Form N-CSR MFS SERIES TRUST VII For: Jul 31

September 17, 2021 12:43 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03090

MFS SERIES TRUST VII

(Exact name of registrant as specified in charter)

111 Huntington Avenue, Boston, Massachusetts 02199

(Address of principal executive offices) (Zip code)

Christopher R. Bohane

Massachusetts Financial Services Company

111 Huntington Avenue

Boston, Massachusetts 02199

(Name and address of agents for service)

Registrant’s telephone number, including area code: (617) 954-5000

Date of fiscal year end: July 31*

Date of reporting period: July 31, 2021

 

*

This Form N-CSR pertains to the following series of the Registrant: MFS Equity Income Fund and MFS Emerging Markets Equity Research Fund. MFS Emerging Markets Equity Research Fund commenced investment operations on February 23, 2021.


ITEM 1.

REPORTS TO STOCKHOLDERS.

Item 1(a):


Annual Report
July 31, 2021
MFS®  Equity Income Fund
EQI-ANN




MFS® Equity Income Fund
CONTENTS
The report is prepared for the general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED  •  MAY LOSE VALUE  •  NO BANK GUARANTEE




LETTER FROM THE CEO
Dear Shareholders:
After experiencing dramatic swings in the early days of the coronavirus pandemic, global equity markets have performed strongly over the past year. Though the speedy development of vaccines brightened the economic and market outlook, uncertainty remains as new variants of the virus appear, and questions persist over how fast vaccines can be made widely available in the developing world.
Global central banks have taken aggressive steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal support. Having passed a $1.9 trillion stimulus package in March, the U.S. Congress could approve additional stimulus later this year, some of it focused on infrastructure. Along with extraordinary government expenditures, pent-up consumer demand fueled a surge in economic activity as coronavirus restrictions were eased, pushing up inflation, at least temporarily. Markets initially reacted by pushing yields on global government bonds higher, though some of the rate rise has since been corrected. Some emerging market central banks have begun to raise interest rates in recent months while the U.S. Federal Reserve has started to discuss tapering its bond buying program before the end of 2021.
A spirited debate is underway among investors over whether the current price pressures will persist or prove to be the temporary result of pandemic-induced bottlenecks. The policy measures put in place to counteract the pandemic's effects have helped build a supportive environment and are encouraging economic recovery; however, if markets disconnect from fundamentals, they can sow the seeds of instability. As such, recent dramatic increases in speculative trading in cryptocurrencies, special purpose acquisition companies (SPACs), and the like bear watching.
In the aftermath of the crisis, we could see societal changes as households, businesses, and governments adjust to a new reality, and any such alterations could affect the investment landscape. For investors, events such as the COVID-19 outbreak demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
At MFS®, we put our clients’ assets to work responsibly by carefully navigating the increasing complexity of global markets and economies. Guided by our long-term philosophy and adhering to our commitment to sustainable investing, we tune out the noise and aim to uncover what we believe are the best, most durable investment opportunities in the market. Our unique global investment platform combines collective expertise, long-term discipline, and thoughtful risk management to create sustainable value for investors.
Respectfully,
Michael W. Roberge
Chief Executive Officer
MFS Investment Management
September 15, 2021
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
1


Portfolio Composition
Portfolio structure
Top ten holdings
Microsoft Corp. 7.4%
Apple, Inc. 3.8%
Eaton Corp. PLC 3.1%
Alphabet, Inc., “A” 3.1%
Comcast Corp., “A” 2.6%
Goldman Sachs Group, Inc. 2.3%
Bank of America Corp. 2.3%
Johnson & Johnson 2.3%
Citigroup, Inc. 2.2%
Merck & Co., Inc. 2.2%
GICS equity sectors (g)
Information Technology 18.7%
Financials 16.1%
Health Care 12.6%
Industrials 9.3%
Communication Services 7.8%
Consumer Staples 7.3%
Consumer Discretionary 6.2%
Real Estate 5.9%
Energy 5.1%
Utilities 3.9%
Convertible Debt 3.7%
Materials 2.1%
 
(g) The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry classification methodology for equity securities and non-equity securities that are unclassified by GICS.
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of July 31, 2021.
The portfolio is actively managed and current holdings may be different.
2


Management Review
Summary of Results
For the twelve months ended July 31, 2021, Class A shares of the MFS Equity Income Fund (fund) provided a total return of 38.34%, at net asset value. This compares with a return of 36.45% for the fund’s benchmark, the Standard & Poor's 500 Stock Index (S&P 500 Stock Index).
Market Environment
The global economy continued to recover from the most unusual recession in memory as financial markets benefited from massive fiscal and monetary intervention aimed at offsetting the economic effects of the pandemic. In developed markets, vaccine distribution broadened after getting off to a slower-than-hoped-for start in some locales, though concerns remained that too few people will be inoculated for herd immunity to be achieved, which could result in the emergence of additional variants. On balance, emerging markets experienced slower rollouts than developed markets amid ongoing vaccine supply constraints.
Around the world, central banks responded quickly and massively to the crisis with programs to improve liquidity and support markets. These undertakings proved largely successful in helping to restore market function, ease volatility and stimulate a prolonged rebound. In the first half of the period, the US Federal Reserve adopted a new, flexible average-inflation-targeting framework, which is expected to result in the federal funds rate remaining at low levels longer than under its previous model. Due to relatively manageable external liabilities and balances of payments in many countries and persistently low inflation, even emerging market countries were able to implement countercyclical policies — a departure from the usual market-dictated response to risk-off crises.
Late in the period, markets grappled with the threat of resurgent inflation resulting from pandemic-induced production bottlenecks, monumental levels of economic stimulus and the unleashing of post-lockdown pent-up demand. Meanwhile, raw materials prices rebounded strongly on account of the surprising resilience of the global manufacturing sector during the pandemic. Global sovereign bond yields initially rose in response to these factors before yields moderated in the second half of the period. The vaccine breakthroughs announced in November 2020 saw market leadership shift from a handful of mega-cap technology companies to a broader array of small-cap and value stocks, though growth stocks have performed strongly in recent months. Signs of excess investor enthusiasm were seen in pockets of the market, such as the “meme stocks” popular with users of online message boards and heavy retail participation in the market for short-dated equity options.
Contributors to Performance
Security selection in the industrials sector was a primary factor that contributed to the fund's performance relative to the S&P 500 Stock Index over the reporting period. Notably, the fund's holdings of agriculture equipment manufacturer AGCO(b) and electronics company Hitachi(b) (Japan), as well as the fund's overweight position in
3


