| ITEM 1. |
REPORTS TO STOCKHOLDERS. |
Item 1(a):
Semiannual Report
May 31, 2022
MFS® Intermediate High
Income Fund
MANAGED DISTRIBUTION POLICY DISCLOSURE
The MFS Intermediate High Income Fund’s (the fund) Board
of Trustees adopted a managed distribution policy. The fund seeks to pay monthly distributions based on an annual rate of 9.50% of the fund’s average monthly net asset value. The primary purpose of the managed distribution policy is to provide
shareholders with a constant, but not guaranteed, fixed rate of distribution each month. You should not draw any conclusions about the fund’s investment performance from the amount of the current distribution or from the terms of the
fund’s managed distribution policy. The Board may amend or terminate the managed distribution policy at any time without prior notice to fund shareholders. The amendment or termination of the managed distribution policy could have an adverse
effect on the market price of the fund’s shares.
With each distribution, the fund will issue a notice to
shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to
shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the fund’s investment experience during the remainder of its
fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Please refer to “Tax Matters
and Distributions” under Note 2 of the Notes to Financial Statements for information regarding the tax character of the fund’s distributions.
Under a managed distribution policy the fund may at times
distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that you invested
in the fund is paid back to you. Any such returns of capital will decrease the fund’s total assets and, therefore, could have the effect of increasing the fund’s expense ratio. In addition, in order to make the level of distributions
called for under its managed distribution policy, the fund may have to sell portfolio securities at a less than opportune time. A return of capital does not necessarily reflect the fund’s investment performance and should not be confused with
‘yield’ or ‘income’. The fund’s total return in relation to changes in net asset value is presented in the Financial Highlights.
MFS® Intermediate
High
Income Fund
New York Stock Exchange Symbol:
CIF
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NOT FDIC INSURED • MAY LOSE VALUE
• NO BANK GUARANTEE
LETTER FROM THE CHAIR AND
CEO
Dear Shareholders:
Global markets have recently been buffeted by a series of
crosscurrents, including rising inflation, tighter financial conditions, the continued spread of the coronavirus (particularly in Asia), and the evolving geopolitical landscape in the wake of Russia’s invasion of Ukraine. Consequently, at a
time when global growth faces multiple headwinds, central banks have been presented with the challenge of reining in rising prices without tipping economies into recession. At its June meeting, the US Federal Reserve undertook a 0.75% rate hike, its
largest since 1994. Additional larger-than-normal hikes are expected in coming meetings as the Fed seeks to move policy into restrictive territory by year-end to slow the economy and dampen inflation. Richly valued, rate-sensitive growth equities
have been hit particularly hard by higher interest rates, and volatility in credit markets has picked up too.
There are, however, encouraging signs for
the markets. The latest wave of COVID-19 cases appears to be receding in Asia, cases outside of Asia remain well below prior peaks, and fewer are seriously ill. Meanwhile, unemployment is low and there are signs that some global supply chain
bottlenecks are beginning to ease, though lingering coronavirus restrictions in China and disruptions stemming from Russia’s invasion of Ukraine could hamper these advances. Additionally, easier Chinese monetary and regulatory policies and the
record pace of corporate stock buybacks are supportive elements, albeit in an otherwise turbulent investment environment.
It is important to have a deep understanding of company
fundamentals during times of market transition, and we have built our unique global research platform to do just that.
At MFS®, we put our clients’ assets to work responsibly by carefully navigating increasingly complex global capital markets. Our investment team is guided by a commitment to
long-term fundamental investing. Our global investment platform — combining collective expertise, long-term discipline, and thoughtful risk management — seeks to uncover what we believe are the best, most durable investment ideas in
markets around the world, enabling us to potentially create value for investors.
Respectfully,
Michael W.
Roberge
Chair and Chief Executive Officer
MFS Investment Management
July 15, 2022
The opinions expressed in this letter are subject to change
and may not be relied upon for investment advice. No forecasts can be guaranteed.
Portfolio structure (i)
Top five industries
(i)
| Cable
TV |
11.3%
|
| Gaming
& Lodging |
8.8%
|
| Medical
& Health Technology & Services |
8.5%
|
| Midstream
|
6.9%
|
| Metals
& Mining |
5.8%
|
Composition including fixed income credit quality (a)(i)
| BBB
|
3.7%
|
| BB
|
64.8%
|
| B
|
53.2%
|
| CCC
|
15.8%
|
| C
|
0.1%
|
| Not
Rated |
(1.4)%
|
| Non-Fixed
Income |
2.0%
|
Cash
& Cash Equivalents
(Less Liabilities) (b) |
(39.6)%
|
| Other
|
1.4%
|
Portfolio facts (i)
| Average
Duration (d) |
6.1
|
| Average
Effective Maturity (m) |
6.0 yrs.
|
| (a)
|
For all
securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three
agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the
security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned.
Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. Not Rated includes fixed income securities and fixed income derivatives that have not
been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and/or commodity-linked derivatives. The fund may or may not have held all of these instruments on this date. The fund
is not rated by these agencies. |
Portfolio Composition -
continued
| (b)
|
Cash
& Cash Equivalents (Less Liabilities) includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Liabilities include the value of outstanding borrowings made by the fund for leverage
transactions. Cash & Cash Equivalents (Less Liabilities) is negative due to these borrowings. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and
liabilities. Please see Note 6 in the Notes to Financial Statements for more information on the fund's outstanding borrowings. |
| (d)
|
Duration is
a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move.
|
| (i)
|
For
purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated
amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the
portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include
any accrued interest amounts. |
| (m)
|
In
determining each instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes
it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
Where the fund holds convertible bonds, they are treated
as part of the equity portion of the portfolio.
Other
includes equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of May 31, 2022.
The portfolio is actively managed and current holdings may be
different.
Portfolio
Managers' Profiles
| Portfolio
Manager |
Primary
Role |
Since
|
Title
and Five Year History |
| David
Cole |
Portfolio
Manager |
2007
|
Investment
Officer of MFS; employed in the investment management area of MFS since 2004. |
| Michael
Skatrud |
Portfolio
Manager |
2018
|
Investment
Officer of MFS; employed in the investment management area of MFS since 2013. |
Other Notes
The fund’s shares may trade at a discount or premium to
net asset value. When fund shares trade at a premium, buyers pay more than the net asset value underlying fund shares, and shares purchased at a premium would receive less than the amount paid for them in the event of the fund’s concurrent
