N-CSR 1 d100062dncsr.htm MFS SERIES TRUST XIII N-CSR MFS SERIES TRUST XIII N-CSR
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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 811-3327

MFS SERIES TRUST XIII

(Exact name of registrant as specified in charter)

111 Huntington Avenue, Boston, Massachusetts 02199

(Address of principal executive offices) (Zip code)

Kristin V. Collins

Massachusetts Financial Services Company

111 Huntington Avenue

Boston, Massachusetts 02199

(Name and address of agents for service)

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

Date of fiscal year end: August 31*

Date of reporting period: August 31, 2016

 

* This Form N-CSR pertains only to the following series of the Registrant: MFS Global Real Estate Fund. The remaining series of the Registrant have a fiscal year end other than 8/31.


Table of Contents
ITEM 1. REPORTS TO STOCKHOLDERS.


Table of Contents

ANNUAL REPORT

August 31, 2016

 

LOGO

 

MFS® GLOBAL REAL ESTATE FUND

 

LOGO

 

GRE-ANN

 


Table of Contents

MFS® GLOBAL REAL ESTATE FUND

 

CONTENTS

 

Letter from the Chairman     1   
Portfolio composition     2   
Management review     3   
Performance summary     5   
Expense table     8   
Portfolio of investments     10   
Statement of assets and liabilities     12   
Statement of operations     14   
Statements of changes in net assets     15   
Financial highlights     16   
Notes to financial statements     22   
Report of independent registered public accounting firm     33   
Trustees and officers     34   
Board review of investment advisory agreement     39   
Proxy voting policies and information     43   
Quarterly portfolio disclosure     43   
Further information     43   
Information about fund contracts and legal claims     44   
Federal tax information     44   
MFS® privacy notice     45   
Contact information    back cover   

 

The report is prepared for the general information of shareholders.

It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

 

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE



Table of Contents

LOGO

 

LETTER FROM THE CHAIRMAN

 

Dear Shareholders:

Despite the unexpected vote by the United Kingdom to leave the European Union, most markets proved resilient, with U.S. shares rallying to record highs during August.

Global interest rates remain very low, with most central banks maintaining extremely accommodative monetary policies to reinvigorate slow-growing economies against a backdrop of low inflation. This environment has favored risky assets such as equities, as investors are forced to accept greater risks in search of acceptable returns in a low-return environment. U.S. investment-grade and high-yield bonds have also benefited from low, and even negative, yields overseas.

China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to

change its domestic economy from one driven by exports to a consumer-driven model. Despite the slow-growth environment, emerging market equities have held up well, withstanding geopolitical shocks like an attempted coup in Turkey and impeachment proceedings against Brazil’s president. The U.S. Federal Reserve’s go-slow approach to rate hikes has also helped.

At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.

In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.

Respectfully,

 

LOGO

Robert J. Manning

Chairman

MFS Investment Management

October 17, 2016

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

 

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PORTFOLIO COMPOSITION

 

Portfolio structure

 

LOGO

 

Top ten holdings  
Simon Property Group, Inc., REIT     6.5%   
Public Storage, Inc., REIT     3.2%   
Mitsui Fudosan Co. Ltd.     3.1%   
Hang Lung Properties Ltd.     3.1%   
Unibail-Rodamco, REIT     2.7%   
Dream Office REIT     2.6%   
Gramercy Property Trust, Inc., REIT     2.6%   
Link REIT     2.5%   
Boardwalk, REIT     2.4%   
Kerry Properties Ltd.     2.4%   
Equity industries  

Real Estate

    95.3%   
Telecommunications - Wireless     1.1%   
Issuer country weightings (x)   
United States     51.2%   
Hong Kong     9.9%   
Japan     8.9%   
United Kingdom     5.8%   
Canada     5.1%   
Singapore     4.2%   
Australia     4.1%   
France     2.7%   
Germany     2.3%   
Other Countries     5.8%   
Currency exposure weightings (y)   
United States Dollar     51.2%   
Hong Kong Dollar     9.9%   
Euro     9.8%   
Japanese Yen     8.9%   
British Pound Sterling     5.8%   
Canadian Dollar     5.1%   
Singapore Dollar     4.2%   
Australian Dollar     4.1%   
Norwegian Krone     1.0%   
 

 

(x) Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents.
(y) Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents.

Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.

Percentages are based on net assets as of 8/31/16.

The portfolio is actively managed and current holdings may be different.

 

2


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MANAGEMENT REVIEW

Summary of Results

For the twelve months ended August 31, 2016, Class A shares of the MFS Global Real Estate Fund (“fund”) provided a total return of 19.14%, at net asset value. This compares with a return of 18.36% for the fund’s benchmark, the FTSE EPRA/NAREIT Developed Real Estate Index (“FTSE Index”).

Market Environment

Sluggish global growth weighed on both developed and emerging market (“EM”) economies during the reporting period. The US Federal Reserve began its long-anticipated monetary tightening cycle in the middle of the period, but the tightening cycle has proved to be more gradual than initially anticipated. Globally, central bank policy remained highly accommodative, which forced many government, and even some corporate, bond yields into negative territory. Near the end of the period, the United Kingdom voted to leave the European Union (“EU”), beginning a multi-year process of negotiation in order to achieve “Brexit”. While markets initially reacted to the vote with alarm, the spillover to European and EM was relatively short-lived (although risks of further hits to EU cohesiveness could re-emerge).

During the second half of the reporting period, US earnings headwinds expanded beyond the energy, materials and industrial sectors, to include most sectors of the market. The sharp rise in the US dollar also weighed on earnings early in the period, though dollar strength ebbed somewhat late in the period. US consumer spending held up well during the second half of the period amid a modest increase in real wages and falling gasoline prices. Demand for autos reached near-record territory before receding modestly late in the period, while the housing market continued its recovery. Slow global trade continued to mirror slow global growth, particularly for many EM countries. That said, EM countries began to show signs of a modest upturn in activity along with adjustment in their external accounts. These improved conditions appeared to have reassured investors and contributed to record inflows into the asset class during July and August as negative yields for an increasing share of developed market bonds drove yield-hungry investors further out on the risk spectrum. Similar investor inflows were experienced in the high grade and high yield corporate markets.

Contributors to Performance

During the reporting period, the fund’s security selection in real estate investments in the United States contributed to performance relative to the FTSE Index. Overweight positions in Rexford Industrial Realty, Corporate Office Properties Trust, Medical Properties Trust, Equity Lifestyle Properties and Gramercy Property Trust lifted relative results.

Stock selection and, to a lesser extent, an underweight position in real estate investments in the United Kingdom also added to relative returns. Not holding Gladstone Land Corp., and an underweight position in British Land Company (h), supported relative returns as both companies’ shares declined during the reporting period.

 

3


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Management Review – continued

 

Stock selection and, to a lesser extent, an overweight position in real estate investments in Hong Kong further benefited relative results, led by the fund’s avoidance of Cheung Kong Property Holdings, which turned in weak performance over the reporting period.

Securities in other countries that helped relative returns included the fund’s avoidance of weak performing Sumitomo Realty & Development (Japan) and an overweight position in Kenedix Office Investment (Japan).

Detractors from Performance

Security selection in real estate investments in Australia and Canada detracted from relative performance. Within Australia, holdings of Gateway Lifestyle Holdings (b) held back relative returns. Within Canada, an overweight position in Dream Office Real Estate Investment Trust dampened relative results as the security underperformed the benchmark over the reporting period.

Elsewhere, overweight positions in Mitsui Fudosan (Japan), Londonmetric Property (United Kingdom), Life Storage (United States), Shaftesbury (United Kingdom) and Big Yellow Group (United Kingdom) were among the fund’s largest detractors from relative performance during the period. Not holding shares of strong-performing Prologis (United States) and Realty Income Corp. (United States) further weighed on relative returns.

