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MFS® Institutional International Equity
Fund
Third quarter 2021 investment report
The MFS Institutional Trust Fund is available without a sales charge to eligible investors.
Before investing, consider the fund's investment objectives, risks, charges, and expenses. For a prospectus, or summary prospectus, containing this and other information,
contact MFS or view online at mfs.com. Please read it carefully.
MFS® investment products are offered through, MFS Fund Distributors, Inc., 111 Huntington Avenue Boston, MA 02199
FOR INVESTMENT PROFESSIONAL AND INSTITUTIONAL USE ONLY.
MFS Institutional Advisors, Inc.
PRPEQ-IIE-30-Sep-21 34132.4Table of Contents
Contents Page
Fund Risks 1
Disciplined Investment Approach 2
Market Overview 3
Executive Summary 4
Performance 5
Attribution 6
Significant Transactions 10
Portfolio Positioning 11
Characteristics 13
Portfolio Outlook 14
Portfolio Holdings 18
Additional Disclosures 20
Country and region information contained in this report is based upon MFS classification methodology which may differ from the methodology used by individual benchmark providers.
Performance and attribution results are for the fund or share class depicted and do not reflect the impact of your contributions and withdrawals. Your personal performance results may
differ.
Portfolio characteristics are based on equivalent exposure, which measures how a portfolio's value would change due to price changes in an asset held either directly or, in the case of a
derivative contract, indirectly. The market value of the holding may differ.
0
MFS Institutional International Equity Fund
PRPEQ-IIE-30-Sep-21Fund Risks
The fund may not achieve its objective and/or you could lose money on your investment in the fund.
Stock: Stock markets and investments in individual stocks are volatile and can decline significantly in response to or investor perception of, issuer, market, economic,
industry, political, regulatory, geopolitical, environmental, public health, and other conditions.
International: Investments in foreign markets can involve greater risk and volatility than U.S. investments because of adverse market, currency, economic, industry,
political, regulatory, geopolitical, or other conditions.
Please see the prospectus for further information on these and other risk considerations.
1
MFS Institutional International Equity Fund 1
PRPEQ-IIE-30-Sep-21Disciplined Investment Approach
Investment objective Seekscapital appreciation
We seek to outperform the MSCIEAFE Index (net div) overfull marketcyclesby relyingon stock
Goal selectionas the primary sourceof alpha.
Investratherthanspeculate
We invest with a long-term investment horizon, which capitalizes on opportunities created
by investors with shorter investment horizons. Our global research platform, collaborative
investmentapproachand compensation structureare all alignedwiththis timeframe.
A growthat a reasonableprice style witha qualitybias
We seek companieswe believehaveabove-average,sustainablegrowthand returnprospects
Philosophy over the long term.Typically these companieshaveidentifiable competitiveadvantagesthat
lead to fairly predictable earningsand cash flow, strong balancesheets,managementinterests
that are alignedwithshareholders,and transparentcorporate governance.
Focus on downsiderisk
We managecapital withthe goal of attemptingto avoidstocks withsubstantialdownside risk,
and onlyinvestwherewe believevaluationsmore than compensatefor inherentrisks.
Downsideriskis emphasizedin stock selection,portfolio construction,and risk management.
2
MFS Institutional International Equity Fund 2
PRPEQ-IIE-30-Sep-21Market Overview
Region performance (%) (USD) as of 30-Sep-21 Sector performance (%) (USD) as of 30-Sep-21
3Q 2021 1 Year 3Q 2021 1 Year
33.9
29.9 31.2
64.0
26.1 25.8
22.1
18.2
45.3
35.8
32.6
29.0
4.6 20.7
25.6
0.3 17.5
10.2 9.1
9.0
-0.3 -1.9 5.1 4.9
-2.5 -4.4
1.8 1.3 0.5
-8.1
-3.0 -3.4 -3.4 -3.5 -4.5 -5.7
Emerging
Japan
Pacific ex Japan
United States
Markets
Canada
UK
Europe ex UK
Financials
Industrials
Services
Consumer Staples
Utilities
Materials
Health Care
Real Estate
Energy
Technology
Discretionary
Information
Communication
Consumer
Source: FactSet. Region performance based on MSCI regional/country indexes. Source: FactSet. Sector performance based on MSCI sector classification. The analysis
of MSCI EAFE Index constituents are broken out by MSCI defined sectors.