liquidation.
The fund's target annual distribution rate
is calculated based on an annual rate of 9.50% of the fund's average monthly net asset value, not a fixed share price, and the fund's dividend amount will fluctuate with changes in the fund's average monthly net assets.
In accordance with Section 23(c) of the Investment Company
Act of 1940, the fund hereby gives notice that it may from time to time repurchase shares of the fund in the open market at the option of the Board of Trustees and on such terms as the Trustees shall determine.
Portfolio of
Investments
5/31/22 (unaudited)
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– 135.5% |
| Aerospace
& Defense – 3.1% |
| Bombardier,
Inc., 7.5%, 3/15/2025 (n) |
|
$
|
89,000
|
$
85,504 |
| Bombardier,
Inc., 7.125%, 6/15/2026 (n) |
|
|
97,000
|
88,616
|
| F-Brasile
S.p.A./F-Brasile U.S. LLC, 7.375%, 8/15/2026 (n) |
|
|
200,000
|
161,000
|
| Moog,
Inc., 4.25%, 12/15/2027 (n) |
|
|
256,000
|
242,560
|
| TransDigm,
Inc., 6.25%, 3/15/2026 (n) |
|
|
200,000
|
203,452
|
| TransDigm,
Inc., 6.375%, 6/15/2026 |
|
|
185,000
|
183,613
|
| TransDigm,
Inc., 5.5%, 11/15/2027 |
|
|
130,000
|
124,459
|
| TransDigm,
Inc., 4.625%, 1/15/2029 |
|
|
147,000
|
131,796
|
| |
|
|
|
$
1,221,000 |
| Automotive
– 3.7% |
| Clarios
Global LP/Clarios U.S. Finance Cois, 8.5%, 5/15/2027 (n) |
|
$
|
260,000
|
$
259,129 |
| Dana,
Inc., 5.375%, 11/15/2027 |
|
|
113,000
|
107,281
|
| Dana,
Inc., 4.25%, 9/01/2030 |
|
|
95,000
|
82,798
|
| Dornoch
Debt Merger Sub, Inc., 6.625%, 10/15/2029 (n) |
|
|
135,000
|
107,663
|
| Ford
Motor Co., 5.113%, 5/03/2029 |
|
|
210,000
|
204,670
|
| Ford
Motor Co., 4.75%, 1/15/2043 |
|
|
155,000
|
127,875
|
| Ford
Motor Credit Co. LLC, 4.134%, 8/04/2025 |
|
|
200,000
|
194,930
|
| IAA
Spinco, Inc., 5.5%, 6/15/2027 (n) |
|
|
200,000
|
193,800
|
| Real
Hero Merger Sub 2, Inc., 6.25%, 2/01/2029 (n) |
|
|
130,000
|
102,265
|
| Wheel
Pros, Inc., 6.5%, 5/15/2029 (n) |
|
|
120,000
|
85,548
|
| |
|
|
|
$
1,465,959 |
| Broadcasting
– 4.0% |
| Advantage
Sales & Marketing, Inc., 6.5%, 11/15/2028 (n) |
|
$
|
174,000
|
$
154,982 |
| Gray
Escrow II, Inc., 5.375%, 11/15/2031 (n) |
|
|
250,000
|
227,679
|
| iHeartCommunications,
Inc., 8.375%, 5/01/2027 |
|
|
50,000
|
46,900
|
| Netflix,
Inc., 5.875%, 11/15/2028 |
|
|
170,000
|
176,066
|
| Scripps
Escrow II, Inc., 5.875%, 7/15/2027 (n) |
|
|
180,000
|
170,391
|
| Summer
(BC) Bidco B LLC, 5.5%, 10/31/2026 (n) |
|
|
200,000
|
186,200
|
| Summer
(BC) Holdco S.à r.l., “A”, 9.25%, 10/31/2027 |
|
EUR
|
90,105
|
90,502
|
| Univision
Communications, Inc., 4.5%, 5/01/2029 (n) |
|
$
|
220,000
|
201,575
|
| WMG
Acquisition Corp., 3.875%, 7/15/2030 (n) |
|
|
350,000
|
321,709
|
| |
|
|
|
$
1,576,004 |
| Brokerage
& Asset Managers – 2.6% |
| Aretec
Escrow Issuer, Inc., 7.5%, 4/01/2029 (n) |
|
$
|
135,000
|
$
120,381 |
| LPL
Holdings, Inc., 4.625%, 11/15/2027 (n) |
|
|
290,000
|
282,750
|
| LPL
Holdings, Inc., 4%, 3/15/2029 (n) |
|
|
216,000
|
200,070
|
| LPL
Holdings, Inc., 4.375%, 5/15/2031 (n) |
|
|
125,000
|
112,344
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Brokerage
& Asset Managers – continued |
| NFP
Corp., 4.875%, 8/15/2028 (n) |
|
$
|
155,000
|
$
143,881 |
| NFP
Corp., 6.875%, 8/15/2028 (n) |
|
|
173,000
|
150,802
|
| |
|
|
|
$
1,010,228 |
| Building
– 5.2% |
| ABC
Supply Co., Inc., 4%, 1/15/2028 (n) |
|
$
|
360,000
|
$
338,613 |
| Foundation
Building Materials LLC, 6%, 3/01/2029 (n) |
|
|
90,000
|
73,350
|
| GYP
Holding III Corp., 4.625%, 5/01/2029 (n) |
|
|
240,000
|
200,410
|
| Interface,
Inc., 5.5%, 12/01/2028 (n) |
|
|
235,000
|
208,477
|
| MIWD
Holdco II LLC/MIWD Finance Co., 5.5%, 2/01/2030 (n) |
|
|
115,000
|
97,763
|
| New
Enterprise Stone & Lime Co., Inc., 9.75%, 7/15/2028 (n) |
|
|
138,000
|
132,357
|
| Park
River Holdings, Inc., 5.625%, 2/01/2029 (n) |
|
|
95,000
|
67,439
|
| Patrick
Industries, Inc., 7.5%, 10/15/2027 (n) |
|
|
200,000
|
198,000
|
| SRM
Escrow Issuer LLC, 6%, 11/01/2028 (n) |
|
|
135,000
|
126,041
|
| SRS
Distribution, Inc., 6.125%, 7/01/2029 (n) |
|
|
170,000
|
145,775
|
| Standard
Industries, Inc., 4.75%, 1/15/2028 (n) |
|
|
90,000
|
85,368
|
| Standard
Industries, Inc., 4.375%, 7/15/2030 (n) |
|
|
241,000
|
217,118
|
| Standard
Industries, Inc., 3.375%, 1/15/2031 (n) |
|
|
40,000
|
33,572
|
| White
Cap Buyer LLC, 6.875%, 10/15/2028 (n) |
|
|
140,000
|
124,600
|
| |
|
|
|
$
2,048,883 |
| Business
Services – 2.6% |
| HealthEquity,
Inc., 4.5%, 10/01/2029 (n) |
|
$
|
215,000
|
$
200,487 |
| Iron
Mountain, Inc., 5.25%, 3/15/2028 (n) |
|
|
100,000
|
97,248
|
| Iron
Mountain, Inc., REIT, 4.875%, 9/15/2027 (n) |
|
|
140,000
|
137,957
|
| Nielsen
Finance LLC, 4.5%, 7/15/2029 (n) |
|
|
130,000
|
122,844
|
| Paysafe
Finance PLC, 4%, 6/15/2029 (n) |
|
|
170,000
|
132,600
|
| Switch
Ltd., 3.75%, 9/15/2028 (n) |
|
|
180,000
|
180,053
|
| Verscend
Escrow Corp., 9.75%, 8/15/2026 (n) |
|
|
150,000
|
154,441
|
| |
|
|
|
$
1,025,630 |
| Cable
TV – 10.9% |
| CCO
Holdings LLC/CCO Holdings Capital Corp., 5.125%, 5/01/2027 (n) |
|
$
|
125,000
|
$
123,200 |
| CCO
Holdings LLC/CCO Holdings Capital Corp., 4.75%, 3/01/2030 (n) |
|
|
651,000
|
600,547
|
| CCO
Holdings LLC/CCO Holdings Capital Corp., 4.5%, 8/15/2030 (n) |
|
|
220,000
|
198,682
|
| CCO
Holdings LLC/CCO Holdings Capital Corp., 4.25%, 2/01/2031 (n) |
|
|
240,000
|
211,728
|
| CCO
Holdings LLC/CCO Holdings Capital Corp., 4.25%, 1/15/2034 (n) |
|
|
155,000
|
128,397
|
| CSC
Holdings LLC, 5.375%, 2/01/2028 (n) |
|
|
200,000
|
190,000
|
| CSC
Holdings LLC, 5.75%, 1/15/2030 (n) |
|
|
400,000
|
334,304
|
| DISH
DBS Corp., 7.75%, 7/01/2026 |
|
|
100,000
|
85,500
|
| DISH
DBS Corp., 5.25%, 12/01/2026 (n) |
|
|
150,000
|
126,907
|
| DISH
DBS Corp., 5.125%, 6/01/2029 |
|
|
135,000
|
95,278
|
| LCPR
Senior Secured Financing DAC, 6.75%, 10/15/2027 (n) |
|
|
180,000
|
181,350
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Cable
TV – continued |
| Sirius
XM Holdings, Inc., 3.875%, 9/01/2031 (n) |
|
$
|
230,000
|
$
202,221 |
| Sirius
XM Radio, Inc., 4%, 7/15/2028 (n) |
|
|
163,000
|
151,158
|
| Sirius
XM Radio, Inc., 5.5%, 7/01/2029 (n) |
|
|
390,000
|
387,385
|
| Telenet
Finance Luxembourg S.A., 5.5%, 3/01/2028 (n) |
|
|
400,000
|
374,000
|
| Videotron
Ltd., 5.125%, 4/15/2027 (n) |
|
|
110,000
|
107,112
|
| Virgin
Media Finance PLC, 5%, 7/15/2030 (n) |
|
|
225,000
|
200,857
|
| Virgin
Media Vendor Financing Notes IV DAC, 5%, 7/15/2028 (n) |
|
|
225,000
|
206,070
|
| Ziggo
Bond Finance B.V., 5.125%, 2/28/2030 (n) |
|
|
400,000
|
355,346
|
| |
|
|
|
$
4,260,042 |
| Chemicals
– 3.6% |
| Axalta
Coating Systems Ltd., 4.75%, 6/15/2027 (n) |
|
$
|
150,000
|
$
142,875 |
| Axalta
Coating Systems Ltd., 3.375%, 2/15/2029 (n) |
|
|
320,000
|
281,374
|
| Consolidated
Energy Finance S.A., 5.625%, 10/15/2028 (n) |
|
|
188,000
|
172,020
|
| Element
Solutions, Inc., 3.875%, 9/01/2028 (n) |
|
|
193,000
|
172,735
|
| Herens
Holdco S.à r.l., 4.75%, 5/15/2028 (n) |
|
|
200,000
|
172,896
|
| Ingevity
Corp., 3.875%, 11/01/2028 (n) |
|
|
225,000
|
201,938
|
| LSF11
A5 HoldCo LLC, 6.625%, 10/15/2029 (n) |
|
|
125,000
|
106,875
|
| S.P.C.M.
S.A., 3.125%, 3/15/2027 (n) |
|
|
200,000
|
174,000
|
| |
|
|
|
$
1,424,713 |
| Computer
Software – 1.8% |
| Camelot
Finance S.A., 4.5%, 11/01/2026 (n) |
|
$
|
120,000
|
$
113,707 |
| Clarivate
Science Holdings Corp., 3.875%, 7/01/2028 (n) |
|
|
50,000
|
45,348
|
| Clarivate
Science Holdings Corp., 4.875%, 7/01/2029 (n) |
|
|
215,000
|
192,533
|
| Dun
& Bradstreet Corp., 5%, 12/15/2029 (n) |
|
|
170,000
|
154,593
|
| PTC,
Inc., 3.625%, 2/15/2025 (n) |
|
|
160,000
|
158,920
|
| PTC,
Inc., 4%, 2/15/2028 (n) |
|
|
45,000
|
42,933
|
| |
|
|
|
$
708,034 |
| Computer
Software - Systems – 2.5% |
| Fair
Isaac Corp., 5.25%, 5/15/2026 (n) |
|
$
|
385,000
|
$
384,519 |
| Fair
Isaac Corp., 4%, 6/15/2028 (n) |
|
|
36,000
|
34,192
|
| SS&C