Management Review - continued
shares of leading diversified industrial manufacturer Eaton (Ireland), benefited relative returns. The stock price of AGCO rose steadily throughout most of the reporting period, benefiting from strong demand for farm equipment and improved operating profitability across all business regions.
Both stock selection and an underweight position in the consumer discretionary sector also aided relative performance. Here, the fund's overweight position in retail giant Target, and its underweight position in internet retailer Amazon.com, both supported relative results. The share price of Target rose, aided by same-store sales growth and gross margin expansion over the reporting period.
An overweight position in the financials sector further helped relative performance. Within this sector, the timing of the fund's overweight position in global financial services company Morgan Stanley(h), and its overweight position in financial services firm Bank of America, aided relative returns. The share price of Bank of America advanced during the reporting period, appearing to have benefited from lower-than-expected credit costs and strong capital market related revenues.
Elsewhere, the fund's overweight position in pharmaceutical company Eli Lilly, the timing of its ownership in shares of storage space operator Extra Space Storage, and its holdings of semiconductor manufacturer Taiwan Semiconductor Manufacturing(b) (Taiwan) supported relative results.
Detractors from Performance
A combination of the fund's overweight position and stock selection in the consumer staples sector weakened relative performance over the reporting period. Notably, the fund's overweight position in office and consumer paper products maker Kimberly-Clark weighed on relative returns as pandemic-related softness in the company's professional division and higher selling, general and administrative costs weighed on its earnings results.
An underweight position and security selection in the information technology sector further detracted from relative results, led by the timing of the fund's underweight position in computer graphics processor maker NVIDIA(h). Shares of NVIDIA rose in the latter part of the reporting period, driven by strong gaming and crypto-related demand.
Stock selection in the real estate sector also held back relative results. Here, the timing of the fund's positions in data center infrastructure solutions provider QTS Realty Trust(b)(h) and wireless communications infrastructure firm SBA Communications(h) hindered relative returns. Shares of QTS Realty declined over the reporting period amid concerns that vaccines and reopening expectations could reduce data center demand and hurt its business results.
Stocks in other sectors that further weakened relative results included the fund's holdings of pharmaceutical and diagnostic company Roche Holding(b) (Switzerland) and insurance provider Zurich Insurance Group(b) (Switzerland), as well as its overweight position in shares of pharmaceutical company Merck & Co. Underweighting shares of technology company Alphabet, and the timing of the fund's ownership in shares of diversified financial services firm Wells Fargo(h), also hindered relative returns.
4


Management Review - continued
The fund’s cash and/or cash equivalents position during the period was another detractor from relative performance. Under normal market conditions, the fund strives to be fully invested and generally holds cash to buy new holdings and to provide liquidity. In a period when equity markets rose, as measured by the fund’s benchmark, holding cash hurt performance versus the benchmark, which has no cash position.
Respectfully,
Portfolio Manager(s)
Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks
(b) Security is not a benchmark constituent.
(h) Security was not held in the portfolio at period end.
The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
5


Performance Summary THROUGH 7/31/21
The following chart illustrates a representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000 Investment (t)
6


Performance Summary  - continued
Total Returns through 7/31/21
Average annual without sales charge
Share Class Class Inception Date 1-yr 5-yr Life (t)
A 9/27/12 38.34% 12.89% 12.14%
B 9/27/12 37.26% 12.04% 11.30%
C 9/27/12 37.27% 12.04% 11.31%
I 9/27/12 38.66% 13.19% 12.42%
R1 9/27/12 37.27% 12.04% 11.29%
R2 9/27/12 37.92% 12.61% 11.85%
R3 9/27/12 38.29% 12.89% 12.13%
R4 9/27/12 38.64% 13.18% 12.41%
R6 9/27/12 38.76% 13.30% 12.59%
Comparative benchmark(s)
       
Standard & Poor's 500 Stock Index (f) 36.45% 17.35% 15.79%
Average annual with sales charge
       
A
With Initial Sales Charge (5.75%)
30.38% 11.56% 11.39%
B
With CDSC (Declining over six years from 4% to 0%) (v)
33.26% 11.78% 11.30%
C
With CDSC (1% for 12 months) (v)
36.27% 12.04% 11.31%
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
(f) Source: FactSet Research Systems Inc.
(t) For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)
(v) Assuming redemption at the end of the applicable period.
Benchmark Definition(s)
Standard & Poor's 500 Stock Index(g) – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
It is not possible to invest directly in an index.
(g) “Standard & Poor's®” and “S&P®” are registered trademarks of Standard & Poor's Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS's product(s) is not sponsored,
7


Performance Summary  - continued
endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s).
Notes to Performance Summary
Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details.
Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
8


Expense Table
Fund expenses borne by the shareholders during the period,
February 1, 2021 through July 31, 2021
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period February 1, 2021 through July 31, 2021.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
9


