | ||||||||||||||||
BUY | EUR | Barclays Bank PLC | 1,794,000 | 1/15/16 | 2,040,394 | 1,975,558 | (64,836 | ) | ||||||||||||||||
BUY | EUR | Deutsche Bank AG | 8,500,114 | 12/17/15 | 9,642,054 | 9,353,948 | (288,106 | ) | ||||||||||||||||
BUY | EUR | Goldman Sachs International | 3,893,532 | 1/15/16 | 4,384,166 | 4,287,568 | (96,598 | ) | ||||||||||||||||
BUY | EUR | JPMorgan Chase Bank | 10,141,398 | 1/15/16 | 11,421,893 | 11,167,734 | (254,159 | ) |
34
Table of Contents
Portfolio of Investments – continued
Forward Foreign Currency Exchange Contracts at 10/31/15 - continued
Type | Currency | Counter- party | Contracts Deliver/ | Settlement Date Range | In Exchange For | Contracts at Value | Net (Depreciation) | |||||||||||||||||
Liability Derivatives - continued | ||||||||||||||||||||||||
SELL | EUR | Goldman Sachs International | 2,310,895 | 1/15/16 | $2,540,008 | $2,544,764 | $(4,756 | ) | ||||||||||||||||
BUY | GBP | Goldman Sachs International | 384,000 | 1/15/16 | 592,704 | 591,822 | (882 | ) | ||||||||||||||||
SELL | GBP | JPMorgan Chase Bank | 3,880,000 | 1/15/16 | 5,944,628 | 5,979,864 | (35,236 | ) | ||||||||||||||||
BUY | ILS | Goldman Sachs International | 2,402,000 | 1/15/16 | 625,463 | 621,290 | (4,173 | ) | ||||||||||||||||
BUY | JPY | Goldman Sachs International | 113,000,000 | 1/15/16 | 943,644 | 937,837 | (5,807 | ) | ||||||||||||||||
BUY | JPY | Credit Suisse Group | 1,565,048,167 | 1/15/16 | 13,074,810 | 12,989,022 | (85,788 | ) | ||||||||||||||||
SELL | MXN | Goldman Sachs International | 79,602,811 | 1/15/16 | 4,761,176 | 4,793,724 | (32,548 | ) | ||||||||||||||||
BUY | MYR | BNP Paribas S.A. | 6,849,863 | 11/23/15 | 1,599,128 | 1,591,906 | (7,222 | ) | ||||||||||||||||
SELL | NZD | JPMorgan Chase Bank | 17,627,000 | 1/15/16 | 11,706,413 | 11,871,342 | (164,929 | ) | ||||||||||||||||
SELL | NZD | Westpac Banking Corp. | 15,911,122 | 1/15/16 | 10,484,236 | 10,715,741 | (231,505 | ) | ||||||||||||||||
BUY | PLN | Morgan Stanley Capital Services | 4,070,803 | 1/15/16 | 1,076,931 | 1,051,331 | (25,600 | ) | ||||||||||||||||
BUY | SEK | Goldman Sachs International | 11,878,000 | 1/15/16 | 1,443,895 | 1,392,983 | (50,912 | ) | ||||||||||||||||
BUY | THB | JPMorgan Chase Bank | 213,255,000 | 11/12/15 | 6,014,733 | 5,979,320 | (35,413 | ) | ||||||||||||||||
SELL | THB | JPMorgan Chase Bank | 157,181,250 | 11/12/15 | 4,327,060 | 4,407,104 | (80,044 | ) | ||||||||||||||||
BUY | ZAR | JPMorgan Chase Bank | 13,302,933 | 1/15/16 | 964,274 | 948,475 | (15,799 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$(1,600,173 | ) | |||||||||||||||||||||||
|
|
35
Table of Contents
Portfolio of Investments – continued
Futures Contracts at 10/31/15
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 2 yr (Short) | USD | 71 | $15,524,594 | December - 2015 | $7,517 | |||||||||||||
Euro-Bund 10yr (Long) | EUR | 30 | 5,186,279 | December - 2015 | 102,861 | |||||||||||||
|
| |||||||||||||||||
$110,378 | ||||||||||||||||||
|
| |||||||||||||||||
Liability Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 36 | $4,596,750 | December - 2015 | $(21,505 | ) | ||||||||||||
|
|
At October 31, 2015, the fund had cash collateral of $320,000 and other liquid securities with an aggregate value of $205,379 to cover any commitments for certain derivative contracts. Cash collateral is comprised of “Restricted cash” in the Statement of Assets and Liabilities.
See Notes to Financial Statements
36
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/15
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets | ||||
Investments | ||||
Non-affiliated issuers, at value (identified cost, $1,247,989,750) | $1,433,476,452 | |||
Underlying affiliated funds, at cost and value | 83,946,356 | |||
Total investments, at value (identified cost, $1,331,936,106) | $1,517,422,808 | |||
Cash | 90,351 | |||
Restricted cash | 320,000 | |||
Foreign currency, at value (identified cost, $160,472) | 160,471 | |||
Receivables for | ||||
Forward foreign currency exchange contracts | 919,092 | |||
Daily variation margin on open futures contracts | 5,565 | |||
Investments sold | 1,176,078 | |||
Fund shares sold | 6,064,433 | |||
Interest and dividends | 6,791,374 | |||
Receivable from investment adviser | 30,433 | |||
Total assets | $1,532,980,605 | |||
Liabilities | ||||
Payables for | ||||
Forward foreign currency exchange contracts | $1,600,173 | |||
Investments purchased | 5,225,822 | |||
TBA purchase commitments | 2,801,642 | |||
Fund shares reacquired | 1,539,797 | |||
Payable to affiliates | ||||
Shareholder servicing costs | 606,531 | |||
Distribution and service fees | 49,002 | |||
Payable for independent Trustees’ compensation | 5,390 | |||
Deferred country tax expense payable | 6,796 | |||
Accrued expenses and other liabilities | 241,411 | |||
Total liabilities | $12,076,564 | |||
Net assets | $1,520,904,041 | |||
Net assets consist of | ||||
Paid-in capital | $1,298,240,887 | |||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies (net of $6,796 deferred country tax) | 184,797,083 | |||
Accumulated net realized gain (loss) on investments and foreign currency | 37,544,574 | |||
Undistributed net investment income | 321,497 | |||
Net assets | $1,520,904,041 | |||
Shares of beneficial interest outstanding | 92,179,876 |
37
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $802,411,746 | 48,647,554 | $16.49 | |||||||||
Class B | 60,196,936 | 3,579,267 | 16.82 | |||||||||
Class C | 323,240,992 | 19,466,617 | 16.60 | |||||||||
Class I | 212,571,289 | 13,006,241 | 16.34 | |||||||||
Class R1 | 3,195,427 | 193,155 | 16.54 | |||||||||
Class R2 | 11,576,514 | 707,951 | 16.35 | |||||||||
Class R3 | 11,367,671 | 691,299 | 16.44 | |||||||||
Class R4 | 10,758,012 | 651,485 | 16.51 | |||||||||
Class R5 | 85,585,454 | 5,236,307 | 16.34 |
(a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $17.50 [100 / 94.25 x $16.49]. 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 R5. |
See Notes to Financial Statements
38
Table of Contents
Financial Statements
Year ended 10/31/15
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 | ||||
Income | ||||
Dividends | $25,844,391 | |||
Interest | 14,716,301 | |||
Dividends from underlying affiliated funds | 66,006 | |||
Foreign taxes withheld | (1,213,255 | ) | ||
Total investment income | $39,413,443 | |||
Expenses | ||||
Management fee | $12,577,553 | |||
Distribution and service fees | 5,943,406 | |||
Shareholder servicing costs | 1,705,430 | |||
Administrative services fee | 247,476 | |||
Independent Trustees’ compensation | 26,817 | |||
Custodian fee | 307,538 | |||
Shareholder communications | 103,862 | |||
Audit and tax fees | 69,586 | |||
Legal fees | 12,061 | |||
Miscellaneous | 229,342 | |||
Total expenses | $21,223,071 | |||
Fees paid indirectly | (236 | ) | ||
Reduction of expenses by investment adviser and distributor | (2,208,727 | ) | ||
Net expenses | $19,014,108 | |||
Net investment income | $20,399,335 | |||
Realized and unrealized gain (loss) on investments and foreign currency | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments (net of $1,218 country tax) | $48,397,180 | |||
Futures contracts | (233,476 | ) | ||
Foreign currency | 2,796,503 | |||
Net realized gain (loss) on investments and foreign currency | $50,960,207 | |||
Change in unrealized appreciation (depreciation) | ||||
Investments (net of $6,796 increase in deferred country tax) | $(71,098,400 | ) | ||
Futures contracts | 113,423 | |||
Translation of assets and liabilities in foreign currencies | 203,857 | |||
Net unrealized gain (loss) on investments and foreign currency translation | $(70,781,120 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency | $(19,820,913 | ) | ||
Change in net assets from operations | $578,422 |
See Notes to Financial Statements
39
Table of Contents
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
Years ended 10/31 | ||||||||
2015 | 2014 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $20,399,335 | $23,433,010 | ||||||
Net realized gain (loss) on investments and foreign currency | 50,960,207 | 17,562,570 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (70,781,120 | ) | 24,155,757 | |||||
Change in net assets from operations | $578,422 | $65,151,337 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $(13,762,055 | ) | $(23,128,568 | ) | ||||
From net realized gain on investments | (16,165,256 | ) | (5,029,471 | ) | ||||
Total distributions declared to shareholders | $(29,927,311 | ) | $(28,158,039 | ) | ||||
Change in net assets from fund share transactions | $97,459,362 | $244,027,546 | ||||||
Total change in net assets | $68,110,473 | $281,020,844 | ||||||
Net assets | ||||||||
At beginning of period | 1,452,793,568 | 1,171,772,724 | ||||||
At end of period (including undistributed net investment income of $321,497 and $6,143,059, respectively) | $1,520,904,041 | $1,452,793,568 |
See Notes to Financial Statements
40
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which 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 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.80 | $16.32 | $14.39 | $13.52 | $13.31 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.25 | $0.32 | $0.24 | $0.25 | $0.26 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.55 | 1.91 | 0.92 | 0.35 | ||||||||||||||
Total from investment operations | $0.03 | $0.87 | $2.15 | $1.17 | $0.61 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.16 | ) | $(0.32 | ) | $(0.22 | ) | $(0.30 | ) | $(0.40 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.34 | ) | $(0.39 | ) | $(0.22 | ) | $(0.30 | ) | $(0.40 | ) | ||||||||||
Net asset value, end of period (x) | $16.49 | $16.80 | $16.32 | $14.39 | $13.52 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 0.20 | 5.41 | 15.13 | 8.81 | 4.69 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.28 | 1.27 | 1.28 | 1.30 | 1.30 | |||||||||||||||
Expenses after expense reductions (f) | 1.13 | 1.17 | 1.22 | 1.25 | 1.25 | |||||||||||||||
Net investment income | 1.51 | 1.93 | 1.60 | 1.80 | 1.89 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $802,412 | $772,769 | $657,312 | $509,475 | $477,216 |
See Notes to Financial Statements
41
Table of Contents
Financial Highlights – continued
Class B | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $17.21 | $16.70 | $14.73 | $13.83 | $13.60 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.13 | $0.20 | $0.13 | $0.15 | $0.16 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.57 | 1.95 | 0.94 | 0.36 | ||||||||||||||
Total from investment operations | $(0.09 | ) | $0.77 | $2.08 | $1.09 | $0.52 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.12 | ) | $(0.19 | ) | $(0.11 | ) | $(0.19 | ) | $(0.29 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.30 | ) | $(0.26 | ) | $(0.11 | ) | $(0.19 | ) | $(0.29 | ) | ||||||||||
Net asset value, end of period (x) | $16.82 | $17.21 | $16.70 | $14.73 | $13.83 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (0.53 | ) | 4.66 | 14.20 | 8.01 | 3.94 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 2.03 | 2.01 | 2.03 | 2.05 | 2.05 | |||||||||||||||
Expenses after expense reductions (f) | 1.88 | 1.92 | 1.97 | 2.00 | 2.00 | |||||||||||||||
Net investment income | 0.75 | 1.19 | 0.86 | 1.05 | 1.14 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $60,197 | $66,528 | $64,457 | $59,468 | $56,479 | |||||||||||||||
Class C | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $17.00 | $16.50 | $14.56 | $13.67 | $13.45 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.13 | $0.20 | $0.13 | $0.15 | $0.16 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.23 | ) | 0.57 | 1.92 | 0.93 | 0.36 | ||||||||||||||
Total from investment operations | $(0.10 | ) | $0.77 | $2.05 | $1.08 | $0.52 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.12 | ) | $(0.20 | ) | $(0.11 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.30 | ) | $(0.27 | ) | $(0.11 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
Net asset value, end of period (x) | $16.60 | $17.00 | $16.50 | $14.56 | $13.67 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (0.59 | ) | 4.70 | 14.19 | 8.05 | 3.92 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 2.03 | 2.02 | 2.03 | 2.05 | 2.05 | |||||||||||||||
Expenses after expense reductions (f) | 1.88 | 1.92 | 1.97 | 2.00 | 2.00 | |||||||||||||||
Net investment income | 0.75 | 1.17 | 0.85 | 1.05 | 1.14 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $323,241 | $308,269 | $245,944 | $186,974 | $171,596 |
See Notes to Financial Statements
42
Table of Contents
Financial Highlights – continued
Class I | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.65 | $16.17 | $14.27 | $13.41 | $13.20 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.29 | $0.35 | $0.28 | $0.27 | $0.29 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.56 | 1.88 | 0.92 | 0.35 | ||||||||||||||
Total from investment operations | $0.07 | $0.91 | $2.16 | $1.19 | $0.64 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.36 | ) | $(0.26 | ) | $(0.33 | ) | $(0.43 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.38 | ) | �� | $(0.43 | ) | $(0.26 | ) | $(0.33 | ) | $(0.43 | ) | |||||||||
Net asset value, end of period (x) | $16.34 | $16.65 | $16.17 | $14.27 | $13.41 | |||||||||||||||
Total return (%) (r)(s)(x) | 0.45 | 5.72 | 15.33 | 9.08 | 5.00 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.03 | 1.02 | 1.03 | 1.06 | 1.05 | |||||||||||||||
Expenses after expense reductions (f) | 0.88 | 0.92 | 0.97 | 1.00 | 1.00 | |||||||||||||||
Net investment income | 1.75 | 2.14 | 1.84 | 2.00 | 2.17 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $212,571 | $193,307 | $108,175 | $67,970 | $26,765 | |||||||||||||||
Class R1 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.93 | $16.44 | $14.50 | $13.62 | $13.40 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.13 | $0.20 | $0.13 | $0.15 | $0.15 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.23 | ) | 0.56 | 1.92 | 0.92 | 0.37 | ||||||||||||||
Total from investment operations | $(0.10 | ) | $0.76 | $2.05 | $1.07 | $0.52 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.11 | ) | $(0.20 | ) | $(0.11 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.29 | ) | $(0.27 | ) | $(0.11 | ) | $(0.19 | ) | $(0.30 | ) | ||||||||||
Net asset value, end of period (x) | $16.54 | $16.93 | $16.44 | $14.50 | $13.62 | |||||||||||||||
Total return (%) (r)(s)(x) | (0.55 | ) | 4.63 | 14.26 | 8.01 | 3.95 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 2.03 | 2.01 | 2.03 | 2.05 | 2.05 | |||||||||||||||
Expenses after expense reductions (f) | 1.88 | 1.92 | 1.97 | 2.00 | 2.00 | |||||||||||||||
Net investment income | 0.75 | 1.18 | 0.87 | 1.05 | 1.13 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $3,195 | $3,518 | $3,613 | $3,124 | $3,126 |
See Notes to Financial Statements
43
Table of Contents
Financial Highlights – continued
Class R2 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.68 | $16.20 | $14.29 | $13.43 | $13.22 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.21 | $0.28 | $0.21 | $0.21 | $0.22 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.55 | 1.88 | 0.92 | 0.36 | ||||||||||||||