The fund’s cash and/or cash equivalents position during the period was also a 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 rise, as measured by the fund’s benchmark, holding cash hinders performance versus the benchmark, which has no cash position.

Respectfully,

Richard Gable

Portfolio Manager

 

(b) Security is not a benchmark constituent.
(h) Security was not held in the portfolio at period end.

The views expressed in this report are those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.

 

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PERFORMANCE SUMMARY THROUGH 8/31/16

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)

 

LOGO

 

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Performance Summary – continued

 

Total Returns through 8/31/16

Average annual without sales charge

 

     Share Class    Class Inception Date    1-yr    5-yr    Life (t)      
    A   

3/11/09

   19.14%    10.67%    19.09%     
    B   

12/19/14

   18.25%    N/A    7.19%     
    C   

12/19/14

   18.32%    N/A    7.16%     
    I   

3/11/09

   19.38%    10.92%    19.37%     
    R1   

12/19/14

   18.32%    N/A    7.23%     
    R2   

12/19/14

   18.92%    N/A    7.72%     
    R3   

12/19/14

   19.18%    N/A    8.02%     
    R4   

12/19/14

   19.47%    N/A    8.27%     
    R6 (formerly Class R5)   

7/02/12

   19.54%    N/A    11.20%     
Comparative benchmark                    
     FTSE EPRA/NAREIT Developed Real Estate Index (f)   

18.36%

  

10.40%

  

20.10%

     
Average annual with sales charge                    
    A

With Initial Sales Charge (5.75%)

   12.29%    9.37%    18.15%     
    B

With CDSC (Declining over six years from 4% to 0%) (v)

   14.25%    N/A    4.93%     
    C

With CDSC (1% for 12 months) (v)

   17.32%    N/A    7.16%     

Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.

Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.

(f) Source: FactSet Research Systems Inc.
(t) For the period from the class inception date through the stated period end. The comparative benchmark performance information provided for the “life” period is from the inception date of the Class A shares. (See Notes to Performance Summary.)
(v) Assuming redemption at the end of the applicable period.

Benchmark Definition

FTSE EPRA/NAREIT Developed Real Estate Index – measures the performance of eligible real estate equities worldwide that generate a majority of their revenue and income through the ownership, disposure and development of income-producing real estate.

It is not possible to invest directly in an index.

Notes to Performance Summary

Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date. As the fund’s share classes may have different inception dates, the life returns may represent different time periods and may not be comparable.

 

6


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Performance Summary – continued

 

Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund’s performance results would be less favorable. Please see the prospectus and financial statements for complete details.

Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

 

7


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EXPENSE TABLE

Fund expenses borne by the shareholders during the period, March 1, 2016 through August 31, 2016

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 March 1, 2016 through August 31, 2016.

The expenses include the payment of a portion of the transfer-agent-related expenses of MFS funds that invest in the fund. For further information, please see the Notes to the Financial Statements.

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.

 

8


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Expense Table – continued

 

 

Share
Class
       Annualized
Expense Ratio
    Beginning
Account Value
3/01/16
    Ending
Account Value
8/31/16
   

Expenses
Paid During

Period (p)
3/01/16-8/31/16

 
A   Actual     1.35%        $1,000.00        $1,159.50        $7.33   
  Hypothetical (h)     1.35%        $1,000.00        $1,018.35        $6.85   
B   Actual     2.10%        $1,000.00        $1,155.79        $11.38   
  Hypothetical (h)     2.10%        $1,000.00        $1,014.58        $10.63   
C   Actual     2.10%        $1,000.00        $1,155.79        $11.38   
  Hypothetical (h)     2.10%        $1,000.00        $1,014.58        $10.63   
I   Actual     1.09%        $1,000.00        $1,161.47        $5.92   
  Hypothetical (h)     1.09%        $1,000.00        $1,019.66        $5.53   
R1   Actual     2.10%        $1,000.00        $1,155.68        $11.38   
  Hypothetical (h)     2.10%        $1,000.00        $1,014.58        $10.63   
R2   Actual     1.60%        $1,000.00        $1,157.96        $8.68   
  Hypothetical (h)     1.60%        $1,000.00        $1,017.09        $8.11   
R3   Actual     1.35%        $1,000.00        $1,160.41        $7.33   
  Hypothetical (h)     1.35%        $1,000.00        $1,018.35        $6.85   
R4   Actual     1.09%        $1,000.00        $1,161.73        $5.92   
  Hypothetical (h)     1.09%        $1,000.00        $1,019.66        $5.53   