Expense Table - continued
Share
Class
  Annualized
Expense
Ratio
Beginning
Account Value
2/01/21
Ending
Account Value
7/31/21
Expenses
Paid During
Period (p)
2/01/21-7/31/21
A Actual 0.87% $1,000.00 $1,175.64 $4.69
Hypothetical (h) 0.87% $1,000.00 $1,020.48 $4.36
B Actual 1.62% $1,000.00 $1,171.59 $8.72
Hypothetical (h) 1.62% $1,000.00 $1,016.76 $8.10
C Actual 1.62% $1,000.00 $1,171.59 $8.72
Hypothetical (h) 1.62% $1,000.00 $1,016.76 $8.10
I Actual 0.62% $1,000.00 $1,177.03 $3.35
Hypothetical (h) 0.62% $1,000.00 $1,021.72 $3.11
R1 Actual 1.62% $1,000.00 $1,171.60 $8.72
Hypothetical (h) 1.62% $1,000.00 $1,016.76 $8.10
R2 Actual 1.12% $1,000.00 $1,174.13 $6.04
Hypothetical (h) 1.12% $1,000.00 $1,019.24 $5.61
R3 Actual 0.86% $1,000.00 $1,175.74 $4.64
Hypothetical (h) 0.86% $1,000.00 $1,020.53 $4.31
R4 Actual 0.62% $1,000.00 $1,176.99 $3.35
Hypothetical (h) 0.62% $1,000.00 $1,021.72 $3.11
R6 Actual 0.55% $1,000.00 $1,177.98 $2.97
Hypothetical (h) 0.55% $1,000.00 $1,022.07 $2.76
(h) 5% class return per year before expenses.
(p) “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher.
10


Portfolio of Investments
7/31/21
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer     Shares/Par Value ($)
Common Stocks – 94.4%
Aerospace & Defense – 0.8%  
Honeywell International, Inc.       10,442  $   2,441,235
Automotive – 0.2%  
Magna International, Inc.        8,204  $     687,831
Biotechnology – 0.4%  
Gilead Sciences, Inc.       15,865  $   1,083,421
Brokerage & Asset Managers – 0.3%  
Invesco Ltd.       32,002  $     780,209
Business Services – 1.1%  
Accenture PLC, “A”        5,090  $   1,616,991
Cognizant Technology Solutions Corp., “A”       21,430   1,575,748
           $3,192,739
Cable TV – 2.6%  
Comcast Corp., “A”      130,820  $   7,696,141
Computer Software – 7.4%  
Microsoft Corp.       77,467  $ 22,071,123
Computer Software - Systems – 5.9%  
Apple, Inc.       77,724  $ 11,336,823
Hitachi Ltd.       77,800   4,468,104
Samsung Electronics Co. Ltd.       14,930   1,020,975
SS&C Technologies Holdings, Inc.        9,547     748,389
        $17,574,291
Consumer Products – 1.1%  
Kimberly-Clark Corp.       25,108  $   3,407,658
Electrical Equipment – 0.6%  
Johnson Controls International PLC        7,175  $     512,439
Schneider Electric SE        6,864   1,150,523
           $1,662,962
Electronics – 5.1%  
Intel Corp.       95,532  $   5,131,979
Taiwan Semiconductor Manufacturing Co. Ltd., ADR       40,173   4,685,779
Texas Instruments, Inc.       28,095   5,355,469
        $15,173,227
11


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Common Stocks – continued
Energy - Independent – 1.3%  
Valero Energy Corp.       56,395  $   3,776,773
Food & Beverages – 2.6%  
General Mills, Inc.       21,287  $   1,252,953
J.M. Smucker Co.       34,701   4,549,648
PepsiCo, Inc.       12,061   1,892,974
           $7,695,575
Food & Drug Stores – 1.3%  
Wal-Mart Stores, Inc.       26,264  $   3,743,933
Forest & Paper Products – 0.6%  
Weyerhaeuser Co., REIT       56,934  $   1,920,384
Health Maintenance Organizations – 2.1%  
Cigna Corp.       26,745  $   6,137,710
Insurance – 4.4%  
Equitable Holdings, Inc.       79,239  $   2,446,108
Everest Re Group Ltd.        4,591   1,160,743
Manulife Financial Corp.      168,277   3,252,794
MetLife, Inc.       74,955   4,324,903
Zurich Insurance Group AG        4,836   1,952,872
        $13,137,420
Internet – 4.1%  
Alphabet, Inc., “A” (a)        3,373  $   9,088,650
Facebook, Inc., “A” (a)        8,852   3,153,967
        $12,242,617
Leisure & Toys – 1.1%  
Activision Blizzard, Inc.       25,510  $   2,133,146
Nintendo Co. Ltd.        2,000   1,030,471
           $3,163,617
Machinery & Tools – 4.9%  
AGCO Corp.       33,766  $   4,460,826
Eaton Corp. PLC       58,054   9,175,435
Regal Beloit Corp.        6,700     986,441
        $14,622,702
Major Banks – 7.9%  
Bank of America Corp.      175,887  $   6,747,025
Bank of Nova Scotia       28,613   1,785,904
Goldman Sachs Group, Inc.       18,169   6,811,195
JPMorgan Chase & Co.       21,292   3,231,700
12