Total from investment operations | $(0.01 | ) | $0.83 | $2.09 | $1.13 | $0.58 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.14 | ) | $(0.28 | ) | $(0.18 | ) | $(0.27 | ) | $(0.37 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.32 | ) | $(0.35 | ) | $(0.18 | ) | $(0.27 | ) | $(0.37 | ) | ||||||||||
Net asset value, end of period (x) | $16.35 | $16.68 | $16.20 | $14.29 | $13.43 | |||||||||||||||
Total return (%) (r)(s)(x) | (0.03 | ) | 5.16 | 14.79 | 8.55 | 4.46 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.53 | 1.51 | 1.53 | 1.56 | 1.55 | |||||||||||||||
Expenses after expense reductions (f) | 1.38 | 1.42 | 1.47 | 1.50 | 1.50 | |||||||||||||||
Net investment income | 1.25 | 1.69 | 1.38 | 1.54 | 1.64 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $11,577 | $9,812 | $10,528 | $8,438 | $5,687 | |||||||||||||||
Class R3 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.75 | $16.27 | $14.35 | $13.48 | $13.27 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.25 | $0.32 | $0.24 | $0.24 | $0.25 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.55 | 1.90 | 0.93 | 0.36 | ||||||||||||||
Total from investment operations | $0.03 | $0.87 | $2.14 | $1.17 | $0.61 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.16 | ) | $(0.32 | ) | $(0.22 | ) | $(0.30 | ) | $(0.40 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.34 | ) | $(0.39 | ) | $(0.22 | ) | $(0.30 | ) | $(0.40 | ) | ||||||||||
Net asset value, end of period (x) | $16.44 | $16.75 | $16.27 | $14.35 | $13.48 | |||||||||||||||
Total return (%) (r)(s)(x) | 0.19 | 5.42 | 15.10 | 8.84 | 4.72 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.27 | 1.27 | 1.28 | 1.31 | 1.30 | |||||||||||||||
Expenses after expense reductions (f) | 1.13 | 1.17 | 1.22 | 1.25 | 1.25 | |||||||||||||||
Net investment income | 1.50 | 1.93 | 1.59 | 1.77 | 1.87 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $11,368 | $13,576 | $12,423 | $9,575 | $6,308 |
See Notes to Financial Statements
44
Table of Contents
Financial Highlights – continued
Class R4 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $16.82 | $16.33 | $14.41 | $13.52 | $13.30 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.29 | $0.36 | $0.27 | $0.30 | $0.29 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 0.56 | 1.91 | 0.90 | 0.36 | ||||||||||||||
Total from investment operations | $0.07 | $0.92 | $2.18 | $1.20 | $0.65 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.20 | ) | $(0.36 | ) | $(0.26 | ) | $(0.31 | ) | $(0.43 | ) | ||||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | — | |||||||||||||
Total distributions declared to shareholders | $(0.38 | ) | $(0.43 | ) | $(0.26 | ) | $(0.31 | ) | $(0.43 | ) | ||||||||||
Net asset value, end of period (x) | $16.51 | $16.82 | $16.33 | $14.41 | $13.52 | |||||||||||||||
Total return (%) (r)(s)(x) | 0.45 | 5.72 | 15.32 | 9.06 | 5.04 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.03 | 1.02 | 1.04 | 1.05 | 1.05 | |||||||||||||||
Expenses after expense reductions (f) | 0.88 | 0.92 | 0.97 | 1.00 | 1.00 | |||||||||||||||
Net investment income | 1.73 | 2.14 | 1.77 | 2.19 | 2.16 | |||||||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | 46 | |||||||||||||||
Net assets at end of period (000 omitted) | $10,758 | $10,042 | $7,938 | $2,642 | $32,383 |
Class R5 | Years ended 10/31 | |||||||||||||||
2015 | 2014 | 2013 | 2012(i) | |||||||||||||
Net asset value, beginning of period | $16.65 | $16.18 | $14.27 | $13.29 | ||||||||||||
Income (loss) from investment operations | ||||||||||||||||
Net investment income (d) | $0.30 | $0.37 | $0.29 | $0.07 | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | (0.21 | ) | 0.55 | 1.89 | 1.01 | |||||||||||
Total from investment operations | $0.09 | $0.92 | $2.18 | $1.08 | ||||||||||||
Less distributions declared to shareholders | ||||||||||||||||
From net investment income | $(0.22 | ) | $(0.38 | ) | $(0.27 | ) | $(0.10 | ) | ||||||||
From net realized gain on investments | (0.18 | ) | (0.07 | ) | — | — | ||||||||||
Total distributions declared to shareholders | $(0.40 | ) | $(0.45 | ) | $(0.27 | ) | $(0.10 | ) | ||||||||
Net asset value, end of period (x) | $16.34 | $16.65 | $16.18 | $14.27 | ||||||||||||
Total return (%) (r)(s)(x) | 0.56 | 5.73 | 15.49 | 8.16 | (n) | |||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||
Expenses before expense reductions (f) | 0.93 | 0.93 | 0.94 | 1.00 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.78 | 0.83 | 0.88 | 0.94 | (a) | |||||||||||
Net investment income | 1.85 | 2.25 | 1.95 | 1.24 | (a) | |||||||||||
Portfolio turnover | 54 | 23 | 40 | 30 | ||||||||||||
Net assets at end of period (000 omitted) | $85,585 | $74,972 | $61,383 | $44,263 |
See Notes to Financial Statements
45
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Financial Highlights – continued
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(i) | For the period from the class inception, June 1, 2012, through the stated period end. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(t) | Total returns do not include any applicable sales charges. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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(1) Business and Organization
MFS Global Total Return Fund (the fund) is a diversified series of MFS Series Trust VI (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) Significant Accounting Policies
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
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 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 as provided by a third-party pricing service on the market or exchange on which they are primarily traded. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. 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 as provided by a third-party pricing service on the market on
47
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Notes to Financial Statements – continued
which they are primarily traded. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation as provided by a third-party pricing service on the market on which such futures contracts are primarily traded. 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. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting 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 on a frequent basis 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.
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Notes to Financial Statements – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as futures contracts and forward foreign currency exchange contracts. The following is a summary of the levels used as of October 31, 2015 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $454,739,505 | $— | $— | $454,739,505 | ||||||||||||
United Kingdom | 97,341,220 | — | — | 97,341,220 | ||||||||||||
Japan | — | 71,723,736 | — | 71,723,736 | ||||||||||||
Switzerland | 65,771,723 | — | — | 65,771,723 | ||||||||||||
Germany | 37,990,598 | — | — | 37,990,598 | ||||||||||||
France | 37,197,342 | — | — | 37,197,342 | ||||||||||||
Canada | 23,417,705 | — | — | 23,417,705 | ||||||||||||
Netherlands | 17,277,276 | — | — | 17,277,276 | ||||||||||||
Sweden | 14,135,253 | — | — | 14,135,253 | ||||||||||||
Other Countries | 50,009,544 | 33,532,301 | — | 83,541,845 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 27,702,308 | — | 27,702,308 | ||||||||||||
Non-U.S. Sovereign Debt | — | 256,566,102 | — | 256,566,102 | ||||||||||||
U.S. Corporate Bonds | — | 118,591,269 | — | 118,591,269 | ||||||||||||
Residential Mortgage-Backed Securities | — | 32,765,450 | — | 32,765,450 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 16,591,124 | — | 16,591,124 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 8,976,834 | — | 8,976,834 | ||||||||||||
Foreign Bonds | — | 69,147,162 | — | 69,147,162 | ||||||||||||
Mutual Funds | 83,946,356 | — | — | 83,946,356 | ||||||||||||
Total Investments | $881,826,522 | $635,596,286 | $— | $1,517,422,808 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $88,873 | $— | $— | $88,873 | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | (681,081 | ) | — | (681,081 | ) |
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Notes to Financial Statements – continued
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $6,644,617 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.
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 for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were futures contracts and forward foreign currency exchange contracts. 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 October 31, 2015 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Interest Rate | Interest Rate Futures | $110,378 | $(21,505) | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | 919,092 | (1,600,173) | |||||||
Total | $1,029,470 | $(1,621,678) |
(a) | The value of futures contracts includes cumulative appreciation (depreciation) as reported in the fund’s Portfolio of Investments. Only the current day variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities. |
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Notes to Financial Statements – continued
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended October 31, 2015 as reported in the Statement of Operations:
Risk | Futures Contracts | Foreign Currency | ||||||
Interest Rate | $(233,476 | ) | $— | |||||
Foreign Exchange | — | 3,840,599 | ||||||
Total | $(233,476 | ) | $3,840,599 |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the year ended October 31, 2015 as reported in the Statement of Operations:
Risk | Futures Contracts | Translation of Assets and Liabilities in Foreign Currencies | ||||||
Interest Rate | $113,423 | $— | ||||||
Foreign Exchange | — | 39,107 | ||||||
Total | $113,423 | $39,107 |
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 certain 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 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 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. Margin requirements are set by the clearing broker and the clearing house for cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options). 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 agreement and one amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated 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” or “Deposits with brokers.” Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
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Notes to Financial Statements – continued
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 certain 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 foreign currency.
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, an industry accepted settlement system. 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.
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Notes to Financial Statements – continued
Security Loans – Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co. (“Chase”), 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. Chase provides the fund with indemnification against Borrower default. In the event of Borrower default, Chase 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, Chase assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, Chase is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in “Interest” income in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At October 31, 2015, there were no securities on loan or collateral outstanding.
Dollar Roll Transactions – The fund enters into dollar roll transactions, with respect to mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, in which the fund sells mortgage-backed securities to financial institutions and simultaneously agrees to purchase similar (same issuer, type and coupon) securities at a later date at an agreed-upon price. During the period between the sale and repurchase in a dollar roll transaction the fund will not be entitled to receive interest and principal payments on the securities sold but is compensated by interest earned on the proceeds of the initial sale and by a lower purchase price on the securities to be repurchased which enhances the fund’s total return. The fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount
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Notes to Financial Statements – continued
is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund 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 purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. TBA securities resulting from these transactions are included in the Portfolio of Investments. TBA purchase (sale) commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
To mitigate this risk of loss on TBA securities and other types of forward settling mortgage-backed securities, 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 certain 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 securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded
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Notes to Financial Statements – continued
under such agreement are netted and one 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 October 31, 2015, 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. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities, passive foreign investment companies, wash sale loss deferrals, straddle loss deferrals, derivative transactions, and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
10/31/15 | 10/31/14 | |||||||
Ordinary income (including any short-term capital gains) | $15,749,709 | $23,128,568 | ||||||
Long-term capital gains | 14,177,602 | 5,029,471 | ||||||
Total distributions | $29,927,311 | $28,158,039 |
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The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 10/31/15 | ||||
Cost of investments | $1,348,944,004 | |||
Gross appreciation | 228,238,366 | |||
Gross depreciation | (59,759,562 | ) | ||
Net unrealized appreciation (depreciation) | $168,478,804 | |||
Undistributed ordinary income | 156,246 | |||
Undistributed long-term capital gain | 56,435,248 | |||
Other temporary differences | (2,407,144 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Year ended 10/31/15 | Year ended 10/31/14 | Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||
Class A | $7,466,123 | $13,928,723 | $8,677,069 | $2,833,860 | ||||||||||||
Class B | 443,853 | 747,446 | 706,492 | 267,205 | ||||||||||||
Class C | 2,153,590 | 3,208,700 | 3,382,639 | 1,049,903 | ||||||||||||
Class I | 2,348,470 | 3,060,675 | 2,158,677 | 469,212 | ||||||||||||
Class R1 | 22,574 | 41,617 | 36,298 | 14,227 | ||||||||||||
Class R2 | 80,980 | 171,283 | 106,492 | 44,914 | ||||||||||||
Class R3 | 125,213 | 254,280 | 147,674 | 53,083 | ||||||||||||
Class R4 | 127,731 | 196,389 | 120,086 | 33,990 | ||||||||||||
Class R5 | 993,521 | 1,519,455 | 829,829 | 263,077 | ||||||||||||
Total | $13,762,055 | $23,128,568 | $16,165,256 | $5,029,471 |
(3) Transactions with Affiliates
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.84% of the fund’s average daily net assets.