Market review as of 30-Sep-21
Following a strong rally, the global equity market pulled back in With economic momentum peaking after a post-pandemic recovery, it is
September 2021 amid signs of peaking economic and earnings growth, even more important to identify companies whose earnings are more
supply chain disruption and ongoing concerns over COVID variants. durable.
The market pullback coincided with US Federal Reserve Chair Powell’s
indication of late 2021 tapering, which weighed on high-multiple growth
stocks.
Debates about transitory versus permanent inflation continue as investors
await developed market central banks’ next moves after a long period of
ultra-loose monetary policy.
3
MFS Institutional International Equity Fund 3
PRPEQ-IIE-30-Sep-21Executive Summary
Performance results (%) net of fees (USD) as of 30-Sep-21 Sector weights (%) as of 30-Sep-21 Portfolio Benchmark^^
Top overweights
Portfolio Benchmark^
Consumer Staples 14.2 10.2
Health Care 16.5 12.6
25.73 Industrials 19.7 15.8
22.93
Top underweights
Communication Services 1.4 4.8
Real Estate – 2.9
11.51 10.96 Financials 14.6 17.2
10.05 8.81
8.10 7.62 7.87 8.35 ^^ MSCI EAFE Index
The Global Industry Classification Standard (GICS®) was developed by
and/or is the exclusive property of MSCI, Inc. and S&P Global Market
Intelligence Inc. ("S&P Global Market Intelligence"). GICS is a service
-0.18 -0.45 mark of MSCI and S&P Global Market Intelligence and has been licensed
for use by MFS. MFS has applied its own internal sector/industry
classification methodology for equity securities and non-equity securities
10 year 5 year 3 year 1 year YTD 3Q 2021
that are unclassified by GICS.
Performance data shown represent past performance and are no guarantee of future results.
Investment return and principal value fluctuate so your shares, when sold, may be worth more
or less than the original cost; current performance may be lower or higher than quoted. For The MFS Institutional International Equity Fund outperformed the MSCI
most recent month-end performance, please visit mfs.com. EAFE (Europe, Australasia, Far East) Index (net div) in the third quarter
Performance results reflect any applicable expense subsidies and waivers in effect during the of 2021.
periods shown. Without such subsidies and waivers the fund's performance results would be less Contributors Detractors
favorable. All results assume the reinvestment of dividends and capital gains. • Industrials – Stock selection • Individual stocks:
MFS Institutional Trust Funds are not subject to a sales charge. • Health Care – Stock selection - Tencent Holdings Limited
Source for benchmark performance SPAR, FactSet Research Systems Inc. - Air Liquide Sa (Eq)
For periods of less than one-year returns are not annualized. - Akzo Nobel Nv
^ MSCI EAFE (Europe, Australasia, Far East) Index (net div) - Beiersdorf Ag
It is not possible to invest directly in an index.
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MFS Institutional International Equity Fund 4
PRPEQ-IIE-30-Sep-21Performance Results
Performance results (%) net of fees (USD) as of 30-Sep-21
Excess return vs
Period Portfolio (%) Benchmark^ (%)
benchmark (%)
4Q 2020 13.97 16.05 -2.08
1Q 2021 1.11 3.48 -2.37
2Q 2021 6.88 5.17 1.70
3Q 2021 -0.18 -0.45 0.26
2016 0.30 1.00 -0.70
2017 28.02 25.03 2.99
2018 -10.66 -13.79 3.13
2019 28.40 22.01 6.39
2020 11.10 7.82 3.29
2021 YTD 7.87 8.35 -0.48
10 year 10.05 8.10 1.95
5 year 11.51 8.81 2.70
3 year 10.96 7.62 3.34
1 year 22.93 25.73 -2.80
Performance data shown represent past performance and are no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold,
may be worth more or less than the original cost; current performance may be lower or higher than quoted. For most recent month-end performance, please visit mfs.com.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results
would be less favorable. All results assume the reinvestment of dividends and capital gains.
MFS Institutional Trust Funds are not subject to a sales charge.
Source for benchmark performance SPAR, FactSet Research Systems Inc.
For periods of less than one-year returns are not annualized.
^ MSCI EAFE (Europe, Australasia, Far East) Index (net div)
It is not possible to invest directly in an index.