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Common Stocks – continued
Major Banks – continued  
Toronto-Dominion Bank       17,040  $   1,132,950
UBS Group AG      219,300   3,616,870
        $23,325,644
Medical & Health Technology & Services – 1.8%  
McKesson Corp.       26,113  $   5,322,613
Metals & Mining – 2.1%  
Glencore PLC      495,860  $   2,230,055
Rio Tinto PLC       45,535   3,861,548
           $6,091,603
Natural Gas - Distribution – 0.5%  
UGI Corp.       31,551  $   1,451,030
Natural Gas - Pipeline – 3.8%  
Enbridge, Inc.      105,584  $   4,162,088
Enterprise Products Partners LP      230,785   5,208,818
ONEOK, Inc.       18,544     963,732
Plains All American Pipeline LP      104,641   1,047,456
        $11,382,094
Other Banks & Diversified Financials – 2.6%  
Citigroup, Inc.       97,934  $   6,622,297
Synchrony Financial       21,136     993,815
           $7,616,112
Pharmaceuticals – 8.4%  
Bayer AG       38,717  $   2,309,720
Eli Lilly & Co.       13,004   3,166,474
Johnson & Johnson       38,915   6,701,163
Merck & Co., Inc.       83,520   6,420,183
Novartis AG        8,438     781,343
Roche Holding AG       14,030   5,426,296
        $24,805,179
Real Estate – 6.2%  
Extra Space Storage, Inc., REIT       31,016  $   5,401,126
Medical Properties Trust, Inc., REIT       95,862   2,015,978
National Retail Properties, Inc., REIT       32,297   1,578,354
National Storage Affiliates Trust, REIT       17,026     922,299
Omega Healthcare Investors, Inc., REIT       23,479     851,818
Public Storage, Inc., REIT        3,421   1,068,994
Spirit Realty Capital, Inc., REIT       52,969   2,660,103
Starwood Property Trust, Inc., REIT      107,265   2,792,108
13


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Common Stocks – continued
Real Estate – continued  
STORE Capital Corp., REIT       33,998  $   1,230,388
        $18,521,168
Restaurants – 2.0%  
Starbucks Corp.       47,792  $   5,803,383
Specialty Stores – 4.0%  
Amazon.com, Inc. (a)        1,657  $   5,513,817
Home Depot, Inc.        9,374   3,076,453
Target Corp.       12,792   3,339,351
        $11,929,621
Tobacco – 2.3%  
British American Tobacco PLC       37,705  $   1,404,850
Japan Tobacco, Inc.      108,200   2,115,944
Philip Morris International, Inc.       34,227   3,425,780
           $6,946,574
Trucking – 1.5%  
United Parcel Service, Inc., “B”       23,637  $   4,523,176
Utilities - Electric Power – 3.4%  
CenterPoint Energy, Inc.       24,991  $     636,271
Edison International       31,342   1,708,139
Exelon Corp.      109,163   5,108,828
NextEra Energy Partners LP       19,399   1,504,004
NRG Energy, Inc.       28,019   1,155,504
        $10,112,746
Total Common Stocks (Identified Cost, $195,345,350)   $ 280,042,511
Convertible Preferred Stocks – 3.7%
Medical Equipment – 2.3%  
Boston Scientific Corp., 5.5%       18,583  $   2,283,108
Danaher Corp., 4.75%        2,235   4,453,796
           $6,736,904
Utilities - Electric Power – 1.4%  
CenterPoint Energy, Inc., 7%       87,791  $   4,134,078
Total Convertible Preferred Stocks (Identified Cost, $9,500,251)  $ 10,870,982
Preferred Stocks – 0.6%
Computer Software - Systems – 0.6%        
Samsung Electronics Co. Ltd. (Identified Cost, $1,263,994)       28,949  $   1,817,209
14


Portfolio of Investments – continued
Issuer     Shares/Par Value ($)
Investment Companies (h) – 1.1%
Money Market Funds – 1.1%  
MFS Institutional Money Market Portfolio, 0.03% (v) (Identified Cost, $3,365,969)     3,365,969  $   3,365,969
Other Assets, Less Liabilities – 0.2%        546,812
Net Assets – 100.0% $ 296,643,483
    
(a) Non-income producing security.      
(h) An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $3,365,969 and $292,730,702, respectively.      
(v) Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.      
    
The following abbreviations are used in this report and are defined:
ADR American Depositary Receipt
REIT Real Estate Investment Trust
See Notes to Financial Statements
15


Financial Statements
Statement of Assets and Liabilities
At 7/31/21
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
Assets  
Investments in unaffiliated issuers, at value (identified cost, $206,109,595) $292,730,702
Investments in affiliated issuers, at value (identified cost, $3,365,969) 3,365,969
Receivables for  
Fund shares sold 216,542
Dividends 721,805
Receivable from investment adviser 3,982
Other assets 356
Total assets $297,039,356
Liabilities  
Payables for  
Fund shares reacquired $239,046
Payable to affiliates  
Administrative services fee 409
Shareholder servicing costs 68,568
Distribution and service fees 5,892
Payable for independent Trustees' compensation 11
Accrued expenses and other liabilities 81,947
Total liabilities $395,873
Net assets $296,643,483
Net assets consist of  
Paid-in capital $193,859,384
Total distributable earnings (loss) 102,784,099
Net assets $296,643,483
Shares of beneficial interest outstanding 14,492,019
16


Statement of Assets and Liabilities – continued
  Net assets Shares
outstanding
Net asset value
per share (a)
Class A $200,390,869 9,798,830 $20.45
Class B 3,911,382 191,250 20.45
Class C 16,921,692 827,591 20.45
Class I 40,721,825 1,990,068 20.46
Class R1 177,195 8,626 20.54
Class R2 241,529 11,776 20.51
Class R3 806,370 39,367 20.48
Class R4 423,758 20,701 20.47
Class R6 33,048,863 1,603,810 20.61
    
(a) Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $21.70 [100 / 94.25 x $20.45]. On sales of $50,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6.
See Notes to Financial Statements
17