The investment adviser has agreed in writing to reduce its management fee to 0.75% of average daily net assets in excess of $500 million up to $1.0 billion, 0.70% of average daily net asset in excess of $1.0 billion up to $2.5 billion, and 0.65% of average daily net assets in excess of $2.5 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until February 28, 2017. For the year ended October 31, 2015, this management
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fee reduction amounted to $1,146,264, which is included in the reduction of total expenses in the Statement of Operations. MFS has also agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended October 31, 2015, this management fee reduction amounted to $101,035, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended October 31, 2015 was equivalent to an annual effective rate of 0.76% 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 | R5 | ||||||||||||||||||||||||||
1.13% | 1.88% | 1.88% | 0.88% | 1.88% | 1.38% | 1.13% | 0.88% | 0.82% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until February 28, 2017. For the year ended October 31, 2015, this reduction amounted to $929,333 and is included in the reduction of total expenses on the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $766,289 for the year ended October 31, 2015, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Distribution Plan Fee Table:
Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | ||||||||||||||||
Class A | — | 0.25% | 0.25% | 0.25% | $1,988,624 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 634,248 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 3,205,207 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 32,599 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 51,318 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 31,410 | |||||||||||||||
Total Distribution and Service Fees | $5,943,406 |
(d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
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(e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended October 31, 2015 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 MFD retains the 0.25% service fee except for accounts attributable to MFS or its affiliates’ seed money. For the year ended October 31, 2015, this rebate amounted to $31,742, $71, and $282 for Class A, Class B, and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended October 31, 2015, were as follows:
Amount | ||||
Class A | $13,937 | |||
Class B | 94,472 | |||
Class C | 54,214 |
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 October 31, 2015, the fee was $178,101, which equated to 0.0119% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R5 shares do not incur sub-accounting fees. For the year ended October 31, 2015, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $1,527,329.
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 October 31, 2015 was equivalent to an annual effective rate of 0.0165% 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 for their services to the fund from MFS. 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
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Trustees who retired on or before December 31, 2001. The DB plan resulted in a pension expense of $457 and is included in “Independent Trustees’ compensation” in the Statement of Operations for the year ended October 31, 2015. The liability for deferred retirement benefits payable to certain independent Trustees under the DB plan amounted to $5,368 at October 31, 2015, and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended October 31, 2015, the fee paid by the fund under this agreement was $5,860 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) Portfolio Securities
For the year ended October 31, 2015, purchases and sales of investments, other than short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $77,085,224 | $89,052,568 | ||||||
Investments (non-U.S. Government securities) | $778,309,712 | $685,773,139 |
(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 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 11,238,180 | $186,488,455 | 11,417,119 | $189,955,986 | ||||||||||||
Class B | 428,415 | 7,280,066 | 688,540 | 11,730,803 | ||||||||||||
Class C | 4,193,350 | 70,402,962 | 5,430,252 | 91,589,691 | ||||||||||||
Class I | 4,895,702 | 80,173,680 | 6,514,945 | 107,777,684 | ||||||||||||
Class R1 | 54,975 | 920,851 | 37,495 | 632,111 | ||||||||||||
Class R2 | 302,157 | 4,942,765 | 235,435 | 3,900,357 | ||||||||||||
Class R3 | 85,386 | 1,406,637 | 148,102 | 2,451,388 | ||||||||||||
Class R4 | 346,739 | 5,808,406 | 286,824 | 4,807,766 | ||||||||||||
Class R5 | 1,291,577 | 20,909,579 | 1,211,880 | 20,214,508 | ||||||||||||
22,836,481 | $378,333,401 | 25,970,592 | $433,060,294 |
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Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 927,290 | $15,271,456 | 947,166 | $15,642,842 | ||||||||||||
Class B | 56,900 | 961,604 | 50,573 | 852,438 | ||||||||||||
Class C | 253,649 | 4,230,876 | 190,475 | 3,176,064 | ||||||||||||
Class I | 210,928 | 3,431,052 | 156,082 | 2,562,571 | ||||||||||||
Class R1 | 3,527 | 58,616 | 3,358 | 55,749 | ||||||||||||
Class R2 | 7,339 | 120,068 | 6,928 | 113,454 | ||||||||||||
Class R3 | 16,617 | 272,887 | 18,674 | 307,363 | ||||||||||||
Class R4 | 12,858 | 211,337 | 11,631 | 192,521 | ||||||||||||
Class R5 | 111,368 | 1,809,971 | 108,853 | 1,782,531 | ||||||||||||
1,600,476 | $26,367,867 | 1,493,740 | $24,685,533 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (9,515,346 | ) | $(157,510,392 | ) | (6,654,074 | ) | $(111,036,032 | ) | ||||||||
Class B | (772,163 | ) | (13,104,403 | ) | (732,667 | ) | (12,498,870 | ) | ||||||||
Class C | (3,119,118 | ) | (52,126,125 | ) | (2,384,622 | ) | (40,205,097 | ) | ||||||||
Class I | (3,709,676 | ) | (60,492,804 | ) | (1,749,781 | ) | (28,765,191 | ) | ||||||||
Class R1 | (73,134 | ) | (1,226,782 | ) | (52,839 | ) | (880,083 | ) | ||||||||
Class R2 | (189,760 | ) | (3,113,887 | ) | (303,991 | ) | (5,059,774 | ) | ||||||||
Class R3 | (221,285 | ) | (3,628,042 | ) | (119,927 | ) | (1,992,813 | ) | ||||||||
Class R4 | (305,194 | ) | (5,063,588 | ) | (187,413 | ) | (3,129,743 | ) | ||||||||
Class R5 | (668,618 | ) | (10,975,883 | ) | (613,493 | ) | (10,150,678 | ) | ||||||||
(18,574,294 | ) | $(307,241,906 | ) | (12,798,807 | ) | $(213,718,281 | ) | |||||||||
Net change | ||||||||||||||||
Class A | 2,650,124 | $44,249,519 | 5,710,211 | $94,562,796 | ||||||||||||
Class B | (286,848 | ) | (4,862,733 | ) | 6,446 | 84,371 | ||||||||||
Class C | 1,327,881 | 22,507,713 | 3,236,105 | 54,560,658 | ||||||||||||
Class I | 1,396,954 | 23,111,928 | 4,921,246 | 81,575,064 | ||||||||||||
Class R1 | (14,632 | ) | (247,315 | ) | (11,986 | ) | (192,223 | ) | ||||||||
Class R2 | 119,736 | 1,948,946 | (61,628 | ) | (1,045,963 | ) | ||||||||||
Class R3 | (119,282 | ) | (1,948,518 | ) | 46,849 | 765,938 | ||||||||||
Class R4 | 54,403 | 956,155 | 111,042 | 1,870,544 | ||||||||||||
Class R5 | 734,327 | 11,743,667 | 707,240 | 11,846,361 | ||||||||||||
5,862,663 | $97,459,362 | 14,665,525 | $244,027,546 |
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication 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 higher of the Overnight Federal Reserve funds rate or daily one month LIBOR 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
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participating funds at the end of each calendar quarter. 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 a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended October 31, 2015, the fund’s commitment fee and interest expense were $4,982 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) Transactions in Underlying Affiliated Funds-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 fund assumes the following to be an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 73,098,625 | 370,164,861 | (359,317,130 | ) | 83,946,356 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $66,006 | $83,946,356 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust VI and Shareholders of MFS Global Total Return Fund:
We have audited the accompanying statement of assets and liabilities of MFS Global Total Return Fund (the Fund) (one of the series constituting MFS Series Trust VI), including the portfolio of investments, as of October 31, 2015, 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 and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2015, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of MFS Global Total Return Fund (one of the series constituting MFS Series Trust VI) at October 31, 2015, 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 periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 15, 2015
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of December 1, 2015, 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) | Principal the Past Five Years | Other Directorships (j) | ||||
INTERESTED TRUSTEES | ||||||||
Robert J. Manning (k) (age 52) | Trustee | February 2004 | Massachusetts Financial Services Company, Chairman, Co-Chief Executive Officer and Director; Chief Investment Officer (until 2010) | N/A | ||||
Robin A. Stelmach (k) (age 54) | Trustee and President | January 2014 | Massachusetts Financial Services Company, Executive Vice President and Chief Operating Officer | N/A | ||||
INDEPENDENT TRUSTEES | ||||||||
David H. Gunning (age 73) | Trustee and Chair of Trustees | January 2004 | Private investor | Lincoln Electric Holdings, Inc., Director; Development Alternatives, Inc., Director/Non-Executive Chairman | ||||
Steven E. Buller (age 64) | Trustee | February 2014 | Chairman, Financial Accounting Standards Advisory Council; Standing Advisory Group, Public Company Accounting Oversight Board, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A | ||||
Robert E. Butler (age 74) | Trustee | January 2006 | Consultant – investment company industry regulatory and compliance matters | N/A |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Maureen R. Goldfarb (age 60) | Trustee | January 2009 | Private investor | N/A | ||||
William R. Gutow (age 74) | Trustee | December 1993 | Private investor and real estate consultant; Capitol Entertainment Management Company (video franchise), Vice Chairman | Texas Donuts, Vice Chairman (until 2010) | ||||
Michael Hegarty (age 70) | Trustee | December 2004 | Private investor | Rouse Properties Inc., Director; Capmark Financial Group Inc., Director | ||||
John P. Kavanaugh (age 61) | Trustee | January 2009 | Private investor | N/A | ||||
Maryanne L. Roepke (age 59) | Trustee | May 2014 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | ||||
Laurie J. Thomsen (age 58) | Trustee | March 2005 | Private investor; New Profit, Inc. (venture philanthropy), Executive Partner (until 2010) | The Travelers Companies, Director; Dycom Industries, Inc. | ||||
Robert W. Uek (age 74) | Trustee | January 2006 | Consultant to investment company industry | N/A | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 41) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Kino Clark (k) (age 47) | Assistant Treasurer | January 2012 | Massachusetts Financial Services Company, Vice President | N/A | ||||
Kristin V. Collins (k) (age 42) | Assistant Secretary and Assistant Clerk | September 2015 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Thomas H. Connors (k) (age 56) | Assistant Secretary and Assistant Clerk | September 2012 | Massachusetts Financial Services Company, Vice President and Senior Counsel; Deutsche Investment Management Americas Inc. (financial service provider), Director and Senior Counsel (until 2012) | N/A | ||||
Ethan D. Corey (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
David L. DiLorenzo (k) (age 47) | Treasurer | July 2005 | Massachusetts Financial Services Company, Senior Vice President | N/A | ||||
Brian E. Langenfeld (k) (age 42) | Assistant Secretary and Assistant Clerk | June 2006 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kenneth Paek (k) (age 41) | Assistant Treasurer | February 2015 | Massachusetts Financial Services Company, Vice President; Cohen & Steers, Vice President/Head of Fund Administration (until 2014) | N/A | ||||
Susan A. Pereira (k) (age 45) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kasey L. Phillips (k) (age 44) | Assistant Treasurer | September 2012 | Massachusetts Financial Services Company, Vice President; Wells Fargo Funds Management, LLC, Senior Vice President, Fund Treasurer (until 2012) | N/A |
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Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Mark N. Polebaum (k) (age 63) | Secretary and Clerk | January 2006 | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary | N/A | ||||
Matthew A. Stowe (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2014 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Frank L. Tarantino (age 71) | Independent Senior Officer | June 2004 | Tarantino LLC (provider of compliance services), Principal | N/A | ||||
Richard S. Weitzel (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2007 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
Martin J. Wolin (k) (age 48) | Chief Compliance Officer | July 2015 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) | N/A | ||||
James O. Yost (k) (age 55) | Deputy Treasurer | September 1990 | Massachusetts Financial Services Company, Senior Vice President | N/A |
(h) | Date first appointed to serve as Trustee/officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. Prior to January 2012, Messrs. DiLorenzo and Yost served as Assistant Treasurers of the Funds. Ms. Stelmach was appointed as President of the Funds as of October 1, 2014. |
(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
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Each Trustee (except Ms. Stelmach, Mr. Buller and Ms. Roepke) 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. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Messrs. Butler, Kavanaugh, Uek and Mses. Thomsen and Roepke are members of the Trust’s Audit Committee.
Each of the Fund’s Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of December 1, 2015, the Trustees served as board members of 138 funds within the MFS Family of Funds.
