Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 5/31/20 (unaudited)
This statement represents your fund’s balance sheet, which details the
assets and liabilities comprising the total value of the fund.
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|
|
|
|
|
|
Assets
|
|
|
|
|
|
Investments in unaffiliated issuers, at value (identified cost, $63,150,095)
|
|
|
$62,371,072
|
|
|
Investments in affiliated issuers, at value (identified cost, $912,669)
|
|
|
912,851
|
|
|
Cash
|
|
|
1,393
|
|
|
Receivables for
|
|
|
|
|
|
Investments sold
|
|
|
255,618
|
|
|
Interest
|
|
|
893,217
|
|
|
Other assets
|
|
|
14,124
|
|
|
Total assets
|
|
|
$64,448,275
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Notes payable
|
|
|
$18,500,000
|
|
|
Payables for
|
|
|
|
|
|
Distributions
|
|
|
14,644
|
|
|
Investments purchased
|
|
|
557,492
|
|
|
Payable to affiliates
|
|
|
|
|
|
Investment adviser
|
|
|
6,277
|
|
|
Administrative services fee
|
|
|
191
|
|
|
Transfer agent and dividend disbursing costs
|
|
|
459
|
|
|
Accrued interest expense
|
|
|
10,526
|
|
|
Accrued expenses and other liabilities
|
|
|
79,011
|
|
|
Total liabilities
|
|
|
$19,168,600
|
|
|
Net assets
|
|
|
$45,279,675
|
|
|
|
|
|
Net assets consist of
|
|
|
|
|
|
Paid-in capital
|
|
|
$53,702,887
|
|
|
Total distributable earnings (loss)
|
|
|
(8,423,212
|
)
|
|
Net assets
|
|
|
$45,279,675
|
|
|
Shares of beneficial interest outstanding (19,530,003 shares authorized less 75,815 capital shares
to be retired)
|
|
|
19,454,188
|
|
|
Net asset value per share (net assets of $45,279,675 / 19,454,188 shares of beneficial interest
outstanding)
|
|
|
$2.33
|
|
See Notes to Financial Statements
19
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 5/31/20 (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.
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|
|
|
|
|
Net investment income (loss)
|
|
|
|
|
|
Income
|
|
|
|
|
|
Interest
|
|
|
$1,785,540
|
|
|
Dividends from affiliated issuers
|
|
|
11,967
|
|
|
Dividends
|
|
|
8,808
|
|
|
Other
|
|
|
5,802
|
|
|
Total investment income
|
|
|
$1,812,117
|
|
|
Expenses
|
|
|
|
|
|
Management fee
|
|
|
$232,299
|
|
|
Transfer agent and dividend disbursing costs
|
|
|
7,583
|
|
|
Administrative services fee
|
|
|
8,775
|
|
|
Independent Trustees’ compensation
|
|
|
6,077
|
|
|
Stock exchange fee
|
|
|
11,894
|
|
|
Custodian fee
|
|
|
3,508
|
|
|
Shareholder communications
|
|
|
27,000
|
|
|
Audit and tax fees
|
|
|
42,458
|
|
|
Legal fees
|
|
|
980
|
|
|
Interest expense and fees
|
|
|
153,141
|
|
|
Miscellaneous
|
|
|
20,821
|
|
|
Total expenses
|
|
|
$514,536
|
|
|
Reduction of expenses by investment adviser
|
|
|
(45,426
|
)
|
|
Net expenses
|
|
|
$469,110
|
|
|
Net investment income (loss)
|
|
|
$1,343,007
|
|
|
|
|
|
Realized and unrealized gain (loss)
|
|
|
|
|
|
Realized gain (loss) (identified cost basis)
|
|
|
|
|
|
Unaffiliated issuers
|
|
|
$(1,072,357
|
)
|
|
Affiliated issuers
|
|
|
(302
|
)
|
|
Futures contracts
|
|
|
(57,902
|
)
|
|
Forward foreign currency exchange contracts
|
|
|
(3,443
|
)
|
|
Foreign currency
|
|
|
8
|
|
|
Net realized gain (loss)
|
|
|
$(1,133,996
|
)
|
|
Change in unrealized appreciation or depreciation
|
|
|
|
|
|
Unaffiliated issuers
|
|
|
$(2,667,181
|
)
|
|
Affiliated issuers
|
|
|
(22
|
)
|
|
Futures contracts
|
|
|
(4,607
|
)
|
|
Forward foreign currency exchange contracts
|
|
|
2,716
|
|
|
Net unrealized gain (loss)
|
|
|
$(2,669,094
|
)
|
|
Net realized and unrealized gain (loss)
|
|
|
$(3,803,090
|
)
|
|
Change in net assets from operations
|
|
|
$(2,460,083
|
)
|
See Notes to Financial Statements
20
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.