R6

(formerly Class R5)

  Actual     1.06%        $1,000.00        $1,161.25        $5.76   
  Hypothetical (h)     1.06%        $1,000.00        $1,019.81        $5.38   

 

(h) 5% class return per year before expenses.
(p) “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/366 (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.

 

9


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PORTFOLIO OF INVESTMENTS

8/31/16

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.

 

Common Stocks - 96.4%                 
Issuer    Shares/Par     Value ($)  
Real Estate - 95.3%                 
Advance Residence Investment Corp., REIT      4,647      $ 12,396,192   
Alexandria Real Estate Equities, Inc., REIT      92,858        10,222,737   
Ascendas India Trust, REIT      12,429,000        9,852,340   
Atrium European Real Estate Ltd.      2,608,752        11,406,937   
AvalonBay Communities, Inc., REIT      63,182        11,057,482   
Big Yellow Group PLC, REIT      907,016        9,010,274   
Boardwalk, REIT      335,512        12,891,909   
Colony Starwood Homes, REIT      286,743        8,889,033   
Conwert Immobilien Invest SE      334,576        5,874,213   
Corporate Office Properties Trust, REIT      175,430        5,003,264   
Derwent London PLC, REIT      184,129        6,605,672   
Dream Office, REIT      1,131,375        13,855,332   
Entra ASA      485,882        5,204,161   
Equity Commonwealth, REIT (a)      341,166        10,675,084   
Equity Lifestyle Properties, Inc., REIT      108,061        8,377,969   
Gateway Lifestyle Stapled Security      5,313,768        9,344,939   
Gramercy Property Trust, Inc., REIT      1,400,852        13,560,247   
Grand City Properties S.A.      313,031        6,876,913   
Hang Lung Properties Ltd.      7,094,256        16,168,307   
Hibernia PLC, REIT      5,038,316        7,851,127   
Japan Logistics Fund, Inc., REIT      3,974        9,060,712   
Kenedix Office Investment Corp., REIT      1,544        9,311,903   
Kerry Properties Ltd.      4,431,000        12,880,233   
LEG Immobilien AG      52,938        5,167,440   
Life Storage, Inc., REIT      111,383        10,024,470   
Link REIT      1,803,405        13,111,361   
LondonMetric Property PLC, REIT      3,353,375        7,226,114   
Mapletree Logistics Trust, REIT      15,150,900        11,898,758   
Medical Properties Trust, Inc., REIT      737,305        11,258,647   
Mid-America Apartment Communities, Inc., REIT      82,406        7,745,340   
Mitsui Fudosan Co. Ltd.      759,274        16,350,094   
National Storage, REIT      9,793,660        12,181,508   
OUTFRONT Media, Inc., REIT      218,152        4,869,153   
Public Storage, Inc., REIT      74,487        16,680,619   
Rexford Industrial Realty, Inc., REIT      471,931        10,538,219   
Shaftesbury PLC, REIT      610,356        7,754,402   
Simon Property Group, Inc., REIT      159,949        34,464,211   
Sino Land Co. Ltd.      5,905,944        10,110,271   
STAG Industrial, Inc., REIT      201,594        5,005,579   

 

10


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Portfolio of Investments – continued

 