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 Managers | ||
Nevin Chitkara Pablo De La Mata Pilar Gomez-Bravo Steven Gorham Richard Hawkins Robert Persons Jonathan Sage Robert Spector Benjamin Stone Erik Weisman |
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2015 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by the MFS Funds’ Independent Senior Officer, a senior officer appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Lipper Inc., an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2014 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Lipper Inc. on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Lipper Inc. (the “Lipper expense group”), (iii) information provided by MFS on the advisory fees of comparable portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to
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Board Review of Investment Advisory Agreement – continued
the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Lipper Inc. was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Class A shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2014, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class A shares was in the 3rd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class A shares was in the 4th quintile for the one-year period and the 3rd quintile for the five-year period ended December 31, 2014 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class A shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Lipper Inc. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also considered that, according to the Lipper data (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each higher than the Lipper expense group median.
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Board Review of Investment Advisory Agreement – continued
The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that MFS has agreed in writing to reduce its advisory fee rate on the Fund’s average daily net assets over $500 million, $1 billion, and $2.5 billion, which may not be changed without the Trustees’ approval. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoints and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.
The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including
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any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund’s portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2015.
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com 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 without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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 by visiting the “Market Commentary” and “Announcements” sub sections in the “Market Outlooks” section of mfs.com or by clicking on the fund’s name under “Mutual Funds” in the “Products” section of mfs.com.
FEDERAL TAX INFORMATION (unaudited)
The fund will notify shareholders of amounts for use in preparing 2015 income tax forms in January 2016. 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 $22,766,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 48.78% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
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rev. 3/11
| WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
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 and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
OVERNIGHT MAIL
MFS Service Center, Inc.
c/o Boston Financial Data Services
30 Dan Road
Canton, MA 02021-2809
Table of Contents
ANNUAL REPORT
October 31, 2015
MFS® UTILITIES FUND
MMU-ANN
Table of Contents
MFS® UTILITIES FUND
The report is prepared for the general information of shareholders.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Table of Contents
Dear Shareholders:
The global economy remains vulnerable as central banks continue to play a major role in supporting growth.
Even the resilient U.S. economy has had slower growth, as a strong U.S. dollar and weak overseas markets have hurt exporters. However, robust consumer demand and a recovering housing market have aided the domestic economy, fueled by cheap gasoline and an improving labor market.
China’s transition to a consumer-based, slower-growth economy has weighed on many commodity-exporting nations. And concerns about weakness in China have eroded investor and business confidence around the world. Meanwhile, rising geopolitical concerns will weigh on the eurozone, which is still reliant on the European Central Bank’s support.
As markets have become more focused on short-term trends in recent years, we believe it’s important for investors to lengthen their investment time horizon. At MFS®, we don’t trade on headlines or trends; we invest for the long term.
We believe that this approach, coupled with the professional guidance of a financial advisor, will help you reach your investment goals.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
December 15, 2015
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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Portfolio structure
Top ten holdings | ||||
NextEra Energy, Inc. | 4.6% | |||
PPL Corp. | 4.3% | |||
Sempra Energy | 3.5% | |||
Exelon Corp. | 3.5% | |||
AES Corp. | 2.6% | |||
EDP Renovaveis S.A. | 2.5% | |||
American Electric Power Co., Inc. | 2.4% | |||
Time Warner Cable, Inc. | 2.2% | |||
Dynegy, Inc. | 2.2% | |||
Calpine Corp. | 2.2% |
Top five industries | ||||
Utilities - Electric Power | 52.3% | |||
Natural Gas - Pipeline | 15.8% | |||
Telephone Services | 9.8% | |||
Natural Gas - Distribution | 7.2% | |||
Cable TV | 6.4% | |||
Issuer country weightings (x) | ||||
United States | 73.2% | |||
Portugal | 4.6% | |||
Italy | 3.5% | |||
Canada | 3.1% | |||
United Kingdom | 2.8% | |||
Spain | 2.0% | |||
Brazil | 1.7% | |||
China | 1.3% | |||
Sweden | 1.3% | |||
Other Countries | 6.5% |
(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, these 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 currency derivatives and/or any offsets to derivative positions.
Percentages are based on net assets as of 10/31/15.
The portfolio is actively managed and current holdings may be different.
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Summary of Results
For the twelve months ended October 31, 2015, Class A shares of the MFS Utilities Fund (“fund”) provided a total return of –10.42%, at net asset value. This compares with a return of 5.20% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index, and a return of –0.29% for the fund’s other benchmark, the Standard & Poor’s 500 Utilities Index.
Market Environment
Sluggish global growth weighed on both developed and emerging market (“EM”) economies during the reporting period. EM economies have been particularly lackluster. While the US Federal Reserve appears ready to tighten monetary conditions, other large developed economies continued to embrace accommodative monetary policies, particularly the European Central Bank, which instituted a large quantitative easing program in January of 2015. Poor policy management by the Chinese government roiled global markets over the summer, beginning with the poorly executed response to the stock market’s boom and bust and then the confusing decision to devalue the renminbi in August. China subsequently stabilized the currency and ramped up a wide range of monetary and fiscal measures to stimulate the economy and bolster sentiment.
During the second half of the reporting period, the US faced an earnings recession caused primarily by the sharp decline in the prices of oil and other commodities. Earnings contractions were concentrated primarily in the energy, materials and industrial sectors. An additional headwind for earnings was the sharp rise in the US dollar over the period. Exports were crimped by the dollar’s strength and falling demand in emerging markets. Consumer spending held up well during the period amid a modest increase in real wages and a tailwind from falling gasoline prices. Demand for autos reached near-record territory late in the period. In emerging markets, two key factors weighed on economies and asset prices: weaker Chinese growth, and the resulting decline in commodity prices, in addition to prospects for higher US interest rates. Structural factors like floating exchange rates and fiscal buffers partially offset these cyclical headwinds.
Detractors from Performance
Stock selection in the electric power industry detracted from performance relative to the Standard & Poor’s 500 Utilities Index. Within this industry, the fund’s positions in energy companies Dynegy (b), Calpine (b), Abengoa Yield (b) (United Kingdom) and OGE Energy (b) hampered relative results. Shares of Abengoa Yield declined after the company unexpectedly announced that the Chief Financial Officer, Eduard Soler, resigned effective immediately. Abengoa Yield also failed to secure debt financing for acquisitions that it had announced previously. Additionally, an overweight position in shares of energy company NRG also hurt relative results.
The fund’s out of benchmark exposure to the natural gas pipeline industry also dampened relative results. Within this industry, holdings of oil transportation and storage company Plains GP Holdings (b) and natural gas pipeline operators Columbia Pipeline Group (b) and Williams Companies (b) weighed on relative performance. Shares
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Management Review – continued
of Plains GP Holdings fell after second-quarter 2015 results missed market expectations due to continued weakness in commodity markets. Additionally, management warned of a significant drop in future distribution growth if crude oil prices remained depressed.
Elsewhere, holdings of telecommunications company Oi SA (b)(h) (Brazil) and voice and data telecommunications services provider Mobile TeleSystems (b) (Russia) also detracted from relative performance.
During the reporting period, the fund’s relative currency exposure, resulting primarily from differences between the fund’s and the benchmark’s exposures to holdings of securities denominated in foreign currencies, was another detractor from relative performance. All of MFS’ investment decisions are driven by the fundamentals of each individual opportunity and as such, it is common for our portfolios to have different currency exposure than the benchmark.
Contributors to Performance
The fund’s out of benchmark exposure to the cable TV industry contributed to relative performance. The fund’s ownership of media company Time Warner Inc. (b), cable services provider Comcast (b) and international cable company Liberty Global (b) supported relative returns as all three stocks outpaced the benchmark over the reporting period. Shares of Time Warner Cable rose after the company reported results that were modestly ahead of market consensus estimates. Better-than-expected revenue was primarily driven by growth in subscriptions and content licensing across all divisions. In addition to these positive results, an acquisition agreement was reached in May 2015 with Charter Communications agreeing to take over the company, which helped buoy the stock price.
Elsewhere, underweight positions in electric power holding company Duke Energy (h), electric and natural gas utility company Centerpoint Energy (h) and diversified energy company First Energy contributed to relative returns. Shares of Duke Energy depreciated after reporting results that were below consensus estimates driven by weakness in its international segment. Poor hydrology in Brazil, headwinds from a stronger dollar as compared to the Brazilian Real and weaker oil prices were primarily responsible for lower-than-expected earnings from this division. Holdings of cable and telecommunications company Altice (b) (Netherlands), wireless network operator T-Mobile US (b)(h) and telecommunications firm Telecom Italia (b) (Italy), and not holding a position in integrated energy company Entergy Corporation, also aided relative performance.
Respectfully,
Claud Davis | Maura Shaughnessy | |
Portfolio Manager | Portfolio Manager |
(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 managers only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of
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Management Review – continued
MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
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PERFORMANCE SUMMARY THROUGH 10/31/15
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment
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Performance Summary – continued
Total Returns through 10/31/15
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 2/14/92 | (10.42)% | 8.97% | 9.24% | N/A | |||||||||
B | 9/07/93 | (11.09)% | 8.16% | 8.42% | N/A | |||||||||
C | 1/03/94 | (11.09)% | 8.15% | 8.42% | N/A | |||||||||
I | 1/02/97 | (10.20)% | 9.24% | 9.51% | N/A | |||||||||
R1 | 4/01/05 | (11.11)% | 8.15% | 8.40% | N/A | |||||||||
R2 | 10/31/03 | (10.66)% | 8.69% | 8.93% | N/A | |||||||||
R3 | 4/01/05 | (10.42)% | 8.98% | 9.20% | N/A | |||||||||
R4 | 4/01/05 | (10.19)% | 9.23% | 9.49% | N/A | |||||||||
R5 | 6/01/12 | (10.15)% | N/A | N/A | 10.77% | |||||||||
Comparative benchmarks | ||||||||||||||
Standard & Poor’s 500 Stock Index (f) | 5.20% | 14.33% | 7.85% | N/A | ||||||||||
Standard & Poor’s 500 Utilities Index (f) | (0.29)% | 11.03% | 7.51% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With initial Sales Charge (5.75%) | (15.57)% | 7.69% | 8.59% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | (14.39)% | 7.86% | 8.42% | N/A | ||||||||||
C With CDSC (1% for 12 months) (v) | (11.92)% | 8.15% | 8.42% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R5 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 Definitions
Standard & Poor’s 500 Stock Index – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
Standard & Poor’s 500 Utilities Index – a market capitalization-weighted index designed to measure the utilities sector, including those companies considered electric, gas or water utilities, or companies that operate as independent producers and/or distributors of power.
It is not possible to invest directly in an index.