Technologies Holdings, Inc., 5.5%, 9/30/2027 (n) |
|
|
270,000
|
269,824
|
| Viavi
Solutions, Inc., 3.75%, 10/01/2029 (n) |
|
|
235,000
|
211,810
|
| Virtusa
Corp., 7.125%, 12/15/2028 (n) |
|
|
115,000
|
96,600
|
| |
|
|
|
$
996,945 |
| Conglomerates
– 3.5% |
| BWX
Technologies, Inc., 4.125%, 6/30/2028 (n) |
|
$
|
58,000
|
$
52,485 |
| BWX
Technologies, Inc., 4.125%, 4/15/2029 (n) |
|
|
335,000
|
299,825
|
| Gates
Global LLC, 6.25%, 1/15/2026 (n) |
|
|
165,000
|
161,078
|
| Griffon
Corp., 5.75%, 3/01/2028 |
|
|
231,000
|
222,915
|
| Madison
IAQ LLC, 5.875%, 6/30/2029 (n) |
|
|
184,000
|
143,980
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Conglomerates
– continued |
| Stevens
Holding Co., Inc., 6.125%, 10/01/2026 (n) |
|
$
|
140,000
|
$
138,950 |
| TriMas
Corp., 4.125%, 4/15/2029 (n) |
|
|
390,000
|
351,000
|
| |
|
|
|
$
1,370,233 |
| Construction
– 1.9% |
| Empire
Communities Corp., 7%, 12/15/2025 (n) |
|
$
|
145,000
|
$
129,956 |
| Mattamy
Group Corp., 5.25%, 12/15/2027 (n) |
|
|
95,000
|
87,669
|
| Mattamy
Group Corp., 4.625%, 3/01/2030 (n) |
|
|
155,000
|
129,742
|
| Meritage
Homes Corp., 3.875%, 4/15/2029 (n) |
|
|
95,000
|
83,933
|
| Taylor
Morrison Communities, Inc., 5.75%, 1/15/2028 (n) |
|
|
165,000
|
163,113
|
| Weekley
Homes LLC/Weekley Finance Corp., 4.875%, 9/15/2028 (n) |
|
|
181,000
|
160,408
|
| |
|
|
|
$
754,821 |
| Consumer
Products – 1.7% |
| Mattel,
Inc., 3.375%, 4/01/2026 (n) |
|
$
|
147,000
|
$
142,560 |
| Mattel,
Inc., 5.875%, 12/15/2027 (n) |
|
|
109,000
|
110,907
|
| Mattel,
Inc., 5.45%, 11/01/2041 |
|
|
55,000
|
52,847
|
| Prestige
Consumer Healthcare, Inc., 5.125%, 1/15/2028 (n) |
|
|
175,000
|
168,000
|
| Prestige
Consumer Healthcare, Inc., 3.75%, 4/01/2031 (n) |
|
|
70,000
|
59,137
|
| SWF
Escrow Issuer Corp., 6.5%, 10/01/2029 (n) |
|
|
155,000
|
117,836
|
| |
|
|
|
$
651,287 |
| Consumer
Services – 5.3% |
| Allied
Universal Holdco LLC, 6.625%, 7/15/2026 (n) |
|
$
|
59,000
|
$
58,472 |
| Allied
Universal Holdco LLC, 9.75%, 7/15/2027 (n) |
|
|
170,000
|
159,764
|
| ANGI
Group LLC, 3.875%, 8/15/2028 (n) |
|
|
227,000
|
190,199
|
| Arches
Buyer, Inc., 6.125%, 12/01/2028 (n) |
|
|
175,000
|
146,935
|
| GoDaddy,
Inc., 3.5%, 3/01/2029 (n) |
|
|
358,000
|
330,479
|
| GW
B-CR Security Corp., 9.5%, 11/01/2027 (n) |
|
|
126,000
|
118,470
|
| Match
Group Holdings II LLC, 3.625%, 10/01/2031 (n) |
|
|
15,000
|
12,746
|
| Match
Group, Inc., 5%, 12/15/2027 (n) |
|
|
185,000
|
180,012
|
| Match
Group, Inc., 4.625%, 6/01/2028 (n) |
|
|
215,000
|
200,266
|
| Match
Group, Inc., 4.125%, 8/01/2030 (n) |
|
|
65,000
|
57,835
|
| Realogy
Group LLC/Realogy Co-Issuer Corp., 5.75%, 1/15/2029 (n) |
|
|
130,000
|
115,856
|
| Realogy
Group LLC/Realogy Co-Issuer Corp., 5.25%, 4/15/2030 (n) |
|
|
115,000
|
100,011
|
| TriNet
Group, Inc., 3.5%, 3/01/2029 (n) |
|
|
283,000
|
252,297
|
| WASH
Multifamily Acquisition, Inc., 5.75%, 4/15/2026 (n) |
|
|
134,000
|
132,909
|
| |
|
|
|
$
2,056,251 |
| Containers
– 4.5% |
| ARD
Finance S.A., 6.5%, (6.5% cash or 7.25% PIK) 6/30/2027 (n)(p) |
|
$
|
200,000
|
$
157,000 |
| Ardagh
Metal Packaging Finance USA LLC, 3.25%, 9/01/2028 (n) |
|
|
200,000
|
177,960
|
| Ardagh
Metal Packaging Finance USA LLC, 4%, 9/01/2029 (n) |
|
|
200,000
|
173,301
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Containers
– continued |
| Ardagh
Packaging Finance PLC/Ardagh MP Holdings USA, Inc., 5.25%, 8/15/2027 (n) |
|
$
|
255,000
|
$
212,925 |
| Ball
Corp., 3.125%, 9/15/2031 |
|
|
95,000
|
82,987
|
| Can-Pack
S.A./Eastern PA Land Investment Holding LLC, 3.875%, 11/15/2029 (n) |
|
|
275,000
|
241,203
|
| Crown
Americas LLC, 5.25%, 4/01/2030 (n) |
|
|
155,000
|
155,282
|
| Crown
Americas LLC/Crown Americas Capital Corp. V, 4.25%, 9/30/2026 |
|
|
250,000
|
245,559
|
| Crown
Americas LLC/Crown Americas Capital Corp. VI, 4.75%, 2/01/2026 |
|
|
130,000
|
128,050
|
| Trivium
Packaging Finance B.V., 8.5%, 8/15/2027 (n) |
|
|
200,000
|
196,887
|
| |
|
|
|
$
1,771,154 |
| Electrical
Equipment – 0.5% |
| CommScope
Technologies LLC, 5%, 3/15/2027 (n) |
|
$
|
255,000
|
$
212,606 |
| Electronics
– 2.4% |
| Diebold
Nixdorf, Inc., 9.375%, 7/15/2025 (n) |
|
$
|
91,000
|
$
69,160 |
| Entegris,
Inc., 4.375%, 4/15/2028 (n) |
|
|
85,000
|
79,263
|
| Entegris,
Inc., 3.625%, 5/01/2029 (n) |
|
|
110,000
|
97,254
|
| Sensata
Technologies B.V., 5.625%, 11/01/2024 (n) |
|
|
130,000
|
132,186
|
| Sensata
Technologies B.V., 5%, 10/01/2025 (n) |
|
|
285,000
|
287,422
|
| Sensata
Technologies, Inc., 4.375%, 2/15/2030 (n) |
|
|
125,000
|
118,687
|
| Synaptics,
Inc., 4%, 6/15/2029 (n) |
|
|
185,000
|
166,500
|
| |
|
|
|
$
950,472 |
| Energy
- Independent – 4.5% |
| Antero
Resources Corp., 7.625%, 2/01/2029 (n) |
|
$
|
140,000
|
$
151,753 |
| CNX
Resources Corp., 6%, 1/15/2029 (n) |
|
|
157,000
|
155,956
|
| Comstock
Resources, Inc., 6.75%, 3/01/2029 (n) |
|
|
210,000
|
209,705
|
| Encino
Acquisition Partners Holdings LLC, 8.5%, 5/01/2028 (n) |
|
|
120,000
|
120,000
|
| Moss
Creek Resources Holdings, Inc., 7.5%, 1/15/2026 (n) |
|
|
90,000
|
81,225
|
| Occidental
Petroleum Corp., 5.875%, 9/01/2025 |
|
|
165,000
|
172,402
|
| Occidental
Petroleum Corp., 6.625%, 9/01/2030 |
|
|
278,000
|
311,639
|
| Occidental
Petroleum Corp., 6.6%, 3/15/2046 |
|
|
115,000
|
129,950
|
| SM
Energy Co., 5.625%, 6/01/2025 |
|
|
95,000
|
94,630
|
| SM
Energy Co., 6.5%, 7/15/2028 |
|
|
100,000
|
99,316
|
| Southwestern
Energy Co., 5.95%, 1/23/2025 |
|
|
13,300
|
13,739
|
| Southwestern
Energy Co., 8.375%, 9/15/2028 |
|
|
90,000
|
98,621
|
| Southwestern
Energy Co., 5.375%, 3/15/2030 |
|
|
120,000
|
121,500
|
| |
|
|
|
$
1,760,436 |
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Entertainment
– 4.3% |
| Carnival
Corp. PLC, 7.625%, 3/01/2026 (n) |
|
$
|
405,000
|
$
379,769 |
| Carnival
Corp. PLC, 5.75%, 3/01/2027 (n) |
|
|
150,000
|
133,076
|
| Carnival
Corp. PLC, 6%, 5/01/2029 (n) |
|
|
45,000
|
38,025
|
| Life
Time, Inc., 5.75%, 1/15/2026 (n) |
|
|
150,000
|
144,234
|
| Live
Nation Entertainment, Inc., 5.625%, 3/15/2026 (n) |
|
|
143,000
|
141,570
|
| Motion
Bondco DAC, 6.625%, 11/15/2027 (n) |
|
|
200,000
|
180,000
|
| NCL
Corp. Ltd., 3.625%, 12/15/2024 (n) |
|
|
115,000
|
103,175
|
| NCL
Corp. Ltd., 5.875%, 3/15/2026 (n) |
|
|
115,000
|
103,615
|
| Royal
Caribbean Cruises Ltd., 5.375%, 7/15/2027 (n) |
|
|
105,000
|
89,168
|
| Royal
Caribbean Cruises Ltd., 5.5%, 4/01/2028 (n) |
|
|
225,000
|
189,880
|
| SeaWorld
Parks & Entertainment, 5.25%, 8/15/2029 (n) |
|
|
200,000
|
179,000
|
| |
|
|
|
$
1,681,512 |
| Financial
Institutions – 3.9% |
| Avation
Capital S.A., 8.25%, (8.25% cash or 9% PIK) 10/31/2026 (n)(p) |
|
$
|
203,202
|
$
162,627 |
| Credit
Acceptance Corp., 5.125%, 12/31/2024 (n) |
|
|
185,000
|
182,225
|
| Global
Aircraft Leasing Co. Ltd., 6.5% (6.5% cash or 7.25% PIK), 9/15/2024 (n)(p) |
|
|
473,020
|
381,964
|
| Howard
Hughes Corp., 4.125%, 2/01/2029 (n) |
|
|
251,000
|
230,373
|
| Nationstar
Mortgage Holdings, Inc., 6%, 1/15/2027 (n) |
|
|
200,000
|
193,980
|
| OneMain
Finance Corp., 6.875%, 3/15/2025 |
|
|
95,000
|
96,550
|
| OneMain
Finance Corp., 7.125%, 3/15/2026 |
|
|
100,000
|
102,400
|
| Rocket
Mortgage Co-Issuer, Inc., 3.625%, 3/01/2029 (n) |
|
|
210,000
|
181,784
|
| |
|
|
|
$
1,531,903 |
| Food
& Beverages – 5.2% |
| Aramark
Services, Inc., 6.375%, 5/01/2025 (n) |
|
$
|
270,000
|
$
276,716 |
| BellRing
Brands, Inc., 7%, 3/15/2030 (n) |
|
|
195,000
|
194,456
|
| JBS
USA Lux S.A./JBS USA Finance, Inc., 6.75%, 2/15/2028 (n) |
|
|
169,000
|
174,440
|
| Lamb
Weston Holdings, Inc., 4.125%, 1/31/2030 (n) |
|
|
340,000
|
314,925
|
| Performance
Food Group Co., 5.5%, 10/15/2027 (n) |
|
|
240,000
|
236,050
|
| Post
Holdings, Inc., 5.625%, 1/15/2028 (n) |
|
|
184,000
|
182,393
|
| Post
Holdings, Inc., 4.625%, 4/15/2030 (n) |
|
|
260,000
|
233,228
|
| Primo
Water Holding, Inc., 4.375%, 4/30/2029 (n) |
|
|
255,000
|
223,184
|
| U.S.