5
MFS Institutional International Equity Fund 5
PRPEQ-IIE-30-Sep-21Performance Drivers - Sectors
Average Relative
Relative to MSCI EAFE Index (USD) - third Portfolio Benchmark Sector Stock Currency
relative + + = contribution
quarter 2021 returns (%) returns (%) allocation1 (%) selection2 (%) effect (%)
weighting (%) (%)
Contributors Industrials 3.9 6.4 1.3 0.1 0.9 0.0 1.0
Health Care 4.0 4.8 0.5 0.0 0.7 0.0 0.7
Utilities -2.6 -4.1 -4.5 0.1 0.0 0.0 0.1
Real Estate -3.0 – -3.0 0.1 – -0.0 0.1
Consumer Discretionary -2.4 -3.5 -3.5 0.1 -0.0 0.0 0.1
Cash 1.2 0.0 – -0.0 – 0.0 0.0
Detractors Information Technology 1.7 1.2 5.1 0.1 -0.5 0.0 -0.3
Consumer Staples 4.3 -4.4 -3.4 -0.1 -0.1 -0.0 -0.3
Energy -1.6 2.9 9.0 -0.2 -0.1 0.0 -0.3
Communication Services -3.4 -22.4 -3.4 0.1 -0.3 0.0 -0.2
Materials 0.3 -6.5 -5.7 -0.0 -0.1 0.0 -0.1
Financials -2.4 1.6 1.8 -0.1 -0.1 0.1 -0.1
Total 0.5 -0.4 0.2 0.4 0.2 0.8
1 Sector allocation is calculated based upon each security's price in local currency.
2 Stock selection is calculated based upon each security's price in local currency and included interaction effect. Interaction effect is the portion of the portfolio's relative
performance attributable to combining allocation decisions with stock selection decisions. This effect measures the relative strength of the manager's convictions. The
interaction effect is the weight differential times the return differential.
Attribution results are generated by the FactSet application utilizing a methodology that is widely accepted in the investment industry. Results are based upon daily holdings
using a buy-and-hold methodology to generate individual security returns and do not include fees or expenses. As such, attribution results are essentially estimates and do not
aggregate to the total return of the portfolio, which can be found elsewhere in this presentation. To obtain the contribution calculation methodology and a complete list of every
holding’s contribution to the overall portfolio’s performance during the measurement period, please email DLAttributionGrp@MFS.com.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. ("S&P Global Market
Intelligence"). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry
classification methodology for equity securities and non-equity securities that are unclassified by GICS.
6
MFS Institutional International Equity Fund 6
PRPEQ-IIE-30-Sep-21Performance Drivers - Stocks
Average Weighting (%) Returns (%)
Relative
Relative to MSCI EAFE Index (USD) - third quarter 2021 Portfolio Benchmark Portfolio¹ Benchmark
contribution (%)
Contributors HOYA Corporation 1.9 0.3 18.3 18.3 0.3
Daikin Industries Ltd 2.0 0.3 18.0 18.0 0.3
Terumo Corp 1.4 0.2 17.1 17.1 0.2
Novo Nordisk 2.3 1.0 16.2 16.2 0.2
Tata Consultancy Services Ltd 1.4 – 13.2 – 0.2
Detractors Tencent Holdings Limited 0.9 – -21.2 – -0.2
Air Liquide Sa (Eq) 2.7 0.5 -8.3 -8.3 -0.2
Akzo Nobel Nv 1.6 0.1 -11.5 -11.5 -0.2
Beiersdorf Ag 1.7 0.1 -10.2 -10.2 -0.2
Asml Holding Nv – 1.9 – 8.9 -0.2
1 Represents performance for the time period stock was held in portfolio.
Attribution results are generated by the FactSet application utilizing a methodology that is widely accepted in the investment industry. Results are based upon daily holdings using
a buy-and-hold methodology to generate individual security returns and do not include fees or expenses. As such, attribution results are essentially estimates and do not
aggregate to the total return of the portfolio, which can be found elsewhere in this presentation. To obtain the contribution calculation methodology and a complete list of every
holding’s contribution to the overall portfolio’s performance during the measurement period, please email DLAttributionGrp@MFS.com.