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Performance Summary – continued
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable. As a result, no comparative benchmark performance information is provided for life periods.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund’s performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
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Fund expenses borne by the shareholders during the period, May 1, 2015 through October 31, 2015
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 May 1, 2015 through October 31, 2015.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value 5/01/15 | Ending Account Value 10/31/15 | Expenses Paid During Period (p) 5/01/15-10/31/15 | ||||||||||||||
A | Actual | 1.00% | $1,000.00 | $884.35 | $4.75 | |||||||||||||
Hypothetical (h) | 1.00% | $1,000.00 | $1,020.16 | $5.09 | ||||||||||||||
B | Actual | 1.75% | $1,000.00 | $880.46 | $8.29 | |||||||||||||
Hypothetical (h) | 1.75% | $1,000.00 | $1,016.38 | $8.89 | ||||||||||||||
C | Actual | 1.75% | $1,000.00 | $880.86 | $8.30 | |||||||||||||
Hypothetical (h) | 1.75% | $1,000.00 | $1,016.38 | $8.89 | ||||||||||||||
I | Actual | 0.75% | $1,000.00 | $884.99 | $3.56 | |||||||||||||
Hypothetical (h) | 0.75% | $1,000.00 | $1,021.42 | $3.82 | ||||||||||||||
R1 | Actual | 1.75% | $1,000.00 | $880.67 | $8.30 | |||||||||||||
Hypothetical (h) | 1.75% | $1,000.00 | $1,016.38 | $8.89 | ||||||||||||||
R2 | Actual | 1.25% | $1,000.00 | $882.93 | $5.93 | |||||||||||||
Hypothetical (h) | 1.25% | $1,000.00 | $1,018.90 | $6.36 | ||||||||||||||
R3 | Actual | 1.00% | $1,000.00 | $884.29 | $4.75 | |||||||||||||
Hypothetical (h) | 1.00% | $1,000.00 | $1,020.16 | $5.09 | ||||||||||||||
R4 | Actual | 0.75% | $1,000.00 | $885.13 | $3.56 | |||||||||||||
Hypothetical (h) | 0.75% | $1,000.00 | $1,021.42 | $3.82 | ||||||||||||||
R5 | Actual | 0.63% | $1,000.00 | $885.53 | $2.99 | |||||||||||||
Hypothetical (h) | 0.63% | $1,000.00 | $1,022.03 | $3.21 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
10
Table of Contents
10/31/15
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Common Stocks - 90.1% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Cable TV - 6.3% | ||||||||
Charter Communications, Inc., “A” (a)(l) | 358,458 | $ | 68,443,971 | |||||
Comcast Corp., “Special A” | 1,654,548 | 103,756,705 | ||||||
Liberty Global PLC, “C” (a) | 1,021,452 | 43,554,713 | ||||||
Time Warner Cable, Inc. | 603,687 | 114,338,318 | ||||||
|
| |||||||
$ | 330,093,707 | |||||||
Energy - Independent - 1.7% | ||||||||
Anadarko Petroleum Corp. | 373,967 | $ | 25,010,913 | |||||
Enable Midstream Partners LP | 1,184,890 | 14,254,227 | ||||||
Noble Energy, Inc. | 623,696 | 22,353,265 | ||||||
Western Gas Equity Partners LP | 655,388 | 28,266,884 | ||||||
|
| |||||||
$ | 89,885,289 | |||||||
Natural Gas - Distribution - 7.2% | ||||||||
China Resources Gas Group Ltd. | 18,242,000 | $ | 49,950,941 | |||||
Engie | 3,487,487 | 61,187,665 | ||||||
Gas Natural SDG S.A. | 1,068,906 | 23,167,577 | ||||||
NorthWestern Corp. | 515,402 | 27,929,634 | ||||||
Sempra Energy | 1,765,441 | 180,798,813 | ||||||
Snam S.p.A. | 5,882,325 | 30,466,628 | ||||||
|
| |||||||
$ | 373,501,258 | |||||||
Natural Gas - Pipeline - 14.5% | ||||||||
APA Group | 2,059,814 | $ | 13,513,450 | |||||
Columbia Pipeline Group, Inc. | 1,257,550 | 26,119,314 | ||||||
Columbia Pipeline Partners LP | 1,897,278 | 25,689,144 | ||||||
Enbridge, Inc. (l) | 2,185,428 | 93,410,501 | ||||||
Energy Transfer Equity LP | 2,232,612 | 48,112,789 | ||||||
Energy Transfer Partners LP | 1,915,225 | 84,576,336 | ||||||
Enterprise Products Partners LP | 2,152,701 | 59,479,129 | ||||||
EQT GP Holdings LP | 270,165 | 7,143,163 | ||||||
EQT Midstream Partners LP | 267,914 | 19,836,353 | ||||||
JP Energy Partners LP | 839,230 | 6,713,840 | ||||||
Kinder Morgan, Inc. | 3,483,896 | 95,284,556 | ||||||
Plains All American Pipeline LP | 408,328 | 12,952,164 | ||||||
Plains GP Holdings LP | 3,404,270 | 52,936,399 | ||||||
SemGroup Corp., “A” | 550,639 | 25,081,606 | ||||||
Sunoco Logistics Partners LP | 1,446,859 | 42,016,785 | ||||||
Tallgrass Energy GP LP | 823,302 | 19,709,850 | ||||||
Williams Cos., Inc. | 1,890,418 | 74,558,086 |
11
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Natural Gas - Pipeline - continued | ||||||||
Williams Partners LP | 1,394,740 | $ | 47,142,212 | |||||
|
| |||||||
$ | 754,275,677 | |||||||
Telecommunications - Wireless - 5.3% | ||||||||
American Tower Corp., REIT | 826,332 | $ | 84,475,920 | |||||
Bharti Airtel Ltd. | 2,256,587 | 12,023,699 | ||||||
Bharti Infratel Ltd. | 1,374,566 | 8,181,765 | ||||||
KDDI Corp. | 911,000 | 22,005,964 | ||||||
Mobile TeleSystems PJSC, ADR | 3,555,830 | 24,997,485 | ||||||
Philippine Long Distance Telephone Co. | 167,110 | 7,852,243 | ||||||
SBA Communications Corp. (a) | 484,775 | 57,697,921 | ||||||
Vodafone Group PLC | 16,828,462 | 55,582,356 | ||||||
|
| |||||||
$ | 272,817,353 | |||||||
Telephone Services - 8.6% | ||||||||
Altice N.V., “A” (a) | 1,552,299 | $ | 26,885,023 | |||||
Altice N.V., “B” (a) | 244,566 | 4,343,333 | ||||||
Bezeq - The Israel Telecommunication Corp. Ltd. | 19,291,878 | 41,479,171 | ||||||
British Telecom Group, PLC | 4,706,850 | 33,740,771 | ||||||
Com Hem Holding AB | 7,979,195 | 68,317,984 | ||||||
Hellenic Telecommunications Organization S.A. | 4,355,497 | 40,567,253 | ||||||
Numericable Group (a) | 112,465 | 5,095,292 | ||||||
PT XL Axiata Tbk (a) | 76,782,800 | 17,474,223 | ||||||
Quebecor, Inc., “B” | 1,605,670 | 37,808,641 | ||||||
TDC A.S. | 7,312,570 | 38,329,173 | ||||||
TELUS Corp. | 661,969 | 22,092,633 | ||||||
Verizon Communications, Inc. | 2,336,995 | 109,558,326 | ||||||
|
| |||||||
$ | 445,691,823 | |||||||
Utilities - Electric Power - 46.4% | ||||||||
Abengoa Yield PLC (l) | 2,710,433 | $ | 50,224,323 | |||||
AES Corp. | 12,274,498 | 134,405,753 | ||||||
ALLETE, Inc. | 604,038 | 30,328,748 | ||||||
Alliant Energy Corp. | 210,759 | 12,438,996 | ||||||
Ameren Corp. | 1,355,470 | 59,206,930 | ||||||
American Electric Power Co., Inc. | 2,188,226 | 123,963,003 | ||||||
Calpine Corp. (a) | 7,237,627 | 112,255,595 | ||||||
China Longyuan Electric Power Group Corp. | 21,210,000 | 19,400,268 | ||||||
CMS Energy Corp. | 590,675 | 21,305,647 | ||||||
CPFL Energia S.A. (a) | 5,540,238 | 22,252,606 | ||||||
Dominion Resources, Inc. | 534,875 | 38,206,121 | ||||||
DTE Energy Co. | 675,757 | 55,135,014 | ||||||
Dynegy, Inc. (a) | 5,869,875 | 114,051,671 | ||||||
Edison International | 585,367 | 35,426,411 |
12
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Utilities - Electric Power - continued | ||||||||
EDP Renovaveis S.A. | 17,564,117 | $ | 127,726,001 | |||||
Enel Green Power S.p.A. | 6,782,482 | 14,357,336 | ||||||
Enel S.p.A | 24,262,276 | 111,949,328 | ||||||
Energias de Portugal S.A. | 29,825,241 | 110,461,393 | ||||||
Energias do Brasil S.A. | 9,238,284 | 27,021,002 | ||||||
Enersis S.A., ADR | 616,048 | 8,162,636 | ||||||
Exelon Corp. | 6,456,915 | 180,277,067 | ||||||
FirstEnergy Corp. | 163,455 | 5,099,796 | ||||||
Hydro One Ltd. (a) | 516,360 | 8,095,274 | ||||||
Iberdrola S.A. | 4,612,711 | 32,955,172 | ||||||
ITC Holdings Corp. | 209,670 | 6,860,402 | ||||||
NextEra Energy Partners LP | 1,487,466 | 39,060,857 | ||||||
NextEra Energy, Inc. | 2,322,909 | 238,469,838 | ||||||
NRG Energy, Inc. | 6,089,176 | 78,489,479 | ||||||
NRG Yield, Inc., “A” (l) | 968,611 | 13,299,029 | ||||||
NRG Yield, Inc., “C” | 1,429,579 | 20,643,121 | ||||||
OGE Energy Corp. | 1,629,054 | 46,444,330 | ||||||
PG&E Corp. | 1,344,294 | 71,785,300 | ||||||
PPL Corp. | 6,463,200 | 222,334,080 | ||||||
Public Service Enterprise Group, Inc. | 2,654,297 | 109,595,923 | ||||||
Red Electrica de Espana | 559,126 | 49,310,400 | ||||||
TerraForm Power, Inc. | 821,995 | 15,001,409 | ||||||
Tractebel Energia S.A. | 1,610,800 | 14,146,788 | ||||||
Xcel Energy, Inc. | 887,491 | 31,621,304 | ||||||
|
| |||||||
$ | 2,411,768,351 | |||||||
Utilities - Water - 0.1% | ||||||||
United Utilities Group PLC | 381,916 | $ | 5,819,909 | |||||
Total Common Stocks (Identified Cost, $4,521,477,165) | $ | 4,683,853,367 | ||||||
Bonds - 0.1% | ||||||||
Asset-Backed & Securitized - 0.0% | ||||||||
Falcon Franchise Loan LLC, FRN, 6.945%, 1/05/23 (i)(z) | $ | 181,344 | $ | 19,023 | ||||
Cable TV - 0.1% | ||||||||
Neptune Finco Corp., 10.125%, 1/15/23 (n) | $ | 3,060,000 | $ | 3,235,950 | ||||
Total Bonds (Identified Cost, $3,065,720) | $ | 3,254,973 | ||||||
Convertible Preferred Stocks - 8.7% | ||||||||
Energy - Independent - 0.5% | ||||||||
Anadarko Petroleum Corp., 7.5% | 594,162 | $ | 23,903,137 |
13
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Convertible Preferred Stocks - continued | ||||||||
Natural Gas - Pipeline - 1.3% | ||||||||
Kinder Morgan, Inc., 1.544% (a) | 1,333,604 | $ | 65,760,013 | |||||
Telecommunications - Wireless - 0.7% | ||||||||
American Tower Corp., 5.5% | 377,310 | $ | 39,428,895 | |||||
Telephone Services - 0.7% | ||||||||
Frontier Communications Corp., 11.125% | 358,977 | $ | 35,585,390 | |||||
Utilities - Electric Power - 5.5% | ||||||||
Dominion Resources, Inc., “A”, 6.125% | 668,072 | $ | 37,285,098 | |||||
Dominion Resources, Inc., “B”, 6% | 785,440 | 44,188,854 | ||||||
Dominion Resources, Inc., 6.375% | 759,909 | 37,714,281 | ||||||
Dynegy, Inc., 5.375% | 566,654 | 41,241,078 | ||||||
Exelon Corp., 6.5% | 2,059,779 | 86,016,371 | ||||||
NextEra Energy, Inc., 5.799% | 274,899 | 15,124,943 | ||||||
NextEra Energy, Inc., 6.371% | 414,370 | 21,779,287 | ||||||
|
| |||||||
$ | 283,349,912 | |||||||
Total Convertible Preferred Stocks (Identified Cost, $477,005,442) | $ | 448,027,347 | ||||||
Preferred Stocks - 0.9% | ||||||||
Telephone Services - 0.5% | ||||||||
Telecom Italia S.p.A. | 23,674,189 | $ | 26,632,088 | |||||
Utilities - Electric Power - 0.4% | ||||||||
Companhia Paranaense de Energia | 2,619,100 | $ | 22,071,735 | |||||
Total Preferred Stocks (Identified Cost, $51,346,702) | $ | 48,703,823 | ||||||
Money Market Funds - 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.12%, at Cost and Net Asset Value (v) | 6,177 | $ | 6,177 | |||||
Collateral for Securities Loaned - 2.6% | ||||||||
JPMorgan Prime Money Market Fund, 0.14%, at Cost and Net Asset Value (j) | 134,046,558 | $ | 134,046,558 | |||||
Total Investments (Identified Cost, $5,186,947,764) | $ | 5,317,892,245 | ||||||
Other Assets, Less Liabilities - (2.4)% | (122,768,136 | ) | ||||||
Net Assets - 100.0% | $ | 5,195,124,109 |
(a) | Non-income producing security. |
(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. |
14
Table of Contents
Portfolio of Investments – continued
(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. |
(n) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $3,235,950, representing 0.1% of net assets. |
(v) | Underlying affiliated fund 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 | |||||||
Falcon Franchise Loan LLC, FRN, 6.945%, 1/05/23 | 1/18/02 | $5,720 | $19,023 | |||||||
% of Net assets | 0.0% |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
FRN | Floating Rate Note. Interest rate resets periodically and the current rate may not be the rate reported at period end. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below:
CAD | Canadian Dollar |
EUR | Euro |
GBP | British Pound |
Derivative Contracts at 10/31/15
Forward Foreign Currency Exchange Contracts at 10/31/15
Type | Currency | Counter- party | Contracts to Deliver/ Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||
Asset Derivatives | ||||||||||||||||||||||
SELL | CAD | Barclays Bank PLC | 6,098,000 | 1/15/16 | $4,684,726 | $4,661,746 | $22,980 | |||||||||||||||
SELL | CAD | BNP Paribas S.A. | 6,102,000 | 1/15/16 | 4,690,837 | 4,664,804 | 26,033 | |||||||||||||||
SELL | CAD | Citibank N.A. | 4,882,000 | 1/15/16 | 3,753,063 | 3,732,149 | 20,914 | |||||||||||||||
SELL | CAD | Deutsche Bank AG | 73,214,000 | 1/15/16 | 56,266,135 | 55,970,005 | 296,130 | |||||||||||||||
SELL | CAD | JPMorgan Chase Bank | 23,146,000 | 1/15/16 | 17,791,737 | 17,694,454 | 97,283 | |||||||||||||||
SELL | CAD | Merrill Lynch International | 12,203,000 | 1/15/16 | 9,370,532 | 9,328,844 | 41,688 |
15
Table of Contents
Portfolio of Investments – continued
Forward Foreign Currency Exchange Contracts at 10/31/15 - continued
Type | Currency | Counter- party | Contracts to Deliver/ Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||
Asset Derivatives - continued | ||||||||||||||||||||||
SELL | CAD | Morgan Stanley Capital Services | 14,204,497 | 1/15/16 | $10,895,248 | $10,858,931 | $36,317 | |||||||||||||||
BUY | EUR | UBS AG | 701,486 | 1/15/16 | 769,909 | 772,478 | 2,569 | |||||||||||||||
SELL | EUR | Citibank N.A. | 29,809,710 | 1/15/16 | 33,371,971 | 32,826,532 | 545,439 | |||||||||||||||
SELL | EUR | Credit Suisse Group | 8,775,036 | 1/15/16 | 9,829,401 | 9,663,094 | 166,307 | |||||||||||||||
SELL | EUR | Deutsche Bank AG | 161,839,584 | 12/17/15-1/15/16 | 182,785,872 | 178,161,459 | 4,624,413 | |||||||||||||||
SELL | EUR | Goldman Sachs International | 2,316,190 | 1/15/16 | 2,600,834 | 2,550,595 | 50,239 | |||||||||||||||
SELL | EUR | JPMorgan Chase Bank | 179,236,084 | 1/15/16 | 200,662,100 | 197,375,253 | 3,286,847 | |||||||||||||||
SELL | EUR | Merrill Lynch International | 10,527,663 | 1/15/16 | 11,794,173 | 11,593,091 | 201,082 | |||||||||||||||
|
| |||||||||||||||||||||
$9,418,241 | ||||||||||||||||||||||
|
| |||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||
BUY | EUR | Credit Suisse Group | 568,826 | 1/15/16 | $648,024 | $626,393 | $(21,631 | ) | ||||||||||||||
BUY | EUR | HBSC Bank | 536,208 | 1/15/16 | 610,794 | 590,473 | (20,321 | ) | ||||||||||||||
SELL | GBP | BNP Paribas S.A. | 40,908,891 | 1/15/16 | 62,249,914 | 63,048,870 | (798,956 | ) | ||||||||||||||
|
| |||||||||||||||||||||