Foods Holding Corp., 4.75%, 2/15/2029 (n) |
|
|
230,000
|
215,895
|
| |
|
|
|
$
2,051,287 |
| Gaming
& Lodging – 8.7% |
| Boyd
Gaming Corp., 4.75%, 12/01/2027 |
|
$
|
115,000
|
$
111,838 |
| Boyd
Gaming Corp., 4.75%, 6/15/2031 (n) |
|
|
75,000
|
68,625
|
| Caesars
Entertainment, Inc., 4.625%, 10/15/2029 (n) |
|
|
130,000
|
110,916
|
| Caesars
Resort Collection LLC/CRC Finco, Inc., 5.75%, 7/01/2025 (n) |
|
|
131,000
|
131,511
|
| Caesars
Resort Collection LLC/CRC Finco, Inc., 8.125%, 7/01/2027 (n) |
|
|
162,000
|
164,786
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Gaming
& Lodging – continued |
| CCM
Merger, Inc., 6.375%, 5/01/2026 (n) |
|
$
|
118,000
|
$
113,863 |
| Hilton
Domestic Operating Co., Inc., 3.75%, 5/01/2029 (n) |
|
|
273,000
|
250,000
|
| Hilton
Domestic Operating Co., Inc., 3.625%, 2/15/2032 (n) |
|
|
221,000
|
191,717
|
| International
Game Technology PLC, 4.125%, 4/15/2026 (n) |
|
|
200,000
|
192,650
|
| International
Game Technology PLC, 6.25%, 1/15/2027 (n) |
|
|
200,000
|
206,070
|
| Marriott
Ownership Resorts, Inc., 4.5%, 6/15/2029 (n) |
|
|
185,000
|
164,363
|
| MGM
China Holdings Ltd., 5.875%, 5/15/2026 (n) |
|
|
200,000
|
174,374
|
| Scientific
Games Holdings LP/Scientific Games US Finco, Inc., 6.625%, 3/01/2030 (n) |
|
|
108,000
|
100,185
|
| VICI
Properties LP / VICI Note Co., Inc., 4.625%, 6/15/2025 (n) |
|
|
185,000
|
180,599
|
| VICI
Properties LP / VICI Note Co., Inc., 4.25%, 12/01/2026 (n) |
|
|
200,000
|
189,924
|
| VICI
Properties LP / VICI Note Co., Inc., 5.75%, 2/01/2027 (n) |
|
|
75,000
|
74,757
|
| VICI
Properties LP / VICI Note Co., Inc., 3.875%, 2/15/2029 (n) |
|
|
111,000
|
99,642
|
| VICI
Properties LP / VICI Note Co., Inc., 4.125%, 8/15/2030 (n) |
|
|
45,000
|
41,275
|
| VICI
Properties LP, REIT, 3.75%, 2/15/2027 (n) |
|
|
200,000
|
185,876
|
| Wyndham
Hotels & Resorts, Inc., 4.375%, 8/15/2028 (n) |
|
|
229,000
|
216,089
|
| Wynn
Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.25%, 5/15/2027 (n) |
|
|
95,000
|
87,408
|
| Wynn
Macau Ltd., 5.5%, 1/15/2026 (n) |
|
|
105,000
|
86,208
|
| Wynn
Macau Ltd., 5.625%, 8/26/2028 (n) |
|
|
200,000
|
149,349
|
| Wynn
Resorts Finance LLC/Wynn Resorts Capital Corp., 5.125%, 10/01/2029 (n) |
|
|
110,000
|
97,570
|
| |
|
|
|
$
3,389,595 |
| Industrial
– 1.4% |
| APi
Escrow Corp., 4.75%, 10/15/2029 (n) |
|
$
|
245,000
|
$
215,600 |
| Dycom
Industries, Inc., 4.5%, 4/15/2029 (n) |
|
|
125,000
|
114,726
|
| Williams
Scotsman International, Inc., 4.625%, 8/15/2028 (n) |
|
|
240,000
|
226,913
|
| |
|
|
|
$
557,239 |
| Insurance
- Health – 0.5% |
| Centene
Corp., 3%, 10/15/2030 |
|
$
|
200,000
|
$
177,908 |
| Insurance
- Property & Casualty – 1.9% |
| Alliant
Holdings Intermediate LLC, 6.75%, 10/15/2027 (n) |
|
$
|
285,000
|
$
275,082 |
| AssuredPartners,
Inc., 5.625%, 1/15/2029 (n) |
|
|
140,000
|
121,876
|
| GTCR
(AP) Finance, Inc., 8%, 5/15/2027 (n) |
|
|
65,000
|
64,895
|
| Hub
International Ltd., 5.625%, 12/01/2029 (n) |
|
|
161,000
|
150,133
|
| Ryan
Specialty Group, 4.375%, 2/01/2030 (n) |
|
|
145,000
|
130,512
|
| |
|
|
|
$
742,498 |
| Machinery
& Tools – 0.6% |
| Terex
Corp., 5%, 5/15/2029 (n) |
|
$
|
250,000
|
$
232,700 |
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Medical
& Health Technology & Services – 8.4% |
| 180
Medical, Inc., 3.875%, 10/15/2029 (n) |
|
$
|
200,000
|
$
181,989 |
| Avantor
Funding, Inc., 4.625%, 7/15/2028 (n) |
|
|
255,000
|
248,250
|
| Catalent,
Inc., 3.125%, 2/15/2029 (n) |
|
|
368,000
|
330,171
|
| Charles
River Laboratories International, Inc., 3.75%, 3/15/2029 (n) |
|
|
453,000
|
419,739
|
| CHS/Community
Health Systems, Inc., 8%, 12/15/2027 (n) |
|
|
105,000
|
104,988
|
| CHS/Community
Health Systems, Inc., 6.125%, 4/01/2030 (n) |
|
|
265,000
|
193,000
|
| CHS/Community
Health Systems, Inc., 5.25%, 5/15/2030 (n) |
|
|
90,000
|
77,528
|
| DaVita,
Inc., 4.625%, 6/01/2030 (n) |
|
|
140,000
|
121,625
|
| Encompass
Health Corp., 5.75%, 9/15/2025 |
|
|
30,000
|
30,303
|
| Encompass
Health Corp., 4.75%, 2/01/2030 |
|
|
155,000
|
141,825
|
| IQVIA
Holdings, Inc., 5%, 5/15/2027 (n) |
|
|
400,000
|
400,280
|
| Legacy
LifePoint Health LLC, 4.375%, 2/15/2027 (n) |
|
|
30,000
|
27,955
|
| Regional
Care/LifePoint Health, Inc., 9.75%, 12/01/2026 (n) |
|
|
155,000
|
157,519
|
| Syneos
Health, Inc., 3.625%, 1/15/2029 (n) |
|
|
275,000
|
241,945
|
| Tenet
Healthcare Corp., 4.875%, 1/01/2026 (n) |
|
|
75,000
|
74,832
|
| Tenet
Healthcare Corp., 6.125%, 10/01/2028 (n) |
|
|
287,000
|
280,168
|
| U.S.
Acute Care Solutions LLC, 6.375%, 3/01/2026 (n) |
|
|
150,000
|
142,321
|
| U.S.