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|
|
|
|
|
|
|
|
|
|
Change in net assets
|
|
Six months ended
5/31/20
(unaudited)
|
|
|
Year ended
11/30/19
|
|
|
|
|
|
|
From operations
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
$1,343,007
|
|
|
|
$2,700,692
|
|
|
Net realized gain (loss)
|
|
|
(1,133,996
|
)
|
|
|
(707,194
|
)
|
|
Net unrealized gain (loss)
|
|
|
(2,669,094
|
)
|
|
|
4,714,668
|
|
|
Change in net assets from operations
|
|
|
$(2,460,083
|
)
|
|
|
$6,708,166
|
|
|
Distributions to shareholders
|
|
|
$(1,446,185
|
)
|
|
|
$(2,778,691
|
)
|
|
Tax return of capital distributions to shareholders
|
|
|
$—
|
|
|
|
$(1,936,826
|
)
|
|
Distributions from other sources
|
|
|
$(842,940
|
)
|
|
|
$—
|
|
|
Change in net assets from fund share transactions
|
|
|
$(357,944
|
)
|
|
|
$(113,342
|
)
|
|
Total change in net assets
|
|
|
$(5,107,152
|
)
|
|
|
$1,879,307
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
|
50,386,827
|
|
|
|
48,507,520
|
|
|
At end of period
|
|
|
$45,279,675
|
|
|
|
$50,386,827
|
|
See Notes to Financial Statements
21
Financial Statements
STATEMENT OF CASH FLOWS
Six months ended 5/31/20 (unaudited)
This statement provides a summary of cash flows from investment
activity for the fund.
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|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Change in net assets from operations
|
|
|
$(2,460,083
|
)
|
|
|
|
|
Adjustments to reconcile change in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
|
Purchase of investment securities
|
|
|
(19,576,213
|
)
|
|
Proceeds from disposition of investment securities
|
|
|
22,219,521
|
|
|
Proceeds from disposition of short-term investments, net
|
|
|
121,631
|
|
|
Realized gain/loss on investments
|
|
|
1,072,357
|
|
|
Unrealized appreciation/depreciation on investments
|
|
|
2,667,203
|
|
|
Unrealized appreciation/depreciation on foreign currency contracts
|
|
|
(2,716
|
)
|
|
Net amortization/accretion of income
|
|
|
60,772
|
|
|
Decrease in interest receivable
|
|
|
34,824
|
|
|
Decrease in accrued expenses and other liabilities
|
|
|
(32,919
|
)
|
|
Decrease in payable for net daily variation margin on open futures contracts
|
|
|
(24
|
)
|
|
Increase in other assets
|
|
|
(12,160
|
)
|
|
Decrease in interest payable
|
|
|
(25,200
|
)
|
|
Net cash provided by operating activities
|
|
|
$4,066,993
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Distributions paid in cash
|
|
|
(2,229,487
|
)
|
|
Decrease in notes payable
|
|
|
(1,500,000
|
)
|
|
Repurchase of shares of beneficial interest
|
|
|
(402,938
|
)
|
|
Net cash used by financing activities
|
|
|
$(4,132,425
|
)
|
|
Net decrease in cash and restricted cash
|
|
|
$(65,432
|
)
|
|
|
|
|
Cash and restricted cash:
|
|
|
|
|
|
Beginning of period
|
|
|
$66,825
|
|
|
End of period
|
|
|
$1,393
|
|
Supplemental disclosure of cash flow information:
Non-cash financing activities not included herein consist of reinvestment of dividends and distributions of $44,994.