Financial Statements
Statement of Operations
Year ended 7/31/21
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Net investment income (loss)  
Income  
Dividends $6,797,607
Other 6,726
Dividends from affiliated issuers 1,448
Income on securities loaned 805
Foreign taxes withheld (176,112)
Total investment income $6,630,474
Expenses  
Management fee $1,230,870
Distribution and service fees 623,404
Shareholder servicing costs 221,054
Administrative services fee 42,516
Independent Trustees' compensation 6,649
Custodian fee 23,330
Shareholder communications 23,272
Audit and tax fees 57,219
Legal fees 1,574
Registration fees 149,927
Miscellaneous 33,200
Total expenses $2,413,015
Reduction of expenses by investment adviser and distributor (256,624)
Net expenses $2,156,391
Net investment income (loss) $4,474,083
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)  
Unaffiliated issuers $17,515,484
Affiliated issuers (95)
Foreign currency 2,225
Net realized gain (loss) $17,517,614
Change in unrealized appreciation or depreciation  
Unaffiliated issuers $56,160,613
Affiliated issuers (54)
Translation of assets and liabilities in foreign currencies 2,170
Net unrealized gain (loss) $56,162,729
Net realized and unrealized gain (loss) $73,680,343
Change in net assets from operations $78,154,426
See Notes to Financial Statements
18


Financial Statements
Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
  Year ended
  7/31/21 7/31/20
Change in net assets    
From operations    
Net investment income (loss) $4,474,083 $4,142,068
Net realized gain (loss) 17,517,614 2,450,590
Net unrealized gain (loss) 56,162,729 (3,187,388)
Change in net assets from operations $78,154,426 $3,405,270
Total distributions to shareholders $(8,020,112) $(4,694,613)
Change in net assets from fund share transactions $21,280,462 $(5,054,242)
Total change in net assets $91,414,776 $(6,343,585)
Net assets    
At beginning of period 205,228,707 211,572,292
At end of period $296,643,483 $205,228,707
See Notes to Financial Statements
19


Financial Statements
Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Class A  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.29 $15.40 $16.05 $15.25 $13.57
Income (loss) from investment operations
Net investment income (loss) (d) $0.33 $0.31 $0.30 $0.31 $0.29
Net realized and unrealized gain (loss) 5.42 (0.06) 0.00(w) 1.32 1.67
 Total from investment operations  $5.75  $0.25  $0.30  $1.63  $1.96
Less distributions declared to shareholders
From net investment income $(0.30) $(0.32) $(0.31) $(0.34) $(0.28)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.59)  $(0.36)  $(0.95)  $(0.83)  $(0.28)
 Net asset value, end of period (x)  $20.45  $15.29  $15.40  $16.05  $15.25
 Total return (%) (r)(s)(t)(x) 38.34 1.69 2.56 10.91 14.57
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 0.99 1.02 1.02 1.03 1.17
Expenses after expense reductions (f) 0.88 0.89 0.89 0.89 0.99
Net investment income (loss) 1.81 2.05 1.97 1.95 2.02
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $200,391  $139,563  $138,043  $135,139  $134,180
See Notes to Financial Statements
20


Financial Highlights – continued
Class B  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.29 $15.39 $16.03 $15.23 $13.56
Income (loss) from investment operations
Net investment income (loss) (d) $0.19 $0.20 $0.19 $0.19 $0.18
Net realized and unrealized gain (loss) 5.42 (0.06) 0.00(w) 1.32 1.66
 Total from investment operations  $5.61  $0.14  $0.19  $1.51  $1.84
Less distributions declared to shareholders
From net investment income $(0.16) $(0.20) $(0.19) $(0.22) $(0.17)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.45)  $(0.24)  $(0.83)  $(0.71)  $(0.17)
 Net asset value, end of period (x)  $20.45  $15.29  $15.39  $16.03  $15.23
 Total return (%) (r)(s)(t)(x) 37.26 0.92 1.86 10.07 13.66
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 1.74 1.77 1.77 1.78 1.92
Expenses after expense reductions (f) 1.63 1.64 1.64 1.64 1.74
Net investment income (loss) 1.07 1.32 1.21 1.20 1.26
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $3,911  $3,534  $4,604  $4,378  $4,298
See Notes to Financial Statements
21


Financial Highlights – continued
Class C  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.29 $15.39 $16.03 $15.23 $13.55
Income (loss) from investment operations
Net investment income (loss) (d) $0.19 $0.20 $0.19 $0.19 $0.18
Net realized and unrealized gain (loss) 5.42 (0.06) 0.00(w) 1.32 1.67
 Total from investment operations  $5.61  $0.14  $0.19  $1.51  $1.85
Less distributions declared to shareholders
From net investment income $(0.16) $(0.20) $(0.19) $(0.22) $(0.17)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.45)  $(0.24)  $(0.83)  $(0.71)  $(0.17)
 Net asset value, end of period (x)  $20.45  $15.29  $15.39  $16.03  $15.23
 Total return (%) (r)(s)(t)(x) 37.27 0.95 1.84 10.06 13.76
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 1.74 1.77 1.77 1.78 1.92
Expenses after expense reductions (f) 1.63 1.64 1.64 1.64 1.74
Net investment income (loss) 1.07 1.31 1.21 1.20 1.26
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $16,922  $15,705  $19,000  $19,927  $21,460
See Notes to Financial Statements
22


Financial Highlights – continued
Class I  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.30 $15.41 $16.06 $15.26 $13.57
Income (loss) from investment operations
Net investment income (loss) (d) $0.37 $0.35 $0.34 $0.34 $0.34
Net realized and unrealized gain (loss) 5.43 (0.06) 0.00(w) 1.33 1.67
 Total from investment operations  $5.80  $0.29  $0.34  $1.67  $2.01
Less distributions declared to shareholders
From net investment income $(0.35) $(0.36) $(0.35) $(0.38) $(0.32)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.64)  $(0.40)  $(0.99)  $(0.87)  $(0.32)
 Net asset value, end of period (x)  $20.46  $15.30  $15.41  $16.06  $15.26
 Total return (%) (r)(s)(t)(x) 38.66 1.95 2.82 11.18 14.97
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 0.73 0.77 0.77 0.78 0.91
Expenses after expense reductions (f) 0.63 0.64 0.64 0.64 0.74
Net investment income (loss) 2.05 2.31 2.20 2.19 2.37
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $40,722  $21,344  $23,261  $13,878  $8,992
See Notes to Financial Statements
23