Renal Care, Inc., 10.625%, 7/15/2027 (n) |
|
|
135,000
|
98,701
|
| |
|
|
|
$
3,273,139 |
| Medical
Equipment – 0.7% |
| Teleflex,
Inc., 4.625%, 11/15/2027 |
|
$
|
265,000
|
$
261,926 |
| Metals
& Mining – 5.7% |
| Baffinland
Iron Mines Corp./Baffinland Iron Mines LP, 8.75%, 7/15/2026 (n) |
|
$
|
220,000
|
$
197,721 |
| Coeur
Mining, Inc., 5.125%, 2/15/2029 (n) |
|
|
201,000
|
162,810
|
| Compass
Minerals International, Inc., 6.75%, 12/01/2027 (n) |
|
|
185,000
|
174,834
|
| Eldorado
Gold Corp., 6.25%, 9/01/2029 (n) |
|
|
135,000
|
120,905
|
| Ero
Copper Corp., 6.5%, 2/15/2030 (n) |
|
|
78,000
|
67,509
|
| First
Quantum Minerals Ltd., 6.875%, 10/15/2027 (n) |
|
|
200,000
|
199,581
|
| FMG
Resources Ltd., 4.375%, 4/01/2031 (n) |
|
|
275,000
|
245,094
|
| GrafTech
Finance, Inc., 4.625%, 12/15/2028 (n) |
|
|
166,000
|
151,935
|
| Kaiser
Aluminum Corp., 4.625%, 3/01/2028 (n) |
|
|
350,000
|
321,800
|
| Kaiser
Aluminum Corp., 4.5%, 6/01/2031 (n) |
|
|
125,000
|
109,149
|
| Novelis
Corp., 3.25%, 11/15/2026 (n) |
|
|
103,000
|
94,485
|
| Novelis
Corp., 4.75%, 1/30/2030 (n) |
|
|
210,000
|
199,237
|
| Novelis
Corp., 3.875%, 8/15/2031 (n) |
|
|
93,000
|
81,143
|
| Petra
Diamonds US$ Treasury PLC, 10.5% PIK to 12/31/2022, 10.5% PIK/9.75% Cash to 6/30/2023, 9.75% Cash to 3/08/2026 (n)(p) |
|
|
81,493
|
84,345
|
| |
|
|
|
$
2,210,548 |
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Midstream
– 6.7% |
| Cheniere
Energy Partners LP, 4.5%, 10/01/2029 |
|
$
|
130,000
|
$
126,823 |
| Cheniere
Energy Partners LP, 4%, 3/01/2031 |
|
|
270,000
|
249,412
|
| DT
Midstream, Inc., 4.125%, 6/15/2029 (n) |
|
|
164,000
|
153,565
|
| DT
Midstream, Inc., 4.375%, 6/15/2031 (n) |
|
|
254,000
|
236,220
|
| EQM
Midstream Partners LP, 6%, 7/01/2025 (n) |
|
|
48,000
|
48,480
|
| EQM
Midstream Partners LP, 6.5%, 7/01/2027 (n) |
|
|
32,000
|
32,000
|
| EQM
Midstream Partners LP, 5.5%, 7/15/2028 |
|
|
430,000
|
408,513
|
| EQM
Midstream Partners LP, 4.5%, 1/15/2029 (n) |
|
|
90,000
|
79,811
|
| Genesis
Energy LP/Genesis Energy Finance Corp., 6.25%, 5/15/2026 |
|
|
54,000
|
50,085
|
| Tallgrass
Energy Partners LP, 5.5%, 1/15/2028 (n) |
|
|
280,000
|
259,823
|
| Targa
Resources Partners LP/Targa Resources Finance Corp., 6.875%, 1/15/2029 |
|
|
270,000
|
283,862
|
| Targa
Resources Partners LP/Targa Resources Finance Corp., 4.875%, 2/01/2031 |
|
|
192,000
|
184,067
|
| Venture
Global Calcasieu Pass LLC, 3.875%, 8/15/2029 (n) |
|
|
235,000
|
222,329
|
| Venture
Global Calcasieu Pass LLC, 4.125%, 8/15/2031 (n) |
|
|
165,000
|
154,687
|
| Western
Midstream Operating LP, 4.55%, 2/01/2030 |
|
|
86,000
|
82,205
|
| Western
Midstream Operation LP, 4.65%, 7/01/2026 |
|
|
65,000
|
64,838
|
| |
|
|
|
$
2,636,720 |
| Municipals
– 0.1% |
| Puerto
Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities Financing Authority Rev., Taxable (Cogeneration Facilities - AES Puerto Rico Project), 9.12%, 6/01/2022 |
|
$
|
35,000
|
$
35,000 |
| Network
& Telecom – 0.5% |
| Iliad
Holding S.A.S., 7%, 10/15/2028 (n) |
|
$
|
200,000
|
$
192,766 |
| Oil
Services – 0.3% |
| Solaris
Midstream Holding LLC, 7.625%, 4/01/2026 (n) |
|
$
|
100,000
|
$
100,000 |
| Oils
– 1.2% |
| Parkland
Corp., 4.625%, 5/01/2030 (n) |
|
$
|
295,000
|
$
266,034 |
| PBF
Holding Co. LLC/PBF Finance Corp., 7.25%, 6/15/2025 |
|
|
120,000
|
116,400
|
| PBF
Holding Co. LLC/PBF Finance Corp., 6%, 2/15/2028 |
|
|
100,000
|
88,658
|
| |
|
|
|
$
471,092 |
| Personal
Computers & Peripherals – 0.8% |
| NCR
Corp., 5%, 10/01/2028 (n) |
|
$
|
225,000
|
$
212,083 |
| NCR
Corp., 5.125%, 4/15/2029 (n) |
|
|
115,000
|
109,674
|
| |
|
|
|
$
321,757 |
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Pharmaceuticals
– 2.2% |
| Bausch
Health Companies, Inc., 5%, 1/30/2028 (n) |
|
$
|
350,000
|
$
223,368 |
| Bausch
Health Companies, Inc., 5%, 2/15/2029 (n) |
|
|
95,000
|
56,770
|
| Jazz
Securities DAC, 4.375%, 1/15/2029 (n) |
|
|
400,000
|
386,000
|
| Organon
Finance 1 LLC, 5.125%, 4/30/2031 (n) |
|
|
200,000
|
192,275
|
| |
|
|
|
$
858,413 |
| Pollution
Control – 1.3% |
| GFL
Environmental, Inc., 4.25%, 6/01/2025 (n) |
|
$
|
70,000
|
$
68,600 |
| GFL
Environmental, Inc., 4%, 8/01/2028 (n) |
|
|
180,000
|
161,919
|
| GFL
Environmental, Inc., 4.75%, 6/15/2029 (n) |
|
|
60,000
|
54,659
|
| GFL
Environmental, Inc., 4.375%, 8/15/2029 (n) |
|
|
80,000
|
71,400
|
| Stericycle,
Inc., 3.875%, 1/15/2029 (n) |
|
|
178,000
|
161,606
|
| |
|
|
|
$
518,184 |
| Precious
Metals & Minerals – 0.6% |
| IAMGOLD
Corp., 5.75%, 10/15/2028 (n) |
|
$
|
155,000
|
$
108,886 |
| Taseko
Mines Ltd., 7%, 2/15/2026 (n) |
|
|
120,000
|
115,253
|
| |
|
|
|
$
224,139 |
| Printing
& Publishing – 0.7% |
| Cimpress
N.V., 7%, 6/15/2026 (n) |
|
$
|
300,000
|
$
255,000 |
| Real
Estate - Other – 1.1% |
| Park
Intermediate Holdings LLC/PK Domestic Property LLC/PK Finance Co-Issuer, REIT, 5.875%, 10/01/2028 (n) |
|
$
|
260,000
|
$
256,672 |
| XHR
LP, REIT, 4.875%, 6/01/2029 (n) |
|
|
180,000
|
168,750
|
| |
|
|
|
$
425,422 |
| Restaurants
– 0.3% |
| Fertitta
Entertainment LLC, 6.75%, 1/15/2030 (n) |
|
$
|
140,000
|
$
121,324 |
| Retailers
– 1.8% |
| Asbury
Automotive Group, Inc., 4.625%, 11/15/2029 (n) |
|
$
|
131,000
|
$
120,767 |
| Bath
& Body Works, Inc., 5.25%, 2/01/2028 |
|
|
445,000
|
424,975
|
| Victoria's
Secret & Co., 4.625%, 7/15/2029 (n) |
|
|
180,000
|
148,050
|
| |
|
|
|
$
693,792 |
| Specialty
Chemicals – 0.5% |
| Univar
Solutions USA, Inc., 5.125%, 12/01/2027 (n) |
|
$
|
186,000
|
$
182,018 |
| Specialty
Stores – 1.4% |
| Group
1 Automotive, Inc., 4%, 8/15/2028 (n) |
|
$
|
174,000
|
$
158,470 |
| Michael
Cos., Inc., 5.25%, 5/01/2028 (n) |
|
|
100,000
|
82,250
|
| Michael
Cos., Inc., 7.875%, 5/01/2029 (n) |
|
|
125,000
|
89,574
|
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Bonds
– continued |
| Specialty
Stores – continued |
| Penske
Automotive Group Co., 3.75%, 6/15/2029 |
|
$
|
254,000
|
$
227,772 |
| |
|
|
|
$
558,066 |
| Supermarkets
– 1.1% |
| Albertsons
Cos. LLC/Safeway, Inc., 4.625%, 1/15/2027 (n) |
|
$
|
270,000
|
$
262,288 |
| Albertsons
Cos. LLC/Safeway, Inc., 3.5%, 3/15/2029 (n) |
|
|
175,000
|
152,304
|
| |
|
|
|
$
414,592 |
| Telecommunications
- Wireless – 4.4% |
| Altice
France S.A., 6%, 2/15/2028 (n) |
|
$
|
200,000
|
$
167,100 |
| SBA
Communications Corp., 3.875%, 2/15/2027 |
|
|
191,000
|
186,727
|
| SBA
Communications Corp., 3.125%, 2/01/2029 |
|
|
305,000
|
271,267
|
| Sprint
Capital Corp., 6.875%, 11/15/2028 |
|
|
360,000
|
407,261
|
| Sprint
Corp., 7.125%, 6/15/2024 |
|
|
70,000
|
74,374
|
| Sprint
Corp., 7.625%, 3/01/2026 |
|
|
420,000
|
464,839
|
| T-Mobile
USA, Inc., 2.625%, 4/15/2026 |
|
|
155,000
|
146,298
|
| |
|
|
|
$
1,717,866 |
| Tobacco
– 0.4% |
| Vector
Group Ltd., 10.5%, 11/01/2026 (n) |
|
$
|
70,000
|
$
69,720 |
| Vector
Group Ltd., 5.75%, 2/01/2029 (n) |
|
|
105,000
|
94,500
|
| |
|
|
|
$
164,220 |
| Utilities
- Electric Power – 4.5% |
| Calpine
Corp., 4.5%, 2/15/2028 (n) |
|
$
|
238,000
|
$
227,516 |
| Calpine
Corp., 5.125%, 3/15/2028 (n) |
|
|
245,000
|
228,646
|
| Clearway
Energy Operating LLC, 4.75%, 3/15/2028 (n) |
|
|
115,000
|
109,825
|
| Clearway
Energy Operating LLC, 3.75%, 2/15/2031 (n) |
|
|
380,000
|
335,350
|
| NextEra
Energy, Inc., 4.25%, 7/15/2024 (n) |
|
|
137,000
|
137,074
|
| NextEra
Energy, Inc., 4.25%, 9/15/2024 (n) |
|
|
29,000
|
28,565
|
| NextEra
Energy, Inc., 4.5%, 9/15/2027 (n) |
|
|
150,000
|
145,534
|
| TerraForm
Global Operating LLC, 6.125%, 3/01/2026 (n) |
|
|
155,000
|
151,900
|
| TerraForm
Power Operating LLC, 5%, 1/31/2028 (n) |
|
|
285,000
|
273,210
|
| TerraForm
Power Operating LLC, 4.75%, 1/15/2030 (n) |
|
|
110,000
|
104,225
|
| |
|
|
|
$
1,741,845 |
| Total
Bonds (Identified Cost, $57,701,324) |
|
$
53,007,169 |
| Common
Stocks – 2.0% |
| Cable
TV – 0.2% |
|
| Intelsat
Emergence S.A. (a) |
|
2,070
|
$
58,995 |
| Construction
– 0.0% |
|
| ICA
Tenedora, S.A. de C.V. (u) |
|
11,385
|
$
9,834 |
Portfolio of
Investments (unaudited) – continued
| Issuer
|
|
|
Shares/Par
|
Value
($) |
| Common
Stocks – continued |
| Oil
Services – 0.2% |
|
| LTRI
Holdings LP (a)(u) |
|
200
|
$
57,518 |
| Special
Products & Services – 1.6% |
|
| iShares
iBoxx $ High Yield Corporate Bond ETF |
|
8,000
|
$
636,000 |
| Total
Common Stocks (Identified Cost, $892,945) |
|
$
762,347 |
| Contingent
Value Rights – 0.0% |
| Cable
TV – 0.0% |
| Intelsat
Jackson Holdings S.A. - Series A, 12/05/2025 (a) |
|
|
216
|
$
972 |
| Intelsat
Jackson Holdings S.A. - Series B, 12/05/2025 (a) |
|
|
216
|
918
|
| Total
Contingent Value Rights (Identified Cost, $0) |
|
$
1,890 |
| |
Strike
Price |
First
Exercise |
|
|
| Warrants
– 0.0% |
|
|
|
|
| Other
Banks & Diversified Financials – 0.0% |
| Avation
Capital S.A. (1 share for 1 warrant, Expiration 10/31/26) (a)(u) (Identified Cost, $0) |
GBP
1.14 |
3/16/21
|
3,500
|
$
382 |
| |
|
|
|
|
| Investment
Companies (h) – 4.6% |
| Money
Market Funds – 4.6% |
|
| MFS
Institutional Money Market Portfolio, 0.64% (v) (Identified Cost, $1,799,099) |
|
|
1,799,121
|
$
1,799,121 |
| |
| |
| Other
Assets, Less Liabilities – (42.1)% |
|
(16,452,314)
|
| Net
Assets – 100.0% |
$
39,118,595 |
| (a)
|
Non-income
producing security. |
|
|
|
| (h)
|
An
affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers
and in unaffiliated issuers were $1,799,121 and $53,771,788, respectively. |
|
|
|
| (n)
|
Securities
exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the
aggregate value of these securities was $44,765,220, representing 114.4% of net assets. |
|
|
|
| (p)
|
Payment-in-kind
(PIK) security for which interest income may be received in additional securities and/or cash. |
|
|
|
| (u)
|
The
security was valued using significant unobservable inputs and is considered level 3 under the fair value hierarchy. For further information about the fund’s level 3 holdings, please see Note 2 in the Notes to Financial Statements. |
|
|
|
| (v)
|
Affiliated
issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
|
|
|
Portfolio of
Investments (unaudited) – continued
| The
following abbreviations are used in this report and are defined: |
| ETF
|
Exchange-Traded
Fund |
| REIT
|
Real
Estate Investment Trust |
| Abbreviations
indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below: |
| EUR
|
Euro
|
| GBP
|
British
Pound |
Derivative Contracts at
5/31/22
| Forward
Foreign Currency Exchange Contracts |
Currency
Purchased |
Currency
Sold |
Counterparty
|
Settlement
Date |
Unrealized
Appreciation
(Depreciation) |
| Asset
Derivatives |
| USD
|
109,930
|
EUR
|
99,766
|
BNP
Paribas S.A. |
7/15/2022
|
$2,587
|
| Futures
Contracts |
| Description
|
Long/
Short |
Currency
|
Contracts
|
Notional
Amount |
Expiration
Date |
Value/Unrealized
Appreciation
(Depreciation) |
| Asset
Derivatives |
| Interest
Rate Futures |
|
|
| U.S.