Cash paid during the six months ended May 31, 2020 for interest was $178,341.
See Notes to Financial
Statements
22
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.
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|
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|
|
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|
Six months
ended
5/31/20
|
|
|
Year ended
|
|
|
|
|
11/30/19
|
|
|
11/30/18
|
|
|
11/30/17
|
|
|
11/30/16
|
|
|
11/30/15
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$2.56
|
|
|
|
$2.46
|
|
|
|
$2.79
|
|
|
|
$2.77
|
|
|
|
$2.70
|
|
|
|
$3.09
|
|
|
|
|
|
|
|
|
Income (loss) from investment operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) (d)
|
|
|
$0.07
|
|
|
|
$0.14
|
|
|
|
$0.14
|
(c)
|
|
|
$0.16
|
|
|
|
$0.19
|
|
|
|
$0.20
|
|
|
Net realized and unrealized gain (loss)
|
|
|
(0.18
|
)
|
|
|
0.20
|
|
|
|
(0.22
|
)
|
|
|
0.12
|
|
|
|
0.14
|
|
|
|
(0.33
|
)
|
|
Total from investment operations
|
|
|
$(0.11
|
)
|
|
|
$0.34
|
|
|
|
$(0.08
|
)
|
|
|
$0.28
|
|
|
|
$0.33
|
|
|
|
$(0.13
|
)
|
|
|
|
|
|
|
|
Less distributions declared to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
$(0.08
|
)
|
|
|
$(0.14
|
)
|
|
|
$(0.15
|
)
|
|
|
$(0.17
|
)
|
|
|
$(0.20
|
)
|
|
|
$(0.21
|
)
|
|
From tax return of capital
|
|
|
—
|
|
|
|
(0.10
|
)
|
|
|
(0.10
|
)
|
|
|
(0.10
|
)
|
|
|
(0.06
|
)
|
|
|
(0.05
|
)
|
|
From other sources
|
|
|
(0.04
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total distributions declared to
shareholders
|
|
|
$(0.12
|
)
|
|
|
$(0.24
|
)
|
|
|
$(0.25
|
)
|
|
|
$(0.27
|
)
|
|
|
$(0.26
|
)
|
|
|
$(0.26
|
)
|
|
Net increase from repurchase of
capital shares
|
|
|
$0.00
|
(w)
|
|
|
$0.00
|
(w)
|
|
|
$—
|
|
|
|
$0.01
|
|
|
|
$0.00
|
(w)
|
|
|
$0.00
|
(w)
|
|
Net asset value, end of period (x)
|
|
|
$2.33
|
|
|
|
$2.56
|
|
|
|
$2.46
|
|
|
|
$2.79
|
|
|
|
$2.77
|
|
|
|
$2.70
|
|
|
Market value, end of period
|
|
|
$2.17
|
|
|
|
$2.70
|
|
|
|
$2.29
|
|
|
|
$2.75
|
|
|
|
$2.48
|
|
|
|
$2.32
|
|
|
Total return at market value (%)
|
|
|
(15.56
|
)(n)
|
|
|
29.74
|
|
|
|
(8.21
|
)
|
|
|
22.30
|
|
|
|
18.72
|
|
|
|
(6.15
|
)
|
|
Total return at net asset
value (%) (j)(r)(s)(x)
|
|
|
(4.38
|
)(n)
|
|
|
14.52
|
|
|
|
(2.81
|
)(c)
|
|
|
11.09
|
|
|
|
13.94
|
|
|
|
(3.50
|
)
|
|
|
|
|
|
|
Ratios (%) (to average net assets)
and Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses before expense
reductions (f)
|
|
|
2.18
|
(a)
|
|
|
2.56
|
|
|
|
2.50
|
(c)
|
|
|
2.15
|
|
|
|
2.07
|
|
|
|
1.77
|
|
|
Expenses after expense
reductions (f)
|
|
|
1.99
|
(a)
|
|
|
2.49
|
|
|
|
2.41
|
(c)
|
|
|
2.05
|
|
|
|
1.84
|
|
|
|
1.70
|
|
|
Net investment income (loss)
|
|
|
5.70
|
(a)
|
|
|
5.43
|
|
|
|
5.50
|
(c)
|
|
|
5.75
|
|
|
|
6.97
|
|
|
|
6.63
|
|
|
Portfolio turnover
|
|
|
28
|
(n)
|
|
|
56
|
|
|
|
45
|
|
|
|
49
|
|
|
|
34
|
|
|
|
34
|
|
|
Net assets at end of period
(000 omitted)
|
|
|
$45,280
|
|
|
|
$50,387
|
|
|
|
$48,508
|
|
|
|
$54,950
|
|
|
|
$56,785
|
|
|
|
$56,362
|
|
23
Financial Highlights – continued
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
5/31/20
|
|
|
Year ended
|
|
|
|
|
11/30/19
|
|
|
11/30/18
|
|
|
11/30/17
|
|
|
11/30/16
|
|
|
11/30/15
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Ratios (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios of expenses to average net
assets after expense reductions
and excluding interest
expense
and fees (f)
|
|
|
1.34
|
(a)
|
|
|
1.34
|
|
|
|
1.33
|
(c)
|
|
|
1.34
|
|
|
|
1.34
|
|
|
|
1.35
|
|
|
|
|
|
|
|
|
|
|
Senior Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable outstanding
(000 omitted)
|
|
|
$18,500
|
|