$(840,908 | ) | |||||||||||||||||||||
|
|
See Notes to Financial Statements
16
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/15
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets | ||||
Investments | ||||
Non-affiliated issuers, at value (identified cost, $5,186,941,587) | $5,317,886,068 | |||
Underlying affiliated funds, at cost and value | 6,177 | |||
Total investments, at value, including $126,903,281 of securities on loan (identified cost, $5,186,947,764) | $5,317,892,245 | |||
Receivables for | ||||
Forward foreign currency exchange contracts | 9,418,241 | |||
Investments sold | 26,150,241 | |||
Fund shares sold | 6,507,497 | |||
Interest and dividends | 12,595,410 | |||
Other assets | 2 | |||
Total assets | $5,372,563,636 | |||
Liabilities | ||||
Payable to custodian | $7,621,756 | |||
Payables for | ||||
Distributions | 984,190 | |||
Forward foreign currency exchange contracts | 840,908 | |||
Investments purchased | 20,142,931 | |||
Fund shares reacquired | 9,939,324 | |||
Collateral for securities loaned, at value | 134,046,558 | |||
Payable to affiliates | ||||
Investment adviser | 252,210 | |||
Shareholder servicing costs | 2,958,558 | |||
Distribution and service fees | 166,818 | |||
Payable for independent Trustees’ compensation | 5,782 | |||
Accrued expenses and other liabilities | 480,492 | |||
Total liabilities | $177,439,527 | |||
Net assets | $5,195,124,109 | |||
Net assets consist of | ||||
Paid-in capital | $4,821,274,407 | |||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 138,930,278 | |||
Accumulated net realized gain (loss) on investments and foreign currency | 238,371,018 | |||
Accumulated distributions in excess of net investment income | (3,451,594 | ) | ||
Net assets | $5,195,124,109 | |||
Shares of beneficial interest outstanding | 270,109,663 |
17
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $2,926,490,690 | 152,057,781 | $19.25 | |||||||||
Class B | 260,078,760 | 13,573,930 | 19.16 | |||||||||
Class C | 945,033,183 | 49,325,767 | 19.16 | |||||||||
Class I | 636,784,218 | 32,976,846 | 19.31 | |||||||||
Class R1 | 10,864,738 | 567,991 | 19.13 | |||||||||
Class R2 | 104,858,045 | 5,461,671 | 19.20 | |||||||||
Class R3 | 134,801,110 | 7,007,477 | 19.24 | |||||||||
Class R4 | 100,251,227 | 5,205,238 | 19.26 | |||||||||
Class R5 | 75,962,138 | 3,932,962 | 19.31 |
(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 $20.42 [100 / 94.25 x $19.25]. 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 R5. |
See Notes to Financial Statements
18
Table of Contents
Financial Statements
Year ended 10/31/15
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 | ||||
Income | ||||
Dividends | $192,114,551 | |||
Interest | 1,248,462 | |||
Dividends from underlying affiliated funds | 147,516 | |||
Foreign taxes withheld | (6,680,902 | ) | ||
Total investment income | $186,829,627 | |||
Expenses | ||||
Management fee | $34,872,473 | |||
Distribution and service fees | 23,677,666 | |||
Shareholder servicing costs | 7,524,465 | |||
Administrative services fee | 645,451 | |||
Independent Trustees’ compensation | 97,247 | |||
Custodian fee | 717,724 | |||
Shareholder communications | 353,012 | |||
Audit and tax fees | 62,815 | |||
Legal fees | 49,827 | |||
Miscellaneous | 380,210 | |||
Total expenses | $68,380,890 | |||
Fees paid indirectly | (1,319 | ) | ||
Reduction of expenses by investment adviser and distributor | (59,736 | ) | ||
Net expenses | $68,319,835 | |||
Net investment income | $118,509,792 | |||
Realized and unrealized gain (loss) on investments and foreign currency | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments (net of $245,221 country tax) | $239,477,596 | |||
Foreign currency | 71,453,020 | |||
Net realized gain (loss) on investments and foreign currency | $310,930,616 | |||
Change in unrealized appreciation (depreciation) | ||||
Investments (net of $106,231 decrease in deferred country tax) | $(1,073,873,565 | ) | ||
Translation of assets and liabilities in foreign currencies | 1,406,881 | |||
Net unrealized gain (loss) on investments and foreign currency translation | $(1,072,466,684 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency | $(761,536,068 | ) | ||
Change in net assets from operations | $(643,026,276 | ) |
See Notes to Financial Statements
19
Table of Contents
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
Years ended 10/31 | ||||||||
2015 | 2014 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $118,509,792 | $164,252,828 | ||||||
Net realized gain (loss) on investments and foreign currency | 310,930,616 | 395,385,632 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (1,072,466,684 | ) | 229,059,090 | |||||
Change in net assets from operations | $(643,026,276 | ) | $788,697,550 | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $(125,992,867 | ) | $(159,743,376 | ) | ||||
From net realized gain on investments | (374,616,272 | ) | (223,100,887 | ) | ||||
Total distributions declared to shareholders | $(500,609,139 | ) | $(382,844,263 | ) | ||||
Change in net assets from fund share transactions | $(125,518,489 | ) | $650,030,340 | |||||
Total change in net assets | $(1,269,153,904 | ) | $1,055,883,627 | |||||
Net assets | ||||||||
At beginning of period | 6,464,278,013 | 5,408,394,386 | ||||||
At end of period (including accumulated distributions in excess of net investment income of $3,451,594 and undistributed net investment income of $9,547,646, respectively) | $5,195,124,109 | $6,464,278,013 |
See Notes to Financial Statements
20
Table of Contents
Financial Statements
The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which 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 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.34 | $21.80 | $18.61 | $17.11 | $16.01 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.45 | $0.66 | $0.60 | $0.51 | $0.61 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.73 | ) | 2.42 | 3.17 | 1.53 | 1.02 | ||||||||||||||
Total from investment operations | $(2.28 | ) | $3.08 | $3.77 | $2.04 | $1.63 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.47 | ) | $(0.64 | ) | $(0.57 | ) | $(0.54 | ) | $(0.53 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.81 | ) | $(1.54 | ) | $(0.58 | ) | $(0.54 | ) | $(0.53 | ) | ||||||||||
Net asset value, end of period (x) | $19.25 | $23.34 | $21.80 | $18.61 | $17.11 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (10.42 | ) | 14.99 | 20.59 | 12.17 | 10.26 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | 0.97 | 1.01 | 1.02 | 1.04 | |||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.97 | 1.01 | 1.02 | 1.04 | |||||||||||||||
Net investment income | 2.10 | 2.97 | 2.97 | 2.90 | 3.62 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $2,926,491 | $3,597,063 | $3,242,884 | $2,699,649 | $2,343,368 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
Class B | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.24 | $21.71 | $18.55 | $17.05 | $15.95 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.28 | $0.49 | $0.44 | $0.37 | $0.49 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.71 | ) | 2.41 | 3.15 | 1.54 | 1.01 | ||||||||||||||
Total from investment operations | $(2.43 | ) | $2.90 | $3.59 | $1.91 | $1.50 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.31 | ) | $(0.47 | ) | $(0.42 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.65 | ) | $(1.37 | ) | $(0.43 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
Net asset value, end of period (x) | $19.16 | $23.24 | $21.71 | $18.55 | $17.05 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (11.09 | ) | 14.15 | 19.60 | 11.39 | 9.47 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Net investment income | 1.34 | 2.23 | 2.21 | 2.14 | 2.88 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $260,079 | $332,141 | $305,988 | $265,748 | $233,107 | |||||||||||||||
Class C | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.24 | $21.71 | $18.55 | $17.05 | $15.96 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.29 | $0.49 | $0.44 | $0.38 | $0.48 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.72 | ) | 2.41 | 3.15 | 1.53 | 1.01 | ||||||||||||||
Total from investment operations | $(2.43 | ) | $2.90 | $3.59 | $1.91 | $1.49 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.31 | ) | $(0.47 | ) | $(0.42 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.65 | ) | $(1.37 | ) | $(0.43 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
Net asset value, end of period (x) | $19.16 | $23.24 | $21.71 | $18.55 | $17.05 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | (11.09 | ) | 14.16 | 19.61 | 11.40 | 9.41 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Net investment income | 1.35 | 2.21 | 2.21 | 2.15 | 2.86 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $945,033 | $1,145,572 | $917,978 | $739,959 | $608,042 |
See Notes to Financial Statements
22
Table of Contents
Financial Highlights – continued
Class I | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.41 | $21.86 | $18.67 | $17.15 | $16.05 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.50 | $0.71 | $0.65 | $0.57 | $0.66 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.73 | ) | 2.44 | 3.17 | 1.53 | 1.01 | ||||||||||||||
Total from investment operations | $(2.23 | ) | $3.15 | $3.82 | $2.10 | $1.67 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.53 | ) | $(0.70 | ) | $(0.62 | ) | $(0.58 | ) | $(0.57 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.87 | ) | $(1.60 | ) | $(0.63 | ) | $(0.58 | ) | $(0.57 | ) | ||||||||||
Net asset value, end of period (x) | $19.31 | $23.41 | $21.86 | $18.67 | $17.15 | |||||||||||||||
Total return (%) (r)(s)(x) | (10.20 | ) | 15.28 | 20.82 | 12.54 | 10.50 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | 0.72 | 0.76 | 0.77 | 0.79 | |||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.72 | 0.76 | 0.77 | 0.79 | |||||||||||||||
Net investment income | 2.33 | 3.14 | 3.21 | 3.22 | 3.88 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $636,784 | $864,695 | $566,374 | $462,849 | $286,562 | |||||||||||||||
Class R1 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.21 | $21.68 | $18.52 | $17.03 | $15.94 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.29 | $0.49 | $0.44 | $0.37 | $0.48 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.72 | ) | 2.41 | 3.15 | 1.53 | 1.01 | ||||||||||||||
Total from investment operations | $(2.43 | ) | $2.90 | $3.59 | $1.90 | $1.49 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.31 | ) | $(0.47 | ) | $(0.42 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.65 | ) | $(1.37 | ) | $(0.43 | ) | $(0.41 | ) | $(0.40 | ) | ||||||||||
Net asset value, end of period (x) | $19.13 | $23.21 | $21.68 | $18.52 | $17.03 | |||||||||||||||
Total return (%) (r)(s)(x) | (11.11 | ) | 14.18 | 19.63 | 11.35 | 9.42 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Expenses after expense reductions (f) | 1.74 | 1.72 | 1.76 | 1.77 | 1.79 | |||||||||||||||
Net investment income | 1.34 | 2.21 | 2.22 | 2.15 | 2.83 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $10,865 | $14,177 | $12,041 | $12,092 | $11,686 |
See Notes to Financial Statements
23
Table of Contents
Financial Highlights – continued
Class R2 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.29 | $21.75 | $18.58 | $17.07 | $15.98 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.39 | $0.60 | $0.54 | $0.46 | $0.57 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.72 | ) | 2.42 | 3.16 | 1.55 | 1.01 | ||||||||||||||
Total from investment operations | $(2.33 | ) | $3.02 | $3.70 | $2.01 | $1.58 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.42 | ) | $(0.58 | ) | $(0.52 | ) | $(0.50 | ) | $(0.49 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.76 | ) | $(1.48 | ) | $(0.53 | ) | $(0.50 | ) | $(0.49 | ) | ||||||||||
Net asset value, end of period (x) | $19.20 | $23.29 | $21.75 | $18.58 | $17.07 | |||||||||||||||
Total return (%) (r)(s)(x) | (10.66 | ) | 14.74 | 20.22 | 11.99 | 9.94 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.24 | 1.22 | 1.26 | 1.27 | 1.29 | |||||||||||||||
Expenses after expense reductions (f) | 1.24 | 1.22 | 1.26 | 1.27 | 1.29 | |||||||||||||||
Net investment income | 1.84 | 2.69 | 2.71 | 2.65 | 3.37 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $104,858 | $137,813 | $116,355 | $116,173 | $101,994 | |||||||||||||||
Class R3 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.33 | $21.79 | $18.59 | $17.09 | $15.99 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.45 | $0.65 | $0.52 | $0.51 | $0.61 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.73 | ) | 2.43 | 3.25 | 1.53 | 1.02 | ||||||||||||||
Total from investment operations | $(2.28 | ) | $3.08 | $3.77 | $2.04 | $1.63 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.47 | ) | $(0.64 | ) | $(0.56 | ) | $(0.54 | ) | $(0.53 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.81 | ) | $(1.54 | ) | $(0.57 | ) | $(0.54 | ) | $(0.53 | ) | ||||||||||
Net asset value, end of period (x) | $19.24 | $23.33 | $21.79 | $18.59 | $17.09 | |||||||||||||||
Total return (%) (r)(s)(x) | (10.42 | ) | 15.00 | 20.61 | 12.19 | 10.27 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | 0.97 | 1.00 | 1.02 | 1.04 | |||||||||||||||
Expenses after expense reductions (f) | 0.99 | 0.97 | 1.00 | 1.02 | 1.04 | |||||||||||||||
Net investment income | 2.09 | 2.93 | 2.67 | 2.90 | 3.62 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $134,801 | $177,562 | $135,710 | $364,245 | $324,613 |
See Notes to Financial Statements
24
Table of Contents
Financial Highlights – continued
Class R4 | Years ended 10/31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $23.35 | $21.81 | $18.63 | $17.12 | $16.02 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.50 | $0.71 | $0.65 | $0.56 | $0.64 | |||||||||||||||