Financial Highlights – continued
Class R1  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.36 $15.47 $16.11 $15.30 $13.62
Income (loss) from investment operations
Net investment income (loss) (d) $0.19 $0.19 $0.19 $0.19 $0.18
Net realized and unrealized gain (loss) 5.45 (0.05) 0.01 1.33 1.67
 Total from investment operations  $5.64  $0.14  $0.20  $1.52  $1.85
Less distributions declared to shareholders
From net investment income $(0.17) $(0.21) $(0.20) $(0.22) $(0.17)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.46)  $(0.25)  $(0.84)  $(0.71)  $(0.17)
 Net asset value, end of period (x)  $20.54  $15.36  $15.47  $16.11  $15.30
 Total return (%) (r)(s)(t)(x) 37.27 0.92 1.85 10.09 13.68
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 1.73 1.77 1.77 1.78 1.92
Expenses after expense reductions (f) 1.63 1.64 1.64 1.64 1.74
Net investment income (loss) 1.06 1.28 1.21 1.20 1.27
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $177  $121  $103  $85  $83
See Notes to Financial Statements
24


Financial Highlights – continued
Class R2  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.34 $15.44 $16.08 $15.28 $13.60
Income (loss) from investment operations
Net investment income (loss) (d) $0.28 $0.28 $0.26 $0.26 $0.25
Net realized and unrealized gain (loss) 5.43 (0.06) 0.01 1.34 1.67
 Total from investment operations  $5.71  $0.22  $0.27  $1.60  $1.92
Less distributions declared to shareholders
From net investment income $(0.25) $(0.28) $(0.27) $(0.31) $(0.24)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.54)  $(0.32)  $(0.91)  $(0.80)  $(0.24)
 Net asset value, end of period (x)  $20.51  $15.34  $15.44  $16.08  $15.28
 Total return (%) (r)(s)(t)(x) 37.92 1.46 2.38 10.63 14.26
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 1.24 1.27 1.27 1.28 1.42
Expenses after expense reductions (f) 1.13 1.14 1.14 1.14 1.24
Net investment income (loss) 1.57 1.80 1.69 1.64 1.76
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $242  $210  $369  $298  $94
See Notes to Financial Statements
25


Financial Highlights – continued
Class R3  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.32 $15.43 $16.08 $15.27 $13.59
Income (loss) from investment operations
Net investment income (loss) (d) $0.33 $0.31 $0.31 $0.31 $0.29
Net realized and unrealized gain (loss) 5.43 (0.06) (0.01) 1.33 1.67
 Total from investment operations  $5.76  $0.25  $0.30  $1.64  $1.96
Less distributions declared to shareholders
From net investment income $(0.31) $(0.32) $(0.31) $(0.34) $(0.28)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.60)  $(0.36)  $(0.95)  $(0.83)  $(0.28)
 Net asset value, end of period (x)  $20.48  $15.32  $15.43  $16.08  $15.27
 Total return (%) (r)(s)(t)(x) 38.29 1.69 2.57 10.94 14.56
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 0.97 1.02 1.02 1.03 1.17
Expenses after expense reductions (f) 0.87 0.89 0.89 0.89 0.99
Net investment income (loss) 1.74 2.05 2.04 1.97 2.02
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $806  $201  $182  $98  $137
See Notes to Financial Statements
26


Financial Highlights – continued
Class R4  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.31 $15.42 $16.06 $15.26 $13.58
Income (loss) from investment operations
Net investment income (loss) (d) $0.39 $0.35 $0.34 $0.35 $0.32
Net realized and unrealized gain (loss) 5.41 (0.06) 0.01 1.32 1.67
 Total from investment operations  $5.80  $0.29  $0.35  $1.67  $1.99
Less distributions declared to shareholders
From net investment income $(0.35) $(0.36) $(0.35) $(0.38) $(0.31)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.64)  $(0.40)  $(0.99)  $(0.87)  $(0.31)
 Net asset value, end of period (x)  $20.47  $15.31  $15.42  $16.06  $15.26
 Total return (%) (r)(s)(t)(x) 38.64 1.95 2.88 11.18 14.85
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 0.72 0.77 0.77 0.78 0.92
Expenses after expense reductions (f) 0.63 0.64 0.64 0.64 0.74
Net investment income (loss) 2.09 2.29 2.25 2.22 2.27
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $424  $101  $88  $56  $63
See Notes to Financial Statements
27


Financial Highlights – continued
Class R6  Year ended
  7/31/21 7/31/20 7/31/19
7/31/18 7/31/17
Net asset value, beginning of period $15.41 $15.52 $16.15 $15.35 $13.65
Income (loss) from investment operations
Net investment income (loss) (d) $0.39 $0.36 $0.36 $0.36 $0.26
Net realized and unrealized gain (loss) 5.46 (0.06) 0.01 1.33 1.77
 Total from investment operations  $5.85  $0.30  $0.37  $1.69  $2.03
Less distributions declared to shareholders
From net investment income $(0.36) $(0.37) $(0.36) $(0.40) $(0.33)
From net realized gain (0.29) (0.04) (0.64) (0.49)
 Total distributions declared to shareholders  $(0.65)  $(0.41)  $(1.00)  $(0.89)  $(0.33)
 Net asset value, end of period (x)  $20.61  $15.41  $15.52  $16.15  $15.35
 Total return (%) (r)(s)(t)(x) 38.76 2.03 3.02 11.23 15.06
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) 0.65 0.68 0.68 0.68 0.84
Expenses after expense reductions (f) 0.55 0.55 0.55 0.54 0.63
Net investment income (loss) 2.14 2.39 2.31 2.30 1.73
Portfolio turnover 43 42 39 51 47
Net assets at end of period (000 omitted)  $33,049  $24,451  $25,922  $25,684  $23,293
    