7
MFS Institutional International Equity Fund 7
PRPEQ-IIE-30-Sep-21Significant Impacts on Performance - Contributors
Relative
Relative to MSCI EAFE Index (USD) - third quarter 2021
contribution (%)
HOYA Corporation An overweight position in imaging products and medical-related equipment manufacturer HOYA (Japan) contributed to relative 0.3
performance as the company reported strong first-quarter profit growth, notably in its information technology and life care
businesses.
Daikin Industries The portfolio's overweight position in air conditioning system manufacturer Daikin Industries (Japan) contributed to relative 0.3
performance. The stock price rose throughout the period on the back of strong first-quarter earnings results, which benefited from
Ltd
price increases and better-than-expected HVAC sales.
Terumo Corp An overweight position in medical products and equipment manufacturer Terumo (Japan) bolstered relative performance. The 0.2
stock price rose as the company delivered quarterly operating profit results that were well ahead of estimates, driven by a recovery
in cardiovascular sales, an improved product mix and lower-than-expected operating costs. The firm's hospital and blood divisions
also reported growth in sales and profits, which further supported the stock.
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MFS Institutional International Equity Fund 8
PRPEQ-IIE-30-Sep-21Significant Impacts on Performance - Detractors
Relative
Relative to MSCI EAFE Index (USD) - third quarter 2021
contribution (%)
Tencent Holdings Holding shares of multinational technology conglomerate Tencent (China) weakened relative returns. Shares of the company -0.2
declined as new technology and gaming regulations from Chinese authorities appeared to have weighed on investor sentiment.
Limited
Air Liquide Sa (Eq) The portfolio's overweight position in industrial and medical gas supplier Air Liquide (France) held back relative returns. The stock -0.2
price declined as the company reported first-half financial results below market expectations, driven by a lower-than-expected
operating margin.
Akzo Nobel Nv The portfolio's position in paint and specialty chemicals manufacturer Akzo Nobel (Netherlands) detracted from relative -0.2
performance. The stock price declined as the company reported earnings before interest and taxes (EBIT) below consensus
estimates, driven by weaker-than-expected profitability, notably in its Performance Coatings division.
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MFS Institutional International Equity Fund 9
PRPEQ-IIE-30-Sep-21Significant Transactions
Ending
From 01-Jul-21 to 30-Sep-21 Sector Transaction type Trade (%)
weight (%)
Purchases SONY GROUP CORP Consumer Discretionary Add 0.5 1.4
TORONTO-DOMINION BANK/THE Financials Add 0.4 1.0
COMPASS GROUP EQUITY Consumer Discretionary Add 0.2 1.5
TENCENT HOLDINGS LTD (EQ) Communication Services Add 0.2 1.0
ENGIE SA Utilities Add 0.2 0.9
Sales DANONE SA Consumer Staples Trim -0.3 0.1
WOLTERS KLUWER NV Industrials Trim -0.2 0.2
KBC GROUP NV Financials Trim -0.2 0.9
ING GROEP NV Financials Trim -0.2 1.1
NOVO NORDISK A/S Health Care Trim -0.2 2.3
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. ("S&P Global Market
Intelligence"). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry
classification methodology for equity securities and non-equity securities that are unclassified by GICS.
10
MFS Institutional International Equity Fund 10
PRPEQ-IIE-30-Sep-21Sector Weights
Underweight/
As of 30-Sep-21 Portfolio (%) Benchmark^ (%) Top holdings
overweight (%)
Consumer Staples 14.2 10.2 4.0 Nestle SA, Pernod Ricard SA, Diageo PLC
Health Care 16.5 12.6 3.9 Roche Holding AG, Novo Nordisk AS, Hoya Corp
Schneider Electric SE, Hitachi Ltd, Daikin
Industrials 19.7 15.8 3.9
Industries Ltd
SAP SE, Capgemini SE, Taiwan Semiconductor
Information Technology 11.2 9.6 1.6
Manufacturing Co Ltd ADR
Materials 7.7 7.3 0.4 Air Liquide SA, Akzo Nobel NV, Linde PLC
Energy 1.7 3.5 -1.8 Galp Energia SGPS SA
LVMH Moet Hennessy Louis Vuitton SE, Compass
Consumer Discretionary 10.5 12.7 -2.2
Group PLC, Sony Group Corp
Utilities 0.9 3.3 -2.4 Engie SA
AIA Group Ltd, Deutsche Boerse AG, UBS Group
Financials 14.6 17.2 -2.6
AG
Real Estate – 2.9 -2.9
Communication Services 1.4 4.8 -3.4 Tencent Holdings Ltd
^ MSCI EAFE Index
1.5% Cash & cash equivalents
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. ("S&P Global Market
Intelligence"). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry
classification methodology for equity securities and non-equity securities that are unclassified by GICS.