Net realized and unrealized gain (loss) on | (2.72 | ) | 2.43 | 3.16 | 1.53 | 1.03 | ||||||||||||||
Total from investment operations | $(2.22 | ) | $3.14 | $3.81 | $2.09 | $1.67 | ||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.53 | ) | $(0.70 | ) | $(0.62 | ) | $(0.58 | ) | $(0.57 | ) | ||||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | — | ||||||||||||
Total distributions declared to shareholders | $(1.87 | ) | $(1.60 | ) | $(0.63 | ) | $(0.58 | ) | $(0.57 | ) | ||||||||||
Net asset value, end of period (x) | $19.26 | $23.35 | $21.81 | $18.63 | $17.12 | |||||||||||||||
Total return (%) (r)(s)(x) | (10.19 | ) | 15.26 | 20.82 | 12.50 | 10.52 | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | 0.72 | 0.76 | 0.77 | 0.79 | |||||||||||||||
Expenses after expense reductions (f) | 0.74 | 0.72 | 0.76 | 0.77 | 0.79 | |||||||||||||||
Net investment income | 2.33 | 3.19 | 3.22 | 3.17 | 3.78 | |||||||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | 51 | |||||||||||||||
Net assets at end of period (000 omitted) | $100,251 | $144,910 | $108,572 | $73,570 | $45,233 |
Class R5 | Years ended 10/31 | |||||||||||||||
2015 | 2014 | 2013 | 2012 (i) | |||||||||||||
Net asset value, beginning of period | $23.42 | $21.86 | $18.67 | $16.71 | ||||||||||||
Income (loss) from investment operations | ||||||||||||||||
Net investment income (d) | $0.53 | $0.62 | $0.72 | $0.22 | ||||||||||||
Net realized and unrealized gain (loss) on | (2.75 | ) | 2.55 | 3.12 | 1.96 | (g) | ||||||||||
Total from investment operations | $(2.22 | ) | $3.17 | $3.84 | $2.18 | |||||||||||
Less distributions declared to shareholders | ||||||||||||||||
From net investment income | $(0.55 | ) | $(0.71 | ) | $(0.64 | ) | $(0.22 | ) | ||||||||
From net realized gain on investments | (1.34 | ) | (0.90 | ) | (0.01 | ) | — | |||||||||
Total distributions declared to shareholders | $(1.89 | ) | $(1.61 | ) | $(0.65 | ) | $(0.22 | ) | ||||||||
Net asset value, end of period (x) | $19.31 | $23.42 | $21.86 | $18.67 | ||||||||||||
Total return (%) (r)(s)(x) | (10.15 | ) | 15.42 | 20.95 | 13.11 | (n) | ||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||
Expenses before expense reductions (f) | 0.63 | 0.63 | 0.65 | 0.71 | (a) | |||||||||||
Expenses after expense reductions (f) | 0.63 | 0.63 | 0.65 | 0.71 | (a) | |||||||||||
Net investment income | 2.48 | 2.71 | 3.48 | 2.93 | (a) | |||||||||||
Portfolio turnover | 45 | 46 | 54 | 46 | ||||||||||||
Net assets at end of period (000 omitted) | $75,962 | $50,344 | $2,492 | $283 |
See Notes to Financial Statements
25
Table of Contents
Financial Highlights – continued
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(g) | The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. |
(i) | For the period from the class inception, June 1, 2012, through the stated period end. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(t) | Total returns do not include any applicable sales charges. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
26
Table of Contents
(1) Business and Organization
MFS Utilities Fund (the fund) is a diversified series of MFS Series Trust VI (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 primarily in securities of issuers in the utility industry. Issuers in a single industry can react similarly to market, economic, political and regulatory conditions and developments. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
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 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 as provided by a third-party pricing service on the market or exchange on which they are primarily traded. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. 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
27
Table of Contents
Notes to Financial Statements – continued
instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting 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 on a frequent basis 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,
28
Table of Contents
Notes to Financial Statements – continued
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 not reflected in total investments, such as forward foreign currency exchange contracts. The following is a summary of the levels used as of October 31, 2015 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $3,791,524,507 | $— | $— | $3,791,524,507 | ||||||||||||
Portugal | 238,187,395 | — | — | 238,187,395 | ||||||||||||
Italy | 183,405,380 | — | — | 183,405,380 | ||||||||||||
Canada | 153,311,775 | 8,095,274 | — | 161,407,049 | ||||||||||||
United Kingdom | 145,367,360 | — | — | 145,367,360 | ||||||||||||
Spain | 105,433,149 | — | — | 105,433,149 | ||||||||||||
Brazil | 85,492,131 | — | — | 85,492,131 | ||||||||||||
China | — | 69,351,209 | — | 69,351,209 | ||||||||||||
Sweden | 68,317,984 | — | — | 68,317,984 | ||||||||||||
Other Countries | 298,068,710 | 34,029,663 | — | 332,098,373 | ||||||||||||
Corporate Bonds | — | 3,235,950 | — | 3,235,950 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 19,023 | — | 19,023 | ||||||||||||
Mutual Funds | 134,052,735 | — | — | 134,052,735 | ||||||||||||
Total Investments | $5,203,161,126 | $114,731,119 | $— | $5,317,892,245 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $— | $8,577,333 | $— | $8,577,333 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $69,351,209 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $54,992,621 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.
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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 for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were forward foreign currency exchange contracts. 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 October 31, 2015 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $9,418,241 | $(840,908 | ) |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended October 31, 2015 as reported in the Statement of Operations:
Risk | Foreign Currency | |||
Foreign Exchange | $72,470,881 |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the year ended October 31, 2015 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | |||
Foreign Exchange | $1,578,918 |
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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 certain 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 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 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. Margin requirements are set by the clearing broker and the clearing house for cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options). 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 agreement and one amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated 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” or “Deposits with brokers.” Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
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 foreign currency.
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
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Settlement, an industry accepted settlement system. 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. (“Chase”), 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. Chase provides the fund with indemnification against Borrower default. In the event of Borrower default, Chase 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, Chase assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, Chase 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 $126,903,281. The fair value of the fund’s investment securities on loan and a related liability of $134,046,558 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The collateral received 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 included in “Interest” income in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
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Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Some securities may be purchased on a “when-issued” or “forward delivery” basis, which means that the securities will be delivered to the fund at a future date, usually beyond customary settlement time. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
The fund purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
To mitigate this risk of loss on TBA securities and other types of forward settling mortgage-backed securities, 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 certain 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 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 one amount is posted from one party to the
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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 October 31, 2015, 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. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals, derivative transactions, treating a portion of the proceeds from redemptions as a distribution for tax purposes, and partnership adjustments.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
10/31/15 | 10/31/14 | |||||||
Ordinary income (including any short-term capital gains) | $197,578,192 | $273,799,802 | ||||||
Long-term capital gains | 303,030,947 | 109,044,461 | ||||||
Total distributions | $500,609,139 | $382,844,263 |
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The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 10/31/15 | ||||
Cost of investments | $5,220,246,224 | |||
Gross appreciation | 727,426,066 | |||
Gross depreciation | (629,780,045 | ) | ||
Net unrealized appreciation (depreciation) | $97,646,021 | |||
Undistributed ordinary income | 13,318,939 | |||
Undistributed long-term capital gain | 268,297,189 | |||
Other temporary differences | (5,412,447 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Year ended 10/31/15 | Year ended 10/31/14 | Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||
Class A | $75,204,473 | $97,218,583 | $207,683,990 | $133,161,909 | ||||||||||||
Class B | 4,510,482 | 6,798,922 | 19,290,935 | 12,632,156 | ||||||||||||
Class C | 16,135,535 | 21,817,584 | 67,087,364 | 38,095,498 | ||||||||||||
Class I | 19,312,693 | 21,258,017 | 50,632,928 | 23,289,939 | ||||||||||||
Class R1 | 194,561 | 278,260 | 820,157 | 502,602 | ||||||||||||
Class R2 | 2,511,681 | 3,301,360 | 7,915,133 | 4,808,744 | ||||||||||||
Class R3 | 3,714,491 | 4,430,526 | 10,555,365 | 5,570,819 | ||||||||||||
Class R4 | 2,998,822 | 3,957,455 | 7,669,394 | 4,594,337 | ||||||||||||
Class R5 | 1,410,129 | 682,669 | 2,961,006 | 444,883 | ||||||||||||
Total | $125,992,867 | $159,743,376 | $374,616,272 | $223,100,887 |
(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:
First $3 billion of average daily net assets | 0.60 | % | ||
Average daily net assets in excess of $3 billion | 0.55 | % |
Effective August 1, 2015, the investment adviser has agreed in writing to reduce its management fee to 0.50% of average daily net assets in excess of $10 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but
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such agreement will continue at least until February 28, 2017. For the period August 1, 2015 to October 31, 2015, the fund’s average daily net assets did not exceed $10 billion and therefore, the management fee was not reduced in accordance with this agreement. The management fee incurred for the year ended October 31, 2015 was equivalent to an annual effective rate of 0.58% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $1,514,092 for the year ended October 31, 2015, 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% | $8,489,147 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 3,061,992 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 10,936,171 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 132,427 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 638,548 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 419,381 | |||||||||||||||
Total Distribution and Service Fees | $23,677,666 |
(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 October 31, 2015 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 MFD retains the 0.25% service fee except for accounts attributable to MFS or its affiliates’ seed money. For the year ended October 31, 2015, this rebate amounted to $54,754, $2,466, and $2,516 for Class A, Class B, and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended October 31, 2015, were as follows:
Amount | ||||
Class A | $42,033 | |||
Class B | 363,717 | |||
Class C | 119,965 |
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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 October 31, 2015, the fee was $676,393, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R5 shares do not incur sub-accounting fees. For the year ended October 31, 2015, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $6,848,072.
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 October 31, 2015 was equivalent to an annual effective rate of 0.0106% 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 for their services to the fund from MFS. 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 $653 and is included in “Independent Trustees’ compensation” in the Statement of Operations for the year ended October 31, 2015. The liability for deferred retirement benefits payable to certain independent Trustees under the DB plan amounted to $5,286 at October 31, 2015, and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended October 31, 2015, the fee paid by the fund under this agreement was $23,946 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity.
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Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) Portfolio Securities
For the year ended October 31, 2015, purchases and sales of investments, other than short-term obligations, aggregated $2,612,368,464 and $2,715,891,966 respectively.