|
|
$20,000
|
|
|
|
$20,000
|
|
|
|
$22,000
|
|
|
|
$22,000
|
|
|
|
$22,000
|
|
|
Asset coverage per $1,000 of
indebtedness (k)
|
|
|
$3,448
|
|
|
|
$3,519
|
|
|
|
$3,425
|
|
|
|
$3,498
|
|
|
|
$3,581
|
|
|
|
$3,562
|
|
|
(c)
|
Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net
investment income and performance would be lower and expenses would be higher.
|
|
(d)
|
Per share data is based on average shares outstanding.
|
|
(f)
|
Ratios do not reflect reductions from fees paid indirectly, if applicable.
|
|
(j)
|
Total return at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than
the total return at market value.
|
|
(k)
|
Calculated by subtracting the fund’s total liabilities (not including notes payable) from the fund’s total assets and dividing this number by
the notes payable outstanding and then multiplying by 1,000.
|
|
(r)
|
Certain expenses have been reduced without which performance would have been lower.
|
|
(s)
|
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
|
|
(w)
|
Per share amount was less than $0.01.
|
|
(x)
|
The net asset values and total returns at net asset value have been calculated on net assets which include adjustments made in accordance with U.S.
generally accepted accounting principles required at period end for financial reporting purposes.
|
See Notes to Financial Statements
24
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, and other conditions.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of
the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of
modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is
effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on
the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
In March 2017, the FASB issued Accounting Standards Update 2017-08, Receivables –Nonrefundable Fees and Other Costs (Subtopic
310-20) – Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). For callable debt securities purchased at a premium that have
explicit, non-contingent call features and that are callable at fixed prices on preset dates, ASU 2017-08 requires the premium to be amortized to the earliest call date.
The fund adopted ASU 2017-08 as of the beginning
25
Notes to Financial Statements (unaudited) – continued
of the reporting period on a modified retrospective basis. The adoption resulted in a
change in accounting principle, since the fund had historically amortized such premiums to maturity for U.S. GAAP. As a result of the adoption, the fund recognized a cumulative effect adjustment that increased the beginning of period cost of
investments and decreased the unrealized appreciation on investments by offsetting amounts. Adoption had no impact on the fund’s net assets or any prior period information presented in the financial statements. With respect to the fund’s
results of operations, amortization of premium to first call date under ASU 2017-08 accelerates amortization with the intent of more closely aligning the recognition of income on such bonds with the economics
of the instrument.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an
event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and
financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the
particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note
under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment
Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for
which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted
debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market
value. Futures contracts 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.