11
MFS Institutional International Equity Fund 11
PRPEQ-IIE-30-Sep-21Region and Country Weights
Portfolio Benchmark^ Underweight/
As of 30-Sep-21 Underweight/overweight
(%) (%) overweight (%)
Europe ex-U.K. 54.4 49.4 5.0
France 17.7 11.2 6.5 Europe ex-U.K. 5.0
Switzerland 13.8 9.5 4.3
Germany 9.8 9.1 0.7
Denmark 3.0 2.6 0.4
Portugal 0.6 0.2 0.4 United Kingdom -4.2
Netherlands 5.0 4.8 0.2
Ireland 0.9 0.7 0.2
Belgium 0.9 0.9 0.0
Italy 1.6 2.5 -0.9 Japan -6.8
Spain 0.9 2.4 -1.5 1 Other
Sweden 0.2 3.7 -3.5
Other countries 1 0.0 1.9 -1.9
United Kingdom 10.2 14.4 -4.2 Asia/Pacific ex-Japan -7.9
Japan 17.4 24.2 -6.8
Asia/Pacific ex-Japan 3.4 11.3 -7.9
Singapore 1.1 1.2 -0.1
Developed - Middle
Hong Kong 2.3 3.0 -0.7 0.4
East/Africa
Other countries 1 0.0 7.2 -7.2
Developed - Middle East/Africa 1.0 0.6 0.4
Israel 1.0 0.6 0.4
North America 5.1 0.0 5.1 North America 5.1
Canada 3.9 0.0 3.9
United States 1.2 0.0 1.2
Emerging Markets 6.9 0.0 6.9
India 3.0 0.0 3.0 Emerging Markets 6.9
China 2.1 0.0 2.1
Taiwan 1.6 0.0 1.6
Brazil 0.3 0.0 0.3
^ MSCI EAFE Index
1.5% Cash & cash equivalents
1
The portfolio does not own any securities in countries represented in the benchmark in the following percentages: Australia 6.9%; Finland 1.0% and 3 countries with weights
less than 1.0% which totals to 1.2%.
12
MFS Institutional International Equity Fund 12
PRPEQ-IIE-30-Sep-21Characteristics
As of 30-Sep-21 Portfolio Benchmark^ Top 10 issuers as of 30-Sep-21 Portfolio (%) Benchmark^ (%)
Fundamentals - weighted average NESTLE SA 3.6 2.1
1
IBES long-term EPS growth 16.3% 18.0%
SCHNEIDER ELECTRIC SE 3.3 0.5
Price/earnings (12 months forward) 19.0x 15.4x
Return on invested capital 11.1% 9.5% ROCHE HOLDING AG 3.0 1.6
Long term debt/capital 33.1% 36.6% AIR LIQUIDE SA (EQ) 2.5 0.5
Market capitalization
Market capitalization (USD)
2
107.0 bn 80.0 bn AIA GROUP LTD 2.3 0.8
Diversification LVMH MOET HENNESSY LOUIS
2.3 1.2
Top ten holdings 26% 13% VUITTON SE
Number of holdings 80 845 NOVO NORDISK A/S 2.3 1.0
Turnover HITACHI LTD 2.2 0.3
3
Trailing 1 year turnover 13% –
SAP SE 2.2 0.8
Risk profile (current)
Active share 78% – CAPGEMINI SE 2.1 0.2
Risk/reward (10 year) Total 25.8 9.0
Upside capture 100.29% –
Downside capture 89.08% –
^ MSCI EAFE Index
Past performance is no guarantee of future results. No forecasts can be
guaranteed.
1
Source: FactSet
2
Weighted average.