(5) Shares of Beneficial Interest
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 25,803,877 | $555,465,201 | 39,532,488 | $885,408,658 | ||||||||||||
Class B | 1,441,375 | 30,989,340 | 1,714,616 | 37,997,145 | ||||||||||||
Class C | 7,261,261 | 156,331,747 | 11,137,720 | 248,282,916 | ||||||||||||
Class I | 10,100,741 | 218,131,807 | 17,523,370 | 396,811,016 | ||||||||||||
Class R1 | 164,715 | 3,524,106 | 205,557 | 4,569,431 | ||||||||||||
Class R2 | 1,485,175 | 31,834,170 | 1,872,389 | 41,999,845 | ||||||||||||
Class R3 | 1,948,433 | 42,149,633 | 2,761,741 | 61,969,815 | ||||||||||||
Class R4 | 1,377,725 | 29,743,951 | 2,759,787 | 61,468,057 | ||||||||||||
Class R5 | 2,538,228 | 51,554,421 | 2,488,788 | 56,424,797 | ||||||||||||
52,121,530 | $1,119,724,376 | 79,996,456 | $1,794,931,680 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 12,445,735 | $267,078,297 | 10,203,200 | $216,704,309 | ||||||||||||
Class B | 974,233 | 20,842,681 | 804,898 | 16,911,638 | ||||||||||||
Class C | 3,197,575 | 68,387,746 | 2,270,910 | 47,816,546 | ||||||||||||
Class I | 2,547,996 | 54,864,140 | 1,509,871 | 32,453,282 | ||||||||||||
Class R1 | 47,512 | 1,014,715 | 37,174 | 780,649 | ||||||||||||
Class R2 | 467,402 | 10,012,338 | 361,839 | 7,663,604 | ||||||||||||
Class R3 | 664,931 | 14,268,909 | 469,704 | 10,000,086 | ||||||||||||
Class R4 | 472,061 | 10,140,977 | 382,598 | 8,171,277 | ||||||||||||
Class R5 | 197,992 | 4,255,830 | 51,496 | 1,127,534 | ||||||||||||
21,015,437 | $450,865,633 | 16,091,690 | $341,628,925 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (40,311,984 | ) | $(853,971,787 | ) | (44,394,708 | ) | $(981,059,960 | ) | ||||||||
Class B | (3,132,064 | ) | (66,365,346 | ) | (2,321,302 | ) | (51,346,277 | ) | ||||||||
Class C | (10,422,394 | ) | (219,108,429 | ) | (6,394,465 | ) | (141,526,773 | ) | ||||||||
Class I | (16,607,107 | ) | (350,526,238 | ) | (8,008,508 | ) | (177,515,807 | ) | ||||||||
Class R1 | (255,137 | ) | (5,349,575 | ) | (187,103 | ) | (4,126,085 | ) | ||||||||
Class R2 | (2,409,003 | ) | (50,972,442 | ) | (1,665,365 | ) | (36,750,657 | ) | ||||||||
Class R3 | (3,217,057 | ) | (67,758,216 | ) | (1,848,776 | ) | (40,946,387 | ) | ||||||||
Class R4 | (2,849,281 | ) | (61,754,233 | ) | (1,915,898 | ) | (42,392,219 | ) | ||||||||
Class R5 | (953,112 | ) | (20,302,232 | ) | (504,450 | ) | (10,866,100 | ) | ||||||||
(80,157,139 | ) | $(1,696,108,498 | ) | (67,240,575 | ) | $(1,486,530,265 | ) |
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Year ended 10/31/15 | Year ended 10/31/14 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Class A | (2,062,372 | ) | $(31,428,289 | ) | 5,340,980 | $121,053,007 | ||||||||||
Class B | (716,456 | ) | (14,533,325 | ) | 198,212 | 3,562,506 | ||||||||||
Class C | 36,442 | 5,611,064 | 7,014,165 | 154,572,689 | ||||||||||||
Class I | (3,958,370 | ) | (77,530,291 | ) | 11,024,733 | 251,748,491 | ||||||||||
Class R1 | (42,910 | ) | (810,754 | ) | 55,628 | 1,223,995 | ||||||||||
Class R2 | (456,426 | ) | (9,125,934 | ) | 568,863 | 12,912,792 | ||||||||||
Class R3 | (603,693 | ) | (11,339,674 | ) | 1,382,669 | 31,023,514 | ||||||||||
Class R4 | (999,495 | ) | (21,869,305 | ) | 1,226,487 | 27,247,115 | ||||||||||
Class R5 | 1,783,108 | 35,508,019 | 2,035,834 | 46,686,231 | ||||||||||||
(7,020,172 | ) | $(125,518,489 | ) | 28,847,571 | $650,030,340 |
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication 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 higher of the Overnight Federal Reserve funds rate or daily one month LIBOR 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 at the end of each calendar quarter. 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 a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended October 31, 2015, the fund’s commitment fee and interest expense were $20,967 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) Transactions in Underlying Affiliated Funds-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 fund assumes the following to be an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 241,096,971 | 1,316,862,454 | (1,557,953,248 | ) | 6,177 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $147,516 | $6,177 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust VI and Shareholders of MFS Utilities Fund:
We have audited the accompanying statement of assets and liabilities of MFS Utilities Fund (the Fund) (one of the series constituting MFS Series Trust VI), including the portfolio of investments, as of October 31, 2015, 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 and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2015, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of MFS Utilities Fund (one of the series constituting MFS Series Trust VI) at October 31, 2015, 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 periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 15, 2015
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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of December 1, 2015, 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) | Principal the Past Five Years | Other Directorships (j) | ||||
INTERESTED TRUSTEES | ||||||||
Robert J. Manning (k) (age 52) | Trustee | February 2004 | Massachusetts Financial Services Company, Chairman, Co-Chief Executive Officer and Director; Chief Investment Officer (until 2010) | N/A | ||||
Robin A. Stelmach (k) (age 54) | Trustee and President | January 2014 | Massachusetts Financial Services Company, Executive Vice President and Chief Operating Officer | N/A | ||||
INDEPENDENT TRUSTEES | ||||||||
David H. Gunning (age 73) | Trustee and Chair of Trustees | January 2004 | Private investor | Lincoln Electric Holdings, Inc., Director; Development Alternatives, Inc., Director/Non-Executive Chairman | ||||
Steven E. Buller (age 64) | Trustee | February 2014 | Chairman, Financial Accounting Standards Advisory Council; Standing Advisory Group, Public Company Accounting Oversight Board, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014) | N/A | ||||
Robert E. Butler (age 74) | Trustee | January 2006 | Consultant – investment company industry regulatory and compliance matters | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Maureen R. Goldfarb (age 60) | Trustee | January 2009 | Private investor | N/A | ||||
William R. Gutow (age 74) | Trustee | December 1993 | Private investor and real estate consultant; Capitol Entertainment Management Company (video franchise), Vice Chairman | Texas Donuts, Vice Chairman (until 2010) | ||||
Michael Hegarty (age 70) | Trustee | December 2004 | Private investor | Rouse Properties Inc., Director; Capmark Financial Group Inc., Director | ||||
John P. Kavanaugh (age 61) | Trustee | January 2009 | Private investor | N/A | ||||
Maryanne L. Roepke (age 59) | Trustee | May 2014 | American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014) | N/A | ||||
Laurie J. Thomsen (age 58) | Trustee | March 2005 | Private investor; New Profit, Inc. (venture philanthropy), Executive Partner (until 2010) | The Travelers Companies, Director; Dycom Industries, Inc. | ||||
Robert W. Uek (age 74) | Trustee | January 2006 | Consultant to investment company industry | N/A | ||||
OFFICERS | ||||||||
Christopher R. Bohane (k) (age 41) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Kino Clark (k) (age 47) | Assistant Treasurer | January 2012 | Massachusetts Financial Services Company, Vice President | N/A | ||||
Kristin V. Collins (k) (age 42) | Assistant Secretary and Assistant Clerk | September 2015 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Thomas H. Connors (k) (age 56) | Assistant Secretary and Assistant Clerk | September 2012 | Massachusetts Financial Services Company, Vice President and Senior Counsel; Deutsche Investment Management Americas Inc. (financial service provider), Director and Senior Counsel (until 2012) | N/A | ||||
Ethan D. Corey (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
David L. DiLorenzo (k) (age 47) | Treasurer | July 2005 | Massachusetts Financial Services Company, Senior Vice President | N/A | ||||
Brian E. Langenfeld (k) (age 42) | Assistant Secretary and Assistant Clerk | June 2006 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kenneth Paek (k) (age 41) | Assistant Treasurer | February 2015 | Massachusetts Financial Services Company, Vice President; Cohen & Steers, Vice President/Head of Fund Administration (until 2014) | N/A | ||||
Susan A. Pereira (k) (age 45) | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel | N/A | ||||
Kasey L. Phillips (k) (age 44) | Assistant Treasurer | September 2012 | Massachusetts Financial Services Company, Vice President; Wells Fargo Funds Management, LLC, Senior Vice President, Fund Treasurer (until 2012) | N/A |
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Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Mark N. Polebaum (k) (age 63) | Secretary and Clerk | January 2006 | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary | N/A | ||||
Matthew A. Stowe (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2014 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | N/A | ||||
Frank L. Tarantino (age 71) | Independent Senior Officer | June 2004 | Tarantino LLC (provider of compliance services), Principal | N/A | ||||
Richard S. Weitzel (k) (age 45) | Assistant Secretary and Assistant Clerk | October 2007 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | N/A | ||||
Martin J. Wolin (k) (age 48) | Chief Compliance Officer | July 2015 | Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015) | N/A | ||||
James O. Yost (k) (age 55) | Deputy Treasurer | September 1990 | Massachusetts Financial Services Company, Senior Vice President | N/A |
(h) | Date first appointed to serve as Trustee/officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. Prior to January 2012, Messrs. DiLorenzo and Yost served as Assistant Treasurers of the Funds. Ms. Stelmach was appointed as President of the Funds as of October 1, 2014. |
(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
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Trustees and Officers – continued
Each Trustee (except Ms. Stelmach, Mr. Buller and Ms. Roepke) 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. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Messrs. Butler, Kavanaugh, Uek and Mses. Thomsen and Roepke are members of the Trust’s Audit Committee.
Each of the Fund’s Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of December 1, 2015, the Trustees served as board members of 138 funds within the MFS Family of Funds.
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 Managers | ||
Claud Davis Maura Shaughnessy |
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2015 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by the MFS Funds’ Independent Senior Officer, a senior officer appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Lipper Inc., an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2014 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Lipper Inc. on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Lipper Inc. (the “Lipper expense group”), (iii) information provided by MFS on the advisory fees of comparable portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to
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Board Review of Investment Advisory Agreement – continued
the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Lipper Inc. was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Class A shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2014, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class A shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class A shares was in the 5th quintile for the one-year period and the 3rd quintile for the five-year period ended December 31, 2014 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class A shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Lipper Inc. The Trustees considered that, according to the Lipper data (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate was approximately at the Lipper expense group median and the Fund’s total expense ratio was lower than the Lipper expense group median.
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Board Review of Investment Advisory Agreement – continued
The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund. They noted that the Fund’s advisory fee rate schedule is subject to a contractual breakpoint that reduces the Fund’s advisory fee rate on average daily net assets over $3 billion, and that MFS has agreed in writing to implement an additional breakpoint that reduces its advisory fee rate on the Fund’s average daily net assets over $10 billion, which may not be changed without the Trustees’ approval. The Trustees concluded that the breakpoints were sufficient to allow the Fund to benefit from economies of scale as its assets grow.
The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and
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Board Review of Investment Advisory Agreement – continued
MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund’s portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2015.
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com 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 without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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 by visiting the “Market Commentary” and “Announcements” sub sections in the “Market Outlooks” section of mfs.com or by clicking on the fund’s name under “Mutual Funds” in the “Products” section of mfs.com.
FEDERAL TAX INFORMATION (unaudited)
The fund will notify shareholders of amounts for use in preparing 2015 income tax forms in January 2016. 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 $391,366,000 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 68.28% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
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rev. 3/11
| WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
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 and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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MFS® will send you prospectuses, |
reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.
To sign up:
1. Go to mfs.com.
2. Log in via MFS® Access.
3. Select eDelivery.
If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.
CONTACT
WEB SITE
mfs.com
MFS TALK
1-800-637-8255
24 hours a day
ACCOUNT SERVICE AND LITERATURE
Shareholders
1-800-225-2606
Financial advisors
1-800-343-2829
Retirement plan services
1-800-637-1255
MAILING ADDRESS
MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
OVERNIGHT MAIL
MFS Service Center, Inc.
c/o Boston Financial Data Services
30 Dan Road
Canton, MA 02021-2809
Table of Contents
ITEM 2. | CODE OF ETHICS. |
The Registrant has adopted a Code of Ethics 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 its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.
A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Messrs. Robert E. Butler, John P. Kavanaugh and Robert W. Uek and Mses. Maryanne L. Roepke and Laurie J. Thomsen, 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. Butler, Kavanaugh and Uek and Mses. Roepke and Thomsen are “independent” members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Items 4(a) through 4(d) and 4(g):
The Board of Trustees has appointed Ernst & Young LLP (“E&Y”) to serve as independent accountants to the 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 Fund (“MFS Related Entities”).
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For the fiscal years ended October 31, 2015 and 2014, audit fees billed to each Fund by E&Y were as follows:
Audit Fees | ||||||||
2015 | 2014 | |||||||
Fees billed by E&Y: | ||||||||
MFS Global Equity Fund | 48,653 | 47,853 | ||||||
MFS Global Total Return Fund | 56,755 | 55,820 | ||||||
MFS Utilities Fund | 44,503 | 43,772 | ||||||
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Total | 149,911 | 147,445 |
For the fiscal years ended October 31, 2015 and 2014, fees billed by 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 | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS Global Equity Fund | 0 | 3,750 | 9,295 | 9,132 | 1,112 | 0 | ||||||||||||||||||
To MFS Global Total Return Fund | 0 | 3,750 | 10,583 | 10,398 | 1,078 | 0 | ||||||||||||||||||
To MFS Utilities Fund | 0 | 3,750 | 8,564 | 8,413 | 1,306 | 0 | ||||||||||||||||||
Total fees billed by E&Y To above Funds | 0 | 11,250 | 28,442 | 27,943 | 3,496 | 0 | ||||||||||||||||||
Audit-Related Fees1 | Tax Fees2 | All Other Fees3 | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS and MFS Related Entities of MFS Global Equity Fund* | 920,675 | 0 | 0 | 0 | 99,446 | 0 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Global Total Return Fund* | 920,675 | 0 | 0 | 0 | 99,446 | 0 | ||||||||||||||||||
To MFS and MFS Related Entities of MFS Utilities Fund* | 920,675 | 0 | 0 | 0 | 99,446 | 0 |
Aggregate fees for non-audit services: | ||||||||
2015 | 2014 | |||||||
Fees billed by E&Y: | ||||||||
To MFS Global Equity Fund, MFS and MFS Related Entities# | 1,281,528 | 87,882 | ||||||
To MFS Global Total Return Fund, MFS and MFS Related Entities# | 1,282,782 | 89,148 | ||||||
To MFS Utilities Fund, MFS and MFS Related Entities# | 1,280,991 | 87,163 |
* | This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Fund (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex). |
# | This amount reflects the aggregate fees billed by E&Y for non-audit services rendered to the Fund and for non-audit services rendered to MFS and the MFS Related Entities. |
1 | The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under ‘‘Audit Fees,’’ including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews. |
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2 | The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis. |
3 | The fees included under “All Other Fees” are fees for products and services provided by E&Y other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to review of internal controls and review of Rule 38a-1 compliance program. |
Item 4(e)(1): |
Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services:
To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the 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.
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ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
ITEM 6. | INVESTMENTS |
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 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 second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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ITEM 12. | EXHIBITS. |
(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. |
(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. |
(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. |
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Notice
A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST VI
By (Signature and Title)* | ROBIN A. STELMACH | |
Robin A. Stelmach, President |
Date: December 15, 2015
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)* | ROBIN A. STELMACH | |
Robin A. Stelmach, President (Principal Executive Officer) |
Date: December 15, 2015
By (Signature and Title)* | DAVID L. DILORENZO | |
David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: December 15, 2015
* | Print name and title of each signing officer under his or her signature. |