Treasury Note 10 yr |
Short
|
USD
|
8
|
$955,625
|
September
– 2022 |
$6,624
|
| Liability
Derivatives |
| Interest
Rate Futures |
|
|
| U.S.
Treasury Bond |
Long
|
USD
|
3
|
$418,312
|
September
– 2022 |
$(3,996)
|
At May 31, 2022, the fund had cash
collateral of $6,190 to cover any collateral or margin obligations for certain derivative contracts. Restricted cash and/or deposits with brokers in the Statement of Assets and Liabilities are comprised of cash collateral.
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
At 5/31/22 (unaudited)
This statement represents your fund’s balance sheet,
which details the assets and liabilities comprising the total value of the fund.
| Assets
|
|
| Investments
in unaffiliated issuers, at value (identified cost, $58,594,269) |
$53,771,788
|
| Investments
in affiliated issuers, at value (identified cost, $1,799,099) |
1,799,121
|
| Deposits
with brokers for |
|
| Futures
contracts |
6,190
|
| Receivables
for |
|
| Forward
foreign currency exchange contracts |
2,587
|
| Net
daily variation margin on open futures contracts |
1,003
|
| Investments
sold |
308,664
|
| Interest
|
814,825
|
| Other
assets |
14,129
|
| Total
assets |
$56,718,307
|
| Liabilities
|
|
| Notes
payable |
$17,500,000
|
| Payable
to affiliates |
|
| Investment
adviser |
1,100
|
| Administrative
services fee |
240
|
| Transfer
agent and dividend disbursing costs |
744
|
| Payable
for independent Trustees' compensation |
29
|
| Accrued
interest expense |
21,206
|
| Accrued
expenses and other liabilities |
76,393
|
| Total
liabilities |
$17,599,712
|
| Net
assets |
$39,118,595
|
| Net
assets consist of |
|
| Paid-in
capital |
$50,252,753
|
| Total
distributable earnings (loss) |
(11,134,158)
|
| Net
assets |
$39,118,595
|
| Shares
of beneficial interest outstanding |
19,384,695
|
| Net
asset value per share (net assets of $39,118,595 / 19,384,695 shares of beneficial interest outstanding) |
$2.02
|
See Notes to Financial
Statements
Financial Statements
Statement of Operations
Six months ended 5/31/22 (unaudited)
This statement describes how much your fund earned in
investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net
investment income (loss) |
|
| Income
|
|
| Interest
|
$1,504,678
|
| Dividends
|
14,633
|
| Other
|
2,162
|
| Dividends
from affiliated issuers |
1,922
|
| Total
investment income |
$1,523,395
|
| Expenses
|
|
| Management
fee |
$217,314
|
| Transfer
agent and dividend disbursing costs |
7,928
|
| Administrative
services fee |
8,727
|
| Independent
Trustees' compensation |
2,058
|
| Stock
exchange fee |
11,851
|
| Custodian
fee |
1,924
|
| Shareholder
communications |
30,711
|
| Audit
and tax fees |
44,920
|
| Legal
fees |
722
|
| Interest
expense and fees |
82,974
|
| Miscellaneous
|
21,842
|
| Total
expenses |
$430,971
|
| Reduction
of expenses by investment adviser |
(65,812)
|
| Net
expenses |
$365,159
|
| Net
investment income (loss) |
$1,158,236
|
| Realized
and unrealized gain (loss) |
| Realized
gain (loss) (identified cost basis) |
|
| Unaffiliated
issuers |
$(267,841)
|
| Futures
contracts |
11,164
|
| Forward
foreign currency exchange contracts |
6,213
|
| Foreign
currency |
(279)
|
| Net
realized gain (loss) |
$(250,743)
|
| Change
in unrealized appreciation or depreciation |
|
| Unaffiliated
issuers |
$(4,760,662)
|
| Futures
contracts |
(1,377)
|
| Forward
foreign currency exchange contracts |
448
|
| Translation
of assets and liabilities in foreign currencies |
18
|
| Net
unrealized gain (loss) |
$(4,761,573)
|
| Net
realized and unrealized gain (loss) |
$(5,012,316)
|
| Change
in net assets from operations |
$(3,854,080)
|
See Notes to Financial
Statements
Financial Statements
Statements of Changes in Net Assets
These statements describe the increases and/or decreases in
net assets resulting from operations, any distributions, and any shareholder transactions.
| |
Six
months ended |
Year
ended |
| |
5/31/22
(unaudited) |
11/30/21
|
| Change
in net assets |
|
|
| From
operations |
|
|
| Net
investment income (loss) |
$1,158,236
|
$2,481,651
|
| Net
realized gain (loss) |
(250,743)
|
1,528,289
|
| Net
unrealized gain (loss) |
(4,761,573)
|
(2,370,288)
|
| Change
in net assets from operations |
$(3,854,080)
|
$1,639,652
|
| Distributions
to shareholders |
$(1,282,279)
|
$(2,704,910)
|
| Tax
return of capital distributions to shareholders |
$—
|
$(1,782,784)
|
| Distributions
from other sources |
$(784,755)
|
$—
|
| Change
in net assets from fund share transactions |
$96,523
|
$206,540
|
| Total
change in net assets |
$(5,824,591)
|
$(2,641,502)
|
| Net
assets |
|
|
| At
beginning of period |
44,943,186
|
47,584,688
|
| At
end of period |
$39,118,595
|
$44,943,186
|
See Notes to Financial
Statements
Financial Statements
Statement of Cash Flows
Six months ended 5/31/22 (unaudited)
This statement provides a summary of cash flows from
investment activity for the fund.
| Cash
flows from operating activities: |
|
| Change
in net assets from operations |
$(3,854,080)
|
| Adjustments
to reconcile change in net assets from operations to net cash provided by operating activities: |
|
| Purchase
of investment securities |
(11,054,217)
|
| Proceeds
from disposition of investment securities |
13,728,742
|
| Purchase
of short-term investments, net |
(970,788)
|
| Realized
gain/loss on investments |
267,841
|
| Unrealized
appreciation/depreciation on investments |
4,760,662
|
| Unrealized
appreciation/depreciation on foreign currency contracts |
(448)
|
| Net
amortization/accretion of income |
70,675
|
| Decrease
in interest receivable |
39,736
|
| Decrease
in accrued expenses and other liabilities |
(28,226)
|
| Decrease
in receivable for net daily variation margin on open futures contracts |
4,061
|
| Increase
in other assets |
(12,111)
|
| Increase
in interest payable |
10,446
|
| Net
cash provided by operating activities |
$2,962,293
|
| Cash
flows from financing activities: |
|
| Distributions
paid in cash |
$(1,970,511)
|
| Decrease
in notes payable |
(1,000,000)
|
| Net
cash used by financing activities |
$(2,970,511)
|
| Net
decrease in cash and restricted cash |
$(8,218)
|
| Cash
and restricted cash: |
|
| Beginning
of period |
$14,408
|
| End
of period |
$6,190
|
Supplemental disclosure of cash flow
information:
Non-cash financing activities not included
herein consist of reinvestment of dividends and distributions of $96,523.
Cash paid during the six months ended May 31, 2022 for interest
was $72,528.