(d) Per share data is based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly, if applicable.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
(x) The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.
See Notes to Financial Statements
28


Notes to Financial Statements
(1) Business and Organization
MFS Equity Income Fund (the fund) is a diversified series of MFS Series Trust VII (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(2) Significant Accounting Policies
General — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industrial, political, regulatory, geopolitical, environmental, public health, and other conditions.
Certain of the fund's investments, including its investments in derivatives, as well as any debt issued by the fund and other contractual arrangements of the fund may be based on reference interest rates such as the London Interbank Offered Rate (“LIBOR”). In 2017, the regulatory authority that oversees financial services firms in the United Kingdom announced plans to transition away from LIBOR by the end of 2021. In March 2021, the administrator of LIBOR announced the extension of the publication of the more commonly used U.S. dollar LIBOR settings to the end of June 2023. Although the full impacts of the transition away from LIBOR are not fully known, the transition may result in, among other things, an increase in volatility or illiquidity of the markets for instruments that currently rely on LIBOR to determine interest rates and this could have an adverse impact on the fund's performance. With respect to the fund's accounting for investments, including its investments in derivatives, as well as any debt issued by the fund and other contractual arrangements of the fund that undergo reference rate-related modifications as a result of the transition, management will rely upon the relief provided by FASB Codification Topic 848 – Reference Rate Reform (Topic 848). The guidance in Topic 848 permits the fund to disregard the GAAP accounting requirements around certain contract modifications resulting from the LIBOR transition such that for contracts considered in scope, the fund can account for those modified contracts as a continuation of the existing contracts.
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
29


Notes to Financial Statements  - continued
transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or
30


Notes to Financial Statements  - continued
published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. The following is a summary of the levels used as of July 31, 2021 in valuing the fund's assets or liabilities:
Financial Instruments Level 1 Level 2 Level 3 Total
Equity Securities:        
United States $243,836,576 $— $— $243,836,576
Switzerland 11,777,381 11,777,381
Canada 11,021,567 11,021,567
Japan 7,614,519 7,614,519
United Kingdom 7,496,453 7,496,453
Taiwan 4,685,779 4,685,779
South Korea 2,838,184 2,838,184
Germany 2,309,720 2,309,720
France 1,150,523 1,150,523
Mutual Funds 3,365,969 3,365,969
Total $285,643,968 $10,452,703 $— $296,096,671
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation — Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans — Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company, as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement
31


Notes to Financial Statements  - continued
period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At July 31, 2021, there were no securities on loan or collateral outstanding.
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income — Investment transactions are recorded on the trade date. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.
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
32


Notes to Financial Statements  - continued
tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily relate to wash sale loss deferrals, treating a portion of the proceeds from redemptions as a distribution for tax purposes, and partnership adjustments.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
  Year ended
7/31/21
Year ended
7/31/20
Ordinary income (including any short-term capital gains) $4,662,077 $4,014,800
Long-term capital gains 3,358,035 679,813
Total distributions $8,020,112 $4,694,613
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 7/31/21  
Cost of investments $210,306,473
Gross appreciation 87,852,955
Gross depreciation (2,062,757)
Net unrealized appreciation (depreciation) $ 85,790,198
Undistributed ordinary income 3,074,549
Undistributed long-term capital gain 12,350,829
Other temporary differences 1,568,523
Total distributable earnings (loss) $102,784,099
Multiple Classes of Shares of Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B and Class C shares will convert to
33


Notes to Financial Statements  - continued
Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
  Year
ended
7/31/21
  Year
ended
7/31/20
Class A $5,427,649   $3,169,345
Class B 96,065   61,646
Class C 432,420   271,014
Class I 996,672   515,942
Class R1 3,722   1,815
Class R2 6,705   5,950
Class R3 10,995   4,398
Class R4 6,774   2,426
Class R6 1,039,110   662,077
Total $8,020,112   $4,694,613
(3) Transactions with Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
Up to $1 billion 0.50%
In excess of $1 billion and up to $2.5 billion 0.475%
In excess of $2.5 billion 0.45%
MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. For the year ended July 31, 2021, this management fee reduction amounted to $28,995, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended July 31, 2021 was equivalent to an annual effective rate of 0.49% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes
A B C I R1 R2 R3 R4 R6
0.89% 1.64% 1.64% 0.64% 1.64% 1.14% 0.89% 0.64% 0.55%
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until November 30, 2022. For the year ended July 31, 2021, this reduction amounted to $227,454, which is included in the reduction of total expenses in the Statement of Operations.
34


Notes to Financial Statements  - continued
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $54,958 for the year ended July 31, 2021, as its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Distribution Plan Fee Table:
  Distribution
Fee Rate (d)
Service
Fee Rate (d)
Total
Distribution
Plan (d)
Annual
Effective
Rate (e)
Distribution
and Service
Fee
Class A 0.25% 0.25% 0.25% $ 416,539
Class B 0.75% 0.25% 1.00% 1.00% 37,561
Class C 0.75% 0.25% 1.00% 1.00% 165,595
Class R1 0.75% 0.25% 1.00% 1.00% 1,486
Class R2 0.25% 0.25% 0.50% 0.50% 1,118
Class R3 0.25% 0.25% 0.25% 1,105
Total Distribution and Service Fees         $623,404
(d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the year ended July 31, 2021 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended July 31, 2021, this rebate amounted to $69 and $106 for Class A and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations.
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended July 31, 2021, were as follows:
  Amount
Class A $1,286
Class B 2,001
Class C 935
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as
35