26
Notes to Financial Statements (unaudited) – continued
The Board of Trustees has delegated primary responsibility for determining or causing
to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily
available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations
are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In
addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded
(such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the
security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment
characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for
purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from
quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per
share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant
to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted
quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk).
Level 3 includes
27
Notes to Financial Statements (unaudited) – continued
unobservable inputs, which may include the adviser’s own assumptions in
determining the fair value of investments. The following is a summary of the levels used as of May 31, 2020 in valuing the fund’s assets or liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
$1,318,720
|
|
|
|
$11
|
|
|
|
$105,880
|
|
|
|
$1,424,611
|
|
|
Mexico
|
|
|
—
|
|
|
|
17,157
|
|
|
|
—
|
|
|
|
17,157
|
|
|
Municipal Bonds
|
|
|
—
|
|
|
|
107,625
|
|
|
|
—
|
|
|
|
107,625
|
|
|
U.S. Corporate Bonds
|
|
|
—
|
|
|
|
52,323,569
|
|
|
|
—
|
|
|
|
52,323,569
|
|
|
Foreign Bonds
|
|
|
—
|
|
|
|
7,597,036
|
|
|
|
—
|
|
|
|
7,597,036
|
|
|
Floating Rate Loans
|
|
|
—
|
|
|
|
901,074
|
|
|
|
—
|
|
|
|
901,074
|
|
|
Mutual Funds
|
|
|
912,851
|
|
|
|
—
|
|
|
|
—
|
|
|
|
912,851
|
|
|
Total
|
|
|
$2,231,571
|
|
|
|
$60,946,472
|
|
|
|
$105,880
|
|
|
|
$63,283,923
|
|
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 11/30/19
|
|
|
$101,158
|
|
|
Change in unrealized appreciation or depreciation
|
|
|
4,722
|
|
|
Balance as of 5/31/20
|
|
|
$105,880
|
|
The net change in unrealized appreciation or depreciation from investments held as level 3 at May 31, 2020 is $4,722. At
May 31, 2020, the fund held one level 3 security.
Foreign Currency Translation – Purchases and sales of foreign investments, income,
and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to
foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income
and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange
rates is not separately disclosed.
Derivatives – The fund uses derivatives primarily to increase or decrease exposure to a particular market
or segment of the market, or security, to increase or decrease interest rate 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,
28
Notes to Financial Statements (unaudited) – continued
the 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. At May 31, 2020, the fund did not have any outstanding derivative instruments.
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,
2020 as reported in the Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
|
|
Futures
Contracts
|
|
|
Forward
Foreign
Currency
Exchange
Contracts
|
|
|
Interest Rate
|
|
|
$(57,902
|
)
|
|
|
$—
|
|
|
Foreign Exchange
|
|
|
—
|
|
|
|
(3,443
|
)
|
|
Total
|
|
|
$(57,902
|
)
|
|
|
$(3,443
|
)
|
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, 2020 as reported in the Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
|
|
Futures
Contracts
|
|
|
Forward
Foreign
Currency
Exchange
Contracts
|
|
|
Interest Rate
|
|
|
$(4,607
|
)
|
|
|
$—
|
|
|
Foreign Exchange
|
|
|
—
|
|
|
|
2,716
|
|
|
Total
|
|
|
$(4,607
|
)
|
|
|
$2,716
|
|
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
29
Notes to Financial Statements (unaudited) – continued
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.
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
30
Notes to Financial Statements (unaudited) – continued
settlement date. On contract settlement date, any gain or loss on the contract is
recorded as realized gains or losses on forward foreign currency exchange contracts.