See Notes to Financial Statements
Financial
Statements
Financial Highlights
The financial highlights table is intended to help you
understand the fund's financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| |
Six months
ended |
Year
ended |
| |
5/31/22
(unaudited) |
11/30/21
|
11/30/20
|
11/30/19
|
11/30/18
|
11/30/17
|
| Net
asset value, beginning of period |
$2.32
|
$2.47
|
$2.56
|
$2.46
|
$2.79
|
$2.77
|
| Income
(loss) from investment operations |
| Net
investment income (loss) (d) |
$0.06
|
$0.13
|
$0.14
|
$0.14
|
$0.14(c)
|
$0.16
|
| Net
realized and unrealized gain (loss) |
(0.25)
|
(0.05)
|
(0.00)(w)
|
0.20
|
(0.22)
|
0.12
|
| Total
from investment operations |
$(0.19)
|
$0.08
|
$0.14
|
$0.34
|
$(0.08)
|
$0.28
|
| Less
distributions declared to shareholders |
| From
net investment income |
$(0.07)
|
$(0.14)
|
$(0.15)
|
$(0.14)
|
$(0.15)
|
$(0.17)
|
| From
tax return of capital |
—
|
(0.09)
|
(0.08)
|
(0.10)
|
(0.10)
|
(0.10)
|
| From
other sources |
(0.04)
|
—
|
—
|
—
|
—
|
—
|
| Total
distributions declared to shareholders |
$(0.11)
|
$(0.23)
|
$(0.23)
|
$(0.24)
|
$(0.25)
|
$(0.27)
|
| Net
increase from repurchase of capital shares |
$—
|
$—
|
$0.00(w)
|
$0.00(w)
|
$—
|
$0.01
|
| Net
asset value, end of period (x) |
$2.02
|
$2.32
|
$2.47
|
$2.56
|
$2.46
|
$2.79
|
| Market
value, end of period |
$2.15
|
$2.97
|
$2.47
|
$2.70
|
$2.29
|
$2.75
|
| Total
return at market value (%) |
(24.12)(n)
|
30.89
|
0.89
|
29.74
|
(8.21)
|
22.30
|
| Total
return at net asset value (%) (j)(r)(s)(x) |
(8.74)(n)
|
2.25
|
6.40
|
14.52
|
(2.81)(c)
|
11.09
|
Ratios
(%) (to average net assets)
and Supplemental data: |
| Expenses
before expense reductions |
2.05(a)
|
1.84
|
2.05
|
2.56
|
2.50(c)
|
2.15
|
| Expenses
after expense reductions |
1.73(a)
|
1.65
|
1.82
|
2.49
|
2.41(c)
|
2.05
|
| Net
investment income (loss) |
5.50(a)
|
5.27
|
5.75
|
5.43
|
5.50(c)
|
5.75
|
| Portfolio
turnover |
17(n)
|
65
|
57
|
56
|
45
|
49
|
| Net
assets at end of period (000 omitted) |
$39,119
|
$44,943
|
$47,585
|
$50,387
|
$48,508
|
$54,950
|
| Supplemental
Ratios (%): |
| Ratios
of expenses to average net assets after expense reductions and excluding interest expense and fees |
1.34(a)
|
1.34
|
1.34
|
1.34
|
1.33(c)
|
1.34
|
| Senior
Securities: |
| Total
notes payable outstanding (000 omitted) |
$17,500
|
$18,500
|
$18,500
|
$20,000
|
$20,000
|
$22,000
|
| Asset
coverage per $1,000 of indebtedness (k) |
$3,235
|
$3,429
|
$3,572
|
$3,519
|
$3,425
|
$3,498
|
See Notes to Financial Statements
Financial
Highlights – continued
| (a)
|
Annualized.
|
| (c)
|
Amount
reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
| (d)
|
Per share
data is based on average shares outstanding. |
| (j)
|
Total return
at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than the total return at market value. |
| (k)
|
Calculated
by subtracting the fund's total liabilities (not including notes payable) from the fund's total assets and dividing this number by the notes payable outstanding and then multiplying by 1,000. |
| (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. |
| (w)
|
Per share
amount was less than $0.01. |
| (x)
|
The
net asset values and total returns at net asset value have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.
|
See Notes to Financial Statements
Notes to Financial
Statements
(unaudited)
(1) Business and Organization
MFS Intermediate High Income Fund (the fund) is organized as a
Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company.
The fund is an investment company and accordingly follows the
investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(2) Significant Accounting Policies
General — The preparation
of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these
financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
The fund invests in high-yield securities rated below investment grade. Investments in below investment grade quality securities can involve a substantially greater risk of default or can already be in default, and their values can decline
significantly. Below investment grade quality securities tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. The fund invests
in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industrial,
political, regulatory, geopolitical, environmental, public health, and other conditions.
Balance Sheet Offsetting
— The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or
similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund's right to
setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the
fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations
— Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing
service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity
at issuance of 60 days or less
Notes to Financial
Statements (unaudited) - continued
may be valued at amortized cost, which approximates market value. Futures
contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the
closing bid quotation on their primary exchange as provided by a third-party pricing service.
Forward foreign currency exchange contracts are generally valued at the mean
of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets
generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information such as
yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of
bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for
determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and
procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from
third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the
investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the
exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value
of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset
value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines
its net asset value per share.
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an
investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety
requires
Notes to Financial
Statements (unaudited) - continued
judgment, and considers factors specific to the investment. Level 1 includes
unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk).
Level 3 includes unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments, such as futures contracts and forward foreign currency
exchange contracts. The following is a summary of the levels used as of May 31, 2022 in valuing the fund's assets and liabilities:
| Financial
Instruments |
Level
1 |
Level
2 |
Level
3 |
Total
|
| Equity
Securities: |
|
|
|
|
| United
States |
$636,000
|
$—
|
$57,518
|
$693,518
|
| Luxembourg
|
—
|
58,995
|
—
|
58,995
|
| Mexico
|
—
|
—
|
9,834
|
9,834
|
| United
Kingdom |
—
|
—
|
382
|
382
|
| Municipal
Bonds |
—
|
35,000
|
—
|
35,000
|
| U.S.
Corporate Bonds |
—
|
45,654,952
|
—
|
45,654,952
|
| Foreign
Bonds |
—
|
7,319,107
|
—
|
7,319,107
|
| Mutual
Funds |
1,799,121
|
—
|
—
|
1,799,121
|
| Total
|
$2,435,121
|
$53,068,054
|
$67,734
|
$55,570,909
|
| Other
Financial Instruments |
|
|
|
|
| Futures
Contracts – Assets |
$6,624
|
$—
|
$—
|
$6,624
|
| Futures
Contracts – Liabilities |
(3,996)
|
—
|
—
|
(3,996)
|
| Forward
Foreign Currency Exchange Contracts – Assets |
—
|
2,587
|
—
|
2,587
|
For further information regarding
security characteristics, see the Portfolio of Investments.
The following is a reconciliation of level 3 assets for which
significant unobservable inputs were used to determine fair value. The table presents the activity of level 3 securities held at the beginning and the end of the period.
| |
Equity
Securities |
| Balance
as of 11/30/21 |
$67,005
|
| Change
in unrealized appreciation or depreciation |
729
|
| Balance
as of 5/31/22 |
$67,734
|
The net change in unrealized
appreciation or depreciation from investments held as level 3 at May 31, 2022 is $729. At May 31, 2022, the fund held three level 3 securities.
Foreign Currency Translation
— Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated
receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign
exchange rate movements on receivables, payables, income and expenses
Notes to Financial
Statements (unaudited) - continued
are recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives — The fund
uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate exposure, or as alternatives to direct investments. Derivatives are used for hedging or
non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund during the period
were futures contracts and forward foreign currency exchange contracts. Depending on the type of derivative, a fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement
with the derivative counterparty, or novating the position to a third party. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by
the exchange. The fund's period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative
contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at May 31, 2022 as reported in the Statement of Assets and Liabilities:
| |
|
Fair
Value (a) |
| Risk
|
Derivative
Contracts |
Asset
Derivatives |
Liability
Derivatives |
| Interest
Rate |
Futures
Contracts |
$6,624
|
$(3,996)
|
| Foreign
Exchange |
Forward
Foreign Currency Exchange Contracts |
2,587
|
—
|
| Total
|
|
$9,211
|
$(3,996)
|
| (a)
|
Values
presented in this table for futures contracts correspond to the values reported in the Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the Statement of Assets and Liabilities.
|
The following table presents, by
major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended May 31, 2022 as reported in the Statement of Operations:
| Risk
|
Futures
Contracts |
Forward
Foreign
Currency
Exchange
Contracts |
| Interest
Rate |
$11,164
|
$—
|
| Foreign
Exchange |
—
|
6,213
|
| Total
|
$11,164
|
$6,213
|
Notes to Financial
Statements (unaudited) - continued
The following table presents, by major type of derivative
contract, the change in unrealized appreciation or depreciation on derivatives held by the fund for the six months ended May 31, 2022 as reported in the Statement of Operations:
| Risk
|
Futures
Contracts |
Forward
Foreign
Currency
Exchange
Contracts |
| Interest
Rate |
$(1,377)
|
$—
|
| Foreign
Exchange |
—
|
448
|
| Total
|
$(1,377)
|
$448
|
Derivative counterparty credit risk
is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an
ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other
party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each agreement to one net amount payable by
one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under
the applicable transactions, if any.
Collateral and
margin requirements differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in the form of
cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared
options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund's custodian in connection with these agreements. For derivatives traded under an ISDA Master Agreement, which contains a collateral support
annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered
to cover the fund's collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared
derivatives. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any
such payments are included in “Interest expense and fees” in the Statement of Operations.
Futures Contracts — The
fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of
an asset at a specified price on a specified date.
Notes to Financial
Statements (unaudited) - continued
Upon entering into a futures contract, the fund is required to
deposit with the broker, either in cash or securities, an initial margin in an amount equal to a specified percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending
on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is
realized.
The fund bears the risk of interest rates,
exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present less counterparty risk to the fund since
the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit
risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Forward Foreign Currency Exchange Contracts — The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s
currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to
hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the
fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or
loss on the contract is recorded as realized gains or losses on forward foreign currency exchange contracts.
Risks may arise upon entering into these contracts from
unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the
contract due to the use of Continuous Linked Settlement, a multicurrency cash settlement system for the centralized settlement of foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the
counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Statement of Cash Flows —
Information on financial transactions which have been settled through the receipt or disbursement of cash or restricted cash is presented in the Statement of Cash Flows. Cash as presented in the fund's Statement of Assets and Liabilities includes
cash on hand at the fund's custodian bank and does not include any short-term investments. Restricted cash is presented in the fund's Statement of Assets
Notes to Financial
Statements (unaudited) - continued
and Liabilities as restricted cash for uncleared derivatives and/or deposits
with brokers for cleared derivatives and represents cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts.
The following table provides a reconciliation of cash and
restricted cash reported within the Statement of Assets and Liabilities with that shown in the Statement of Cash Flows:
| |
5/31/22
|
| Cash
|
$—
|
| Restricted
cash |
—
|
| Restricted
cash included in deposits with brokers |
6,190
|
| Total
cash and restricted cash in the Statement of Cash Flows |
$6,190
|
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the
normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against
the fund that have not yet occurred.