Notes to Financial Statements  - continued
determined periodically under the supervision of the fund's Board of Trustees. For the year ended July 31, 2021, the fee was $26,179, which equated to 0.0106% annually of the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R6 shares do not incur sub-accounting fees. For the year ended July 31, 2021, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $194,875.
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the year ended July 31, 2021 was equivalent to an annual effective rate of 0.0172% of the fund's average daily net assets.
Trustees’ and Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money market fund does not pay a management fee to MFS but does incur investment and operating costs.
At July 31, 2021, MFS held approximately 54% of the outstanding shares of Class R1.
The adviser has voluntarily undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time. For the year ended July 31, 2021, this reimbursement amounted to $6,647, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended July 31, 2021, purchases and sales of investments, other than short-term obligations, aggregated $118,846,523 and $103,774,479, respectively.
36


Notes to Financial Statements  - continued
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
  Year ended
7/31/21
  Year ended
7/31/20
  Shares Amount   Shares Amount
Shares sold          
Class A 1,849,009 $33,945,171   1,664,588 $24,235,950
Class B 7,502 140,379   6,406 94,249
Class C 160,824 2,952,073   125,536 1,831,768
Class I 904,887 16,860,998   589,270 8,499,926
Class R1 647 12,075   1,088 16,020
Class R2 524 9,258   1,072 16,242
Class R3 42,476 812,602   1,057 17,301
Class R4 13,759 249,326   737 11,052
Class R6 380,858 6,932,197   252,287 3,769,744
  3,360,486 $61,914,079   2,642,041 $38,492,252
Shares issued to shareholders
in reinvestment of distributions
         
Class A 308,877 $5,418,146   213,924 $3,162,669
Class B 5,481 95,400   4,107 61,408
Class C 24,792 431,174   18,147 269,980
Class I 54,440 961,835   32,409 480,294
Class R1 212 3,722   122 1,815
Class R2 384 6,705   391 5,950
Class R3 596 10,995   298 4,398
Class R4 372 6,774   164 2,426
Class R6 54,439 962,285   41,543 618,613
  449,593 $7,897,036   311,105 $4,607,553
Shares reacquired          
Class A (1,484,551) $(26,024,199)   (1,714,286) $(25,130,150)
Class B (52,853) (946,476)   (78,535) (1,130,659)
Class C (385,328) (6,963,612)   (350,868) (5,247,621)
Class I (364,047) (6,609,096)   (735,907) (10,823,431)
Class R1 (93) (1,775)   (33) (547)
Class R2 (2,808) (48,089)   (11,681) (196,775)
Class R3 (16,838) (327,666)   (18) (279)
Class R4 (26) (514)   (12) (181)
Class R6 (418,513) (7,609,226)   (377,403) (5,624,404)
  (2,725,057) $(48,530,653)   (3,268,743) $(48,154,047)
37


Notes to Financial Statements  - continued
  Year ended
7/31/21
  Year ended
7/31/20
  Shares Amount   Shares Amount
Net change          
Class A 673,335 $13,339,118   164,226 $2,268,469
Class B (39,870) (710,697)   (68,022) (975,002)
Class C (199,712) (3,580,365)   (207,185) (3,145,873)
Class I 595,280 11,213,737   (114,228) (1,843,211)
Class R1 766 14,022   1,177 17,288
Class R2 (1,900) (32,126)   (10,218) (174,583)
Class R3 26,234 495,931   1,337 21,420
Class R4 14,105 255,586   889 13,297
Class R6 16,784 285,256   (83,573) (1,236,047)
  1,085,022 $21,280,462   (315,597) $(5,054,242)
Effective June 1, 2019, purchases of the fund’s Class B shares are closed to new and existing investors subject to certain exceptions. Please see the fund’s prospectus for details.
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit of which $1 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an agreed upon spread. For the year ended July 31, 2021, the fund’s commitment fee and interest expense were $951 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
Affiliated Issuers Beginning
Value
Purchases Sales
Proceeds
Realized
Gain
(Loss)
Change in
Unrealized
Appreciation or
Depreciation
Ending
Value
MFS Institutional Money Market Portfolio  $1,492,382  $34,994,968  $33,121,232  $(95)  $(54)  $3,365,969
38


Notes to Financial Statements  - continued
Affiliated Issuers Dividend
Income
Capital Gain
Distributions
MFS Institutional Money Market Portfolio  $1,448  $—
(8) Impacts of COVID-19
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. Multiple surges in cases globally, the availability and widespread adoption of vaccines, and the emergence of variant strains of the virus continue to create uncertainty as to the future and long-term impacts resulting from the pandemic including impacts to the prices and liquidity of the fund's investments and the fund's performance.
39


Report of Independent Registered Public Accounting Firm
To the Shareholders of MFS Equity Income Fund and the Board of Trustees of MFS Series Trust VII
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MFS Equity Income Fund (the “Fund”) (one of the funds constituting MFS Series Trust VII (the “Trust”)), including the portfolio of investments, as of July 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting MFS Series Trust VII) at July 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
40


Report of Independent Registered Public Accounting Firm – continued
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more MFS investment companies since 1993.
Boston, Massachusetts
September 15, 2021
41


Trustees and Officers — Identification and Background
The Trustees and Officers of the Trust, as of September 1, 2021, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.
Name, Age   Position(s) Held with Fund   Trustee/Officer Since(h)   Number of MFS Funds overseen by the Trustee   Principal Occupations During
the Past Five Years
  Other Directorships During
the Past Five Years (j)
INTERESTED TRUSTEES    
Robert J. Manning (k)
(age 57)