Risks may arise upon entering into these contracts from
unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the
contract due to the use of Continuous Linked Settlement, a multicurrency cash settlement system for the centralized settlement of foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the
counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Loans and Other Direct Debt Instruments – The fund invests in loans and loan participations or other receivables. These investments may include standby
financing commitments, including revolving credit facilities, which contractually obligate the fund to supply additional cash to the borrower on demand. The fund generally provides this financial support in order to preserve its existing investment
or to obtain a more senior secured interest in the assets of the borrower. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Statement of Cash Flows – Information on financial transactions which have been settled through the receipt or disbursement of cash or restricted cash is presented in the Statement of Cash Flows. Cash
as presented in the fund’s Statement of Assets and Liabilities includes cash on hand at the fund’s custodian bank and does not include any short-term investments. Restricted cash is presented in the fund’s Statement of Assets and
Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives and represents cash that has been segregated or delivered to cover the fund’s collateral or margin obligations under derivative
contracts.
The following table provides a reconciliation of cash and restricted cash reported within the Statement of Assets and Liabilities with that
shown in the Statement of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
5/31/20
|
|
|
Cash
|
|
|
$1,393
|
|
|
Restricted cash
|
|
|
—
|
|
|
Restricted cash included in deposits with brokers
|
|
|
—
|
|
|
Total cash and restricted cash in the Statement of Cash Flows
|
|
|
$1,393
|
|
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.
31
Notes to Financial Statements (unaudited) – continued
generally accepted accounting principles. The fund earns certain fees in connection
with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual
basis as income in the accompanying financial statements. 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. Debt obligations may be placed on
non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations
may be further reduced by the write-off of the related interest receivables when deemed uncollectible.
The fund
may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized
gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income,
including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.
Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any,
have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by
the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to
shareholders are recorded on the ex-dividend date. The fund seeks to pay monthly distributions based on an annual rate of 9.50% of the fund’s average monthly net asset value. As a result, distributions
may exceed actual earnings which may result in a tax return of capital. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain
capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise
from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
During the year ended November 30, 2019, there were no significant adjustments due to differences between book and tax accounting.
32
Notes to Financial Statements (unaudited) – continued
For the six months ended May 31, 2020, the amount of distributions estimated to be
a tax return of capital was approximately $842,940 which is reported as distributions from other sources in the Statements of Changes in Net Assets.
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
11/30/19
|
|
Ordinary income (including any
short-term capital gains)
|
|
|
$2,778,691
|
|
|
Tax return of capital (b)
|
|
|
1,936,826
|
|
|
|
|
|
Total distributions
|
|
|
$4,715,517
|
|
|
(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 5/31/20
|
|
|
|
|
|
|
|
Cost of investments
|
|
|
$64,097,909
|
|
|
Gross appreciation
|
|
|
1,358,660
|
|
|
|
|
|
Gross depreciation
|
|
|
(2,172,646
|
)
|
|
Net unrealized appreciation (depreciation)
|
|
|
$(813,986
|
)
|
|
|
|
|
As of 11/30/19
|
|
|
|
|
|
|
|
Capital loss carryforwards
|
|
|
(5,502,916
|
)
|
|
Net unrealized appreciation (depreciation)
|
|
|
1,828,912
|
|
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of November 30, 2019, 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
|
|
|
$(317,724
|
)
|
|
Long-Term
|
|
|
(5,185,192
|
)
|
|
Total
|
|
|
$(5,502,916
|
)
|
(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, 2020 was equivalent to an annual effective rate of 0.99% of the fund’s average daily net assets.
33
Notes to Financial Statements (unaudited) – continued
The investment adviser has agreed in writing to pay a portion of the fund’s total
annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed 1.34% annually of the fund’s average daily net
assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until November 30, 2021. For the six months ended May 31, 2020, this reduction amounted to $45,426,
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, 2020, these fees paid to MFSC amounted to $1,431.
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, 2020 was equivalent to an annual effective rate of 0.0372% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their
services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS and MFSC.