Issuer    Shares/Par     Value ($)  
Common Stocks - continued                 
Real Estate - continued                 
Starwood Property Trust, Inc., REIT      518,974      $ 11,884,505   
Store Capital Corp., REIT      225,762        6,689,328   
Sun Communities, Inc., REIT      66,670        5,101,588   
Tanger Factory Outlet Centers, Inc., REIT      313,414        12,737,145   
Unibail-Rodamco, REIT      51,888        14,238,106   
Urban Edge Properties, REIT      258,591        7,411,218   
Vornado Realty Trust, REIT      121,432        12,545,140   
Washington Prime Group, Inc., REIT      918,497        12,620,149   
Weyerhaeuser Co., REIT      239,750        7,636,038   
    

 

 

 
      $ 501,626,383   
Telecommunications - Wireless – 1.1%                 
American Tower Corp., REIT      51,481      $ 5,836,916   
Total Common Stocks (Identified Cost, $410,001,831)      $ 507,463,299   
Money Market Funds - 3.4%                 
MFS Institutional Money Market Portfolio, 0.38% (v)
(Identified Cost, $17,908,364)
     17,908,364      $ 17,908,364   
Total Investments (Identified Cost, $427,910,195)      $ 525,371,663   
Other Assets, Less Liabilities - 0.2%        932,155   
Net Assets - 100.0%      $ 526,303,818   

 

(a) Non-income producing security.
(v) Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.

The following abbreviations are used in this report and are defined:

 

PLC   Public Limited Company
REIT   Real Estate Investment Trust

See Notes to Financial Statements

 

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Financial Statements

 

STATEMENT OF ASSETS AND LIABILITIES

At 8/31/16

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.

 

Assets         

Investments

  

Non-affiliated issuers, at value (identified cost, $410,001,831)

     $507,463,299   

Underlying affiliated funds, at value (identified cost, $17,908,364)

     17,908,364   

Total investments, at value (identified cost, $427,910,195)

     $525,371,663   

Receivables for

  

Investments sold

     647,182   

Fund shares sold

     891,381   

Dividends

     874,289   

Other assets

     624   

Total assets

     $527,785,139   
Liabilities         

Payable to custodian

     $19,011   

Payables for

  

Investments purchased

     970,317   

Fund shares reacquired

     112,932   

Payable to affiliates

  

Investment adviser

     47,531   

Shareholder servicing costs

     172,131   

Distribution and service fees

     419   

Payable for independent Trustees’ compensation

     13   

Accrued expenses and other liabilities

     158,967   

Total liabilities

     $1,481,321   

Net assets

     $526,303,818   
Net assets consist of         

Paid-in capital

     $399,874,833   

Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies

     97,450,921   

Accumulated net realized gain (loss) on investments and foreign currency

     13,210,893   

Undistributed net investment income

     15,767,171   

Net assets

     $526,303,818   

Shares of beneficial interest outstanding

     31,562,169   

 

12


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Statement of Assets and Liabilities – continued

 

 

     Net assets      Shares
outstanding
     Net asset value
per share (a)
 

Class A

     $15,980,648         955,810         $16.72   

Class B

     1,116,107         110,629         10.09   

Class C

     2,676,174         265,240         10.09   

Class I

     41,107,594         2,453,067         16.76   

Class R1

     67,437         6,632         10.17   

Class R2

     84,406         8,283         10.19   

Class R3

     226,457         22,208         10.20   

Class R4

     762,677         74,771         10.20   

Class R6 (formerly Class R5)

     464,282,318         27,665,529         16.78   

Shares outstanding are rounded for presentation purposes.

(a) Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $17.74 [100 / 94.25 x $16.72]. 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

 

13


Table of Contents

Financial Statements

 

STATEMENT OF OPERATIONS

Year ended 8/31/16

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.