3
US Turnover Methodology: (Lesser of Purchase or Sales)/Average Month
End Market Value
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MFS Institutional International Equity Fund 13
PRPEQ-IIE-30-Sep-21Portfolio Outlook and Positioning
MARKET REVIEW
The equity rally finally ran out of steam in September, with the MSCI EAFE Index (net div. in USD) falling 3%, leaving the total return modestly
negative (-0.5%) for the quarter though still 8.4% year to date through September. Some profit-taking seemed inevitable after seven months
of consecutive gains that had pushed global equity markets to all-time highs. While economic growth remains strong, the rate of growth
decelerated in the third quarter, due to rising COVID cases (primarily the Delta variant), continued supply chain disruptions and labor market
friction. While US GDP growth (6.5% annualized) was strong, the results fell significantly short of economists' expectations. China's growth has
clearly slowed while forward-looking indicators, most notably the PMI data falling below 50, suggest a contraction. Recent and more frequent
regulatory changes in China are centered around “common prosperity” and target many sectors, including gaming, private education, food
delivery and information technology, which adds an extra risk premium for global investors interested in investing in China. Furthermore,
investor concerns over a potential Chinese property market bubble reappeared when its largest property company, Evergrande, confirmed it
had $304 billion of liabilities due for payment. Perhaps the China worries are overdone, but it does seem clear China will not be the same
engine of growth as it was emerging from the 2008 financial crisis.
Within equity markets, the rotation from deep-value stocks in the first quarter toward more growth-oriented stocks has broadly continued,
albeit with a late swing back to value at the end of the third quarter. There has been a sharp focus on earnings growth as corporate profits
continue to recover at an impressive rate. In fact, all of the gains in equity markets so far this year can be attributed to strong earnings growth,
with no “multiple expansion” since last summer. In other words, markets have not become more expensive. During the third quarter the spread
between sector returns was fairly narrow, but at the stock level there was significant dispersion.
While growth momentum appears to be fading, the inflation debate rages on, with economists split on what is transitory and what might be
more permanent. The latest data showed US inflation at 5.3%, a fraction off a 13-year high, and eurozone inflation at 3.4%, the highest since
2008, just before the global financial crisis. Many companies are reporting rising input cost inflation and pockets of wage inflation. While many
companies talk of pricing power, we have yet to see which price increases will actually stick. Near-term pressure on operating margins seems
inevitable, which may lead to profit warnings and fewer “earnings beats” over the coming months.
45692.7 14
MFS Institutional International Equity Fund 14
PRPEQ-IIE-30-Sep-21Portfolio Outlook and Positioning
It feels as if equity markets have hit “pause” and are awaiting a change in the direction of monetary policy. Investors are anxious to see if
central banks can mastermind an orderly exit from a remarkably long period of ultraloose monetary policy and unprecedented fiscal stimulus.
Several EM countries have already started raising rates. Jerome Powell, the US Federal Reserve chair, said “the pace of QE could be dialed back
this year” in his recent speech at the Jackson Hole meeting, and the Fed is now expected to start raising rates in 2023. The governor of the
Bank of England said recently, “a rise in interest rates next year is becoming more likely” while at the European Central Bank the consensus is
shifting toward a tapering of QE sooner rather than later. Investors will keep a close watch on the timing of policy moves, fearing a policy error.
The risk is that if central bankers don’t act soon, they may need to slam on the brakes harder in future.
PORTFOLIO POSITIONING
The portfolio's positioning was generally unchanged during the third quarter, with no new initiations or eliminations and only modest adds and
trims to existing positions. We remain focused on companies that we believe are emerging stronger from the COVID-19 crisis and are displaying
pricing power, operating leverage and capital discipline to enhance their competitive positions. We believe the inflation risk is still temporary,
although extended, and generally covered through our companies which have flexible cost structures and the ability to pass through pricing to
deal with higher input costs. The market's volatility has given us the opportunity to continually upgrade the quality of the portfolio by adding
to positions in high-quality cyclical businesses while taking profits in others.
The biggest overweights remain in consumer staples, industrials and health care, where we continue to own several high-quality companies
that we believe have above-average earnings growth and whose valuations are reasonable relative to our growth expectations. The biggest
underweight sectors include communication services, financials (banks and real estate), utilities and consumer discretionary (autos). Our
largest underweight, communication services, is primarily the result of not owning many telecommunications companies that lack sustainable
above-average growth or pricing power and that maintain higher-than-average capital intensity.