Investment
Transactions and Income — Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash
are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in
additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. In determining the net gain or loss on securities sold, the cost of
securities is determined on the identified cost basis.
The fund may receive proceeds from litigation settlements. Any
proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund.
Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Tax Matters and Distributions
— The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal
income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state
tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in
accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be
subject to capital gains tax imposed by those countries.
Notes to Financial
Statements (unaudited) - continued
Distributions to shareholders are recorded on the ex-dividend
date. The fund seeks to pay monthly distributions based on an annual rate of 9.50% of the fund’s average monthly net asset value. As a result, distributions may exceed actual earnings which may result in a tax return of capital. Income and
capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods
for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily relate to amortization and
accretion of debt securities.
For the six months ended
May 31, 2022, the amount of distributions estimated to be a tax return of capital was approximately $784,755 which is reported as distributions from other sources in the Statements of Changes in Net Assets. All or a portion of this amount may be
redesignated as capital gains at fiscal year end.
The tax
character of distributions made during the current period will be determined at fiscal year end. The tax character of distributions declared to shareholders for the last fiscal year is as follows:
| |
Year
ended
11/30/21 |
| Ordinary
income (including any short-term capital gains) |
$2,704,910
|
| Tax
return of capital (b) |
1,782,784
|
| Total
distributions |
$4,487,694
|
| (b)
|
Distributions
in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital. |
The federal tax cost and the tax basis components of
distributable earnings were as follows:
| As
of 5/31/22 |
|
| Cost
of investments |
$60,581,946
|
| Gross
appreciation |
99,828
|
| Gross
depreciation |
(5,110,865)
|
| Net
unrealized appreciation (depreciation) |
$
(5,011,037) |
| As
of 11/30/21 |
|
| Capital
loss carryforwards |
(5,020,873)
|
| Other
temporary differences |
(5)
|
| Net
unrealized appreciation (depreciation) |
(192,166)
|
The aggregate cost above includes
prior fiscal year end tax adjustments, if applicable.
Notes to Financial
Statements (unaudited) - continued
As of November 30, 2021, the fund had capital loss
carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
| Short-Term
|
$(155,706)
|
| Long-Term
|
(4,865,167)
|
| Total
|
$(5,020,873)
|
(3) Transactions with
Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of the fund’s average daily net assets. The fund pays the adviser a monthly fee equal to 20% of the fund’s leverage income after deducting the expenses of
leveraging (“net leverage income”); provided, however, if the fund’s net leverage income is less than zero, MFS will reduce its management fee by an amount equivalent to the percentage indicated of the fund’s net leverage
income. The management fee incurred for the six months ended May 31, 2022 was equivalent to an annual effective rate of 1.03% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion
of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, certain tax reclaim recovery expenses (including contingency fees and closing agreement expenses), and
investment-related expenses, such that total fund operating expenses do not exceed 1.34% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such
agreement will continue at least until November 30, 2023. For the six months ended May 31, 2022, this reduction amounted to $65,812, which is included in the reduction of total expenses in the Statement of Operations.
Transfer Agent — The fund
engages Computershare Trust Company, N.A. (“Computershare”) as the sole transfer agent for the fund. MFS Service Center, Inc. (MFSC) monitors and supervises the activities of Computershare for an agreed upon fee approved by the Board of
Trustees. For the six months ended May 31, 2022, these fees paid to MFSC amounted to $1,482.
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 six months ended May 31, 2022 was equivalent to an annual effective rate of 0.0414% of the fund's average daily
net assets.
Trustees’ and Officers’
Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation
directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS and
MFSC.
Notes to Financial
Statements (unaudited) - continued
Other — The fund invests
in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money market fund does not pay a management fee to MFS but does incur investment and
operating costs.
The fund is permitted to engage
in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that
cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the six months ended May 31, 2022, the fund engaged in purchase transactions pursuant to this policy, which amounted to $18,668.
(4) Portfolio Securities
For the six months ended May 31, 2022, purchases and sales of
investments, other than short-term obligations, aggregated $9,895,579 and $12,788,813, respectively.
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest. The Trustees have authorized the repurchase by the fund of up to 10% annually of its own shares of beneficial interest.
During the six months ended May 31, 2022 and the year ended November 30, 2021,
the fund did not repurchase any shares. Transactions in fund shares were as follows:
| |
Six
months ended
5/31/22 |
|
Year
ended
11/30/21 |
| |
Shares
|
Amount
|
|
Shares
|
Amount
|
| Shares
issued to shareholders in reinvestment of distributions |
42,560
|
$96,523
|
|
75,458
|
$206,540
|
(6) Loan Agreement
The fund has a credit agreement with a bank for a revolving
secured line of credit that can be drawn upon up to $20,000,000. Prior to May 11, 2022, the maximum amount of the revolving secured line of credit was $21,000,000. At May 31, 2022, the fund had outstanding borrowings under this agreement in the
amount of $17,500,000, which are secured by a lien on the fund’s assets. The loan’s carrying value in the fund’s Statement of Assets and Liabilities approximates its fair value. The loan value as of the reporting date is considered
level 2 under the fair value hierarchy. The credit agreement matures on August 19, 2022. The Trustees approved the renewal of the revolving secured line of credit up to the amount of $20,000,000 on substantially similar terms for a 365 day period
which matures on August 19, 2023. Borrowings under the agreement can be made for liquidity or leverage purposes. Interest is charged at a rate per annum equal to LIBOR plus an agreed upon spread with the option to choose LIBOR periods of overnight,
1, 3, or 6 months, or at the option of the borrower an alternate base rate plus an agreed upon spread. The fund incurred interest expense of $81,369 during the period, which is included in “Interest expense and fees” in the Statement of
Operations. The fund may also be charged a commitment fee based on the average daily unused portion of the line of credit. The fund paid a commitment fee of $1,580 during the period, which is included in “Interest expense and fees” in
the Statement of Operations. For the six months ended May 31, 2022, the average loan
Notes to Financial
Statements (unaudited) - continued
balance was $18,384,615 at a weighted average annual interest rate of 0.89%.
The fund is subject to certain covenants including, but not limited to, requirements with respect to asset coverage, portfolio diversification and liquidity. On June 16, 2022, the fund repaid $1,000,000 of the outstanding borrowings under the
agreement.
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund
owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated
Issuers |
Beginning
Value |
Purchases
|
Sales
Proceeds |
Realized
Gain
(Loss) |
Change
in
Unrealized
Appreciation or
Depreciation |
Ending
Value |
| MFS
Institutional Money Market Portfolio |
$828,333
|
$7,993,609
|
$7,022,821
|
$—
|
$—
|
$1,799,121
|
| Affiliated
Issuers |
Dividend
Income |
Capital
Gain
Distributions |
| MFS
Institutional Money Market Portfolio |
$1,922
|
$—
|
(8) LIBOR Transition
Certain of the fund's investments, including investments in
certain debt instruments and derivatives (if any), as well as borrowings by the fund and certain other contractual arrangements of the fund, may be based on the London Interbank Offered Rate (“LIBOR”). In 2017, the regulatory authority
that oversees financial services firms in the United Kingdom announced plans to transition away from LIBOR by the end of 2021. In March 2021, the administrator of LIBOR announced the extension of the publication of the more commonly used U.S. dollar
LIBOR settings to the end of June 2023. Although the full impacts of the transition away from LIBOR are not fully known, the transition may result in, among other things, an increase in volatility or illiquidity of the markets for instruments that
currently rely on LIBOR to determine interest rates and this could have an adverse impact on the fund's performance. With respect to the fund's accounting for investments, including investments in certain debt instruments and derivatives, as well as
borrowings by the fund and any other contractual arrangements of the fund that undergo reference rate-related modifications as a result of the transition, management will rely upon the relief provided by FASB Codification Topic 848 – Reference
Rate Reform (Topic 848). The guidance in Topic 848 permits the fund to account for those modified contracts as a continuation of the existing contracts. Management is still evaluating the impact to the fund of the June 30, 2023 planned
discontinuation of the more commonly used U.S. dollar LIBOR settings.
(9) Russia and Ukraine Conflict
The market disruptions, which began in late February 2022,
associated with geopolitical events related to the conflict between Russia and Ukraine may adversely affect the value of the fund’s assets and thus the fund’s performance. Management continues to monitor these events and to evaluate the
related impacts, if any, to the fund.
Report of Independent
Registered Public Accounting Firm
To the Shareholders
and the Board of Trustees of MFS Intermediate High Income Fund
Results of Review of Interim Financial Statements
We have reviewed the accompanying statement of assets and
liabilities of MFS Intermediate High Income Fund (the “Fund”), including the portfolio of investments, as of May 31, 2022, and the related statements of operations, changes in net assets, cash flows and financial highlights for the
six-month period then ended and the related notes (collectively referred to as the “interim financial statements”). Based on our review, we are not aware of any material modifications that should be made to the interim financial
statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States) (“PCAOB”), the statement of changes in net assets for the year ended November 30, 2021 and the financial highlights for each of the five years in the period then ended; and in
our report dated January 14, 2022, we expressed an unqualified opinion on those financial statements.
Basis for Review Results
These financial statements are the responsibility of the Fund's
management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.
We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Boston,
Massachusetts
July 15, 2022
Proxy
Voting Policies and Information
MFS votes proxies on
behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s
Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to
portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure
The fund files a complete schedule of portfolio holdings with
the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s Web site at
http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at
mfs.com/closedendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post important information about the
fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at
mfs.com/closedendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Additional information about the fund (e.g., performance,
dividends and the fund’s price history) is also available at mfs.com/closedendfunds by choosing the fund's name, if any.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an
investment adviser, administrator, transfer agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these
contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws, any claims asserted against or
on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
CONTACT US
TRANSFER AGENT, REGISTRAR, AND
DIVIDEND DISBURSING
AGENT
CALL
1-800-637-2304
9 a.m. to 5 p.m. Eastern time
WRITE
Computershare Trust Company, N.A.
P.O. Box 505005
Louisville, KY 40233-5005
New York Stock Exchange Symbol: CIF
Item 1(b):
A copy of the notice transmitted to the Registrant’s shareholders in reliance on Rule 30e-3 of the Investment
Company Act of 1940, as amended that contains disclosure specified by paragraph (c)(3) of Rule 30e-3 is attached hereto as
EX-99.30e-3Notice.