Other – The fund invests in the
MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money market fund does not pay a management fee to MFS but does incur investment and operating
costs.
(4) Portfolio Securities
For the six
months ended May 31, 2020, purchases and sales of investments, other than short-term obligations, aggregated $17,937,555 and $21,354,008, 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. The fund repurchased 216,298 shares of beneficial interest
during the six months ended May 31, 2020 at an average price per share of $1.86 and a weighted average discount of 10.64% per share. The fund repurchased 117,869 shares of beneficial
34
Notes to Financial Statements (unaudited) – continued
interest during the year ended November 30, 2019 at an average price per share of
$2.18 and a weighted average discount of 10.05% per share. Transactions in fund shares were as follows:
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Six months ended
5/31/20
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Year ended
11/30/19
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Shares
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Amount
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Shares
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Amount
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Shares issued to shareholders in
reinvestment of distributions
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16,939
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$44,994
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56,233
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$144,186
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Capital shares repurchased
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(216,298
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)
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(402,938
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)
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(117,869
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)
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(257,528
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)
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Net change
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(199,359
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)
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$(357,944
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)
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(61,636
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)
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$(113,342
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)
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(6) Loan Agreement
The fund
has a credit agreement with a bank for a revolving secured line of credit that can be drawn upon up to $21,000,000. Prior to May 26, 2020, the maximum amount available under the line of credit was $23,000,000. At May 31, 2020, the fund had
outstanding borrowings under this agreement in the amount of $18,500,000, which are secured by a lien on the fund’s assets. The loan’s carrying value in the fund’s Statement of Assets and Liabilities approximates its fair value. The
loan value as of the reporting date is considered level 2 under the fair value hierarchy. The credit agreement matures on August 19, 2020. The Trustees approved the renewal of the revolving secured line of credit up to the amount of $21,000,000
on substantially similar terms for a 365 day period which matures on August 19, 2021. 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, 2, 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 $150,872 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 $2,245 during the period, which
is included in “Interest expense and fees” in the Statement of Operations. For the six months ended May 31, 2020, the average loan balance was $19,396,175 at a weighted average annual interest rate of 1.56%. The fund is subject to
certain covenants including, but not limited to, requirements with respect to asset coverage, portfolio diversification and liquidity.
(7)
Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities,
or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
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Affiliated Issuers
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Beginning
Value
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Purchases
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Sales
Proceeds
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Realized
Gain
(Loss)
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Change in
Unrealized
Appreciation or
Depreciation
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Ending
Value
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MFS Institutional Money
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Market Portfolio
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$1,034,504
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$11,629,820
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$11,751,149
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$(302
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)
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$(22
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)
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$912,851
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Affiliated Issuers
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Dividend
Income
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Capital Gain
Distributions
|
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MFS Institutional Money Market Portfolio
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|
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$11,967
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|
$—
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35
Notes to Financial Statements (unaudited) – continued
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December
2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities
markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of MFS Intermediate High Income Fund:
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, 2020, and the related
statements of operations, changes in net assets, cash flows and financial highlights for the six-month period ended May 31, 2020. These interim financial statements and financial highlights are the
responsibility of the Fund’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board
(United States). A review of interim financial information 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 Public Company Accounting Oversight Board (United States), 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.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial
statements and financial highlights 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), the statement of changes in net assets for the year ended November 30, 2019 and the financial highlights for each of the five years in the period
ended November 30, 2019, and in our report dated January 15, 2020, we expressed an unqualified opinion on such statement of changes in net assets and financial highlights.
Boston, Massachusetts
July 17, 2020
37
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
website 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 selecting the
“Resources” tab and clicking on “Prospectus and Reports”.
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/en-us/what-we-do/announcements.html or at mfs.com/closedendfunds by choosing the fund’s name.
Additional
information about the fund (e.g., performance, dividends and the fund’s price history) is also available by clicking on the fund’s name under “Closed-End Funds” in the “Products” section of mfs.com.
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.
38
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