During the quarter, we topped up our position in Japan-based electronic equipment and gaming console manufacturer Sony Group Corp, which
we had initiated last quarter. The company's outlook has improved significantly over the past several years due to portfolio restructuring and
a positive evolution of its end markets and business model. The transformation of Sony's businesses and culture has resulted in more reliable
profit streams and more direct accountability across divisions. Their Games & Networks business segment has seen the greatest transformation
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MFS Institutional International Equity Fund 15
PRPEQ-IIE-30-Sep-21Portfolio Outlook and Positioning
within a secular growth industry. We believe this business possesses more levers to grow through stronger monetization, increased penetration
of higher margin games, penetration into emerging markets and the direct distribution of software. We also believe the company's valuation
is attractive on a sum-of-the-parts analysis relative to our growth expectations. Additionally, we added to Canadian financial services provider
Toronto-Dominion Bank. The company maintains a dominant position in retail banking and wealth management in Canada. It also has several
growth drivers in the United States and should benefit from higher interest rates due to higher net interest margins and a 10% stake in Charles
Schwab. The company's valuation is attractive. Finally, in order to manage position sizes or take profits, we trimmed several names to fund
these purchases, including Danone, Wolters Kluwer, KBC Group and ING Groep.
Near the end of the quarter, we attended the annual gathering of analysts and portfolio managers at the MFS® Global Roundtable. Once again,
the event was conducted virtually, but the collaboration and valuable insights shared across the entire research platform were on full display.
The sessions were lively, thought-provoking and topical. This year's format included a panel session on the art of engagement in which
numerous portfolio managers and equity analysts and credit analysts discussed best practices for effectively engaging with management teams
on ESG issues. We also conducted an in-depth interview with the CEO of Home Depot, covering several areas, including the importance of a
strong culture and how to maintain it long term. And we held panels covering the US and global real estate markets, the macro environment
in Japan and the impact of inflation on corporate earnings and strategy.
MARKET OUTLOOK
Is this as good as it gets? Arguably, equity markets have enjoyed the tailwinds of a near perfect investment world— strong earnings growth,
abundant liquidity, low interest rates and volatility at new post-COVID lows. Perhaps behavioral themes have reconditioned investors. Do
equity markets keep going up just because of FOMO (the fear of missing out) or because there is no alternative (TINA) to owning equities when
bond yields are so low? One of the hallmarks of the strategy’s long-term success has been a patient approach and aiming to not overpay for
assets. We are mindful of this today as we assess the prospects and valuations of stocks on a case-by-case basis.
We believe the macro environment remains supportive for equity markets as we await a change in the direction of monetary policy. While
equities offer value relative to bonds provided there is profitable growth, they look expensive in absolute terms.
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MFS Institutional International Equity Fund 16
PRPEQ-IIE-30-Sep-21Portfolio Outlook and Positioning
Some equity valuation measures do look a little stretched. Measures like the “cylically-adjusted PE” ratio and the “market cap to GDP” ratio
are two times higher than historical norms. Risks remain abundant — inflation, fading stimulus, higher taxes, trade wars, central bank policy
mistakes and new COVID variants, in addition to ever present political risks around the world. All these risks should be watched. The spectacular
12.7% per annum return from global equity markets (MSCI World Index) over the past decade is unlikely to be repeated. We believe investors
should position themselves for a lower-return environment going forward.
As always, we aim to build an “all-weather” portfolio and think about these factors at a stock level, following the strategy of investing in
companies with sustainable growth through the cycle with a focus on downside risk management and assessing risk that others often overlook.
We try not to worry too much about macro gyrations, but we do worry about paying the right price, as valuation is the key determinant of
long-term returns. We continue to take advantage of anomalies thrown up by market movements and look to find plenty of great companies
with above average growth and returns in which to invest.
The commentary included in this report was based on a representative fully discretionary portfolio for this product style; as such the commentary may include securities not held in
your portfolio due to account, fund, or other limits.
45692.7 17
MFS Institutional International Equity Fund 17
PRPEQ-IIE-30-Sep-21Portfolio Holdings
Equivalent Equivalent
As of 30-Sep-21 Country As of 30-Sep-21 Country
exposure (%) exposure (%)
Cash & Cash Equivalents 1.5 Financials 14.6
Cash & Cash Equivalents 1.5 AIA Group Ltd Hong Kong 2.3
Communication Services 1.4 Deutsche Boerse AG Germany 1.7
Tencent Holdings Ltd China 1.0 UBS Group AG Switzerland 1.6
NetEase Inc China 0.4 Zurich Insurance Group AG Switzerland 1.2
Consumer Discretionary 10.5 DBS Group Holdings Ltd Singapore 1.1
LVMH Moet Hennessy Louis Vuitton SE France 2.3 ING Groep NV Netherlands 1.1
Compass Group PLC United Kingdom 1.5 Intesa Sanpaolo SpA Italy 1.0
Sony Group Corp Japan 1.4 Toronto-Dominion Bank Canada 1.0
EssilorLuxottica SA France 1.3 Housing Development Finance Corp Ltd India 1.0
Cie Financiere Richemont SA Switzerland 1.2 KBC Group NV Belgium 0.9
Koito Manufacturing Co Ltd Japan 0.8 Julius Baer Group Ltd Switzerland 0.8
Denso Corp Japan 0.8 Intact Financial Corp Canada 0.5
Yum China Holdings Inc China 0.7 HDFC Bank Ltd India 0.5
Cie Generale des Etablissements Michelin SCA France 0.6 Health Care 16.5
Consumer Staples 14.2 Roche Holding AG Switzerland 3.0
Nestle SA Switzerland 3.6 Novo Nordisk AS Denmark 2.3
Pernod Ricard SA France 1.8 Hoya Corp Japan 1.9
Diageo PLC United Kingdom 1.7 Merck KGaA Germany 1.7
Beiersdorf AG Germany 1.6 Terumo Corp Japan 1.5
Reckitt Benckiser Group PLC United Kingdom 1.0 Koninklijke Philips Electronics NV Netherlands 1.4
L'Oreal SA France 0.9 Olympus Corp Japan 1.4
Tesco PLC United Kingdom 0.9 Novartis AG Switzerland 1.3
Carlsberg AS Denmark 0.7 Bayer AG Germany 1.1
Japan Tobacco Inc Japan 0.7 QIAGEN NV Germany 1.0
Kose Corp Japan 0.7 Industrials 19.7
Ambev SA ADR Brazil 0.3 Schneider Electric SE France 3.3
Essity AB Sweden 0.2 Hitachi Ltd Japan 2.2
Danone SA France 0.1 Daikin Industries Ltd Japan 1.9
Energy 1.7 Canadian National Railway Co Canada 1.9
Galp Energia SGPS SA Portugal 0.6 RELX PLC United Kingdom 1.6
Eni SpA Italy 0.6 Kubota Corp Japan 1.4
Suncor Energy Inc Canada 0.5 Experian PLC United Kingdom 1.4
18
MFS Institutional International Equity Fund 18
PRPEQ-IIE-30-Sep-21Portfolio Holdings
Equivalent
As of 30-Sep-21 Country
exposure (%)
Industrials 19.7
Legrand SA France 1.0
SMC Corp Japan 1.0
Ryanair Holdings PLC ADR Ireland 0.9
Randstad NV Netherlands 0.9
Rolls-Royce Holdings PLC United Kingdom 0.7
MTU Aero Engines AG Germany 0.6
Smiths Group PLC United Kingdom 0.5
Wolters Kluwer NV Netherlands 0.2
Information Technology 11.2
SAP SE Germany 2.2
Capgemini SE France 2.1
Taiwan Semiconductor Manufacturing Co Ltd ADR Taiwan 1.6
Tata Consultancy Services Ltd India 1.5
Kyocera Corp Japan 1.1
Check Point Software Technologies Ltd Israel 1.0
Amadeus IT Group SA Spain 0.9
Dassault Systemes SE France 0.8
Materials 7.7
Air Liquide SA France 2.5
Akzo Nobel NV Netherlands 1.5
Linde PLC United States 1.2
Sika AG Switzerland 1.0
Rio Tinto PLC United Kingdom 0.9
Shin-Etsu Chemical Co Ltd Japan 0.6
Utilities 0.9
Engie SA France 0.9
The Global Industry Classification Standard (GICS®) was developed by and/or is the
exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. ("S&P Global
Market Intelligence"). GICS is a service mark of MSCI and S&P Global Market
Intelligence and has been licensed for use by MFS. MFS has applied its own internal
sector/industry classification methodology for equity securities and non-equity
securities that are unclassified by GICS.
19
MFS Institutional International Equity Fund 19
PRPEQ-IIE-30-Sep-21Additional Disclosures
Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data
contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved,
reviewed or produced by MSCI.
20
MFS Institutional International Equity Fund 20
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