 

Net investment income         

Income

  

Dividends

     $16,815,327   

Dividends from underlying affiliated funds

     32,110   

Foreign taxes withheld

     (708,224

Total investment income

     $16,139,213   

Expenses

  

Management fee

     $4,260,541   

Distribution and service fees

     44,068   

Shareholder servicing costs

     540,439   

Administrative services fee

     84,012   

Independent Trustees’ compensation

     10,671   

Custodian fee

     93,517   

Shareholder communications

     17,419   

Audit and tax fees

     62,305   

Legal fees

     4,974   

Miscellaneous

     158,746   

Total expenses

     $5,276,692   

Reduction of expenses by investment adviser and distributor

     (352,688

Net expenses

     $4,924,004   

Net investment income

     $11,215,209   
Realized and unrealized gain (loss) on investments and foreign currency   

Realized gain (loss) (identified cost basis)

  

Investments

     $35,176,406   

Foreign currency

     99,487   

Net realized gain (loss) on investments and foreign currency

     $35,275,893   

Change in unrealized appreciation (depreciation)

  

Investments

     $38,628,720   

Translation of assets and liabilities in foreign currencies

     (3,915

Net unrealized gain (loss) on investments and foreign currency translation

     $38,624,805   

Net realized and unrealized gain (loss) on investments and foreign currency

     $73,900,698   

Change in net assets from operations

     $85,115,907   

See Notes to Financial Statements

 

14


Table of Contents

Financial Statements

 

STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.

 

     Year ended
8/31/16
     Period ended
8/31/15 (z)
     Year ended
2/28/15
 
Change in net assets                     
From operations                           

Net investment income

     $11,215,209         $4,746,099         $7,901,629   

Net realized gain (loss) on investments and foreign currency

     35,275,893         12,461,825         21,198,966   

Net unrealized gain (loss) on investments and foreign currency translation

     38,624,805         (54,678,580      36,720,590   

Change in net assets from operations

     $85,115,907         $(37,470,656      $65,821,185   
Distributions declared to shareholders            

From net investment income

     $(8,000,149      $(2,285,070      $(12,100,176

From net realized gain on investments

     (17,502,321      (4,678,398      (6,782,166

Total distributions declared to shareholders

     $(25,502,470      $(6,963,468      $(18,882,342

Change in net assets from fund share transactions

     $21,493,193         $36,301,369         $(3,943,926

Total change in net assets

     $81,106,630         $(8,132,755      $42,994,917   
Net assets                           

At beginning of period

     445,197,188         453,329,943         410,335,026   

At end of period (including undistributed net investment income of $15,767,171, $1,993,623, and $2,284,891 respectively)

     $526,303,818         $445,197,188         $453,329,943   

 

(z) For the period March 1, 2015 through August 31, 2015. Effective March 1, 2015, the fund changed its fiscal year-end from February 28 to August 31.

See Notes to Financial Statements

 

15


Table of Contents

Financial Statements

 

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years (or life of a particular share class, if shorter). Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.

 

Class A   Year
ended
8/31/16
   

Period

ended

8/31/15 (z)

    Years ended 2/28, 2/29  
        2015     2014     2013     2012  

Net asset value, beginning of period

    $14.84        $16.36        $14.72        $15.12        $13.51        $14.57   
Income (loss) from investment operations                                   

Net investment income (d)

    $0.31        $0.13        $0.22        $0.26        $0.26        $0.23   

Net realized and unrealized gain (loss)
on investments and foreign currency

    2.41        (1.41     2.08        0.33        2.38        (0.55

Total from investment operations

    $2.72        $(1.28     $2.30        $0.59        $2.64        $(0.32
Less distributions declared to shareholders                                   

From net investment income

    $(0.25     $(0.08     $(0.41     $(0.38     $(0.51     $(0.30

From net realized gain on investments

    (0.59     (0.16     (0.25     (0.61     (0.52     (0.44

Total distributions declared to shareholders

    $(0.84     $(0.24     $(0.66     $(0.99     $(1.03     $(0.74

Net asset value, end of period (x)

    $16.72        $14.84        $16.36        $14.72        $15.12        $13.51   

Total return (%) (r)(s)(t)(x)

    19.14        (7.94 )(n)      15.83        4.24        20.14        (1.81
Ratios (%) (to average net assets)
and Supplemental data:
                                   

Expenses before expense reductions (f)

    1.42        1.26 (a)      1.25        1.22        1.23        1.24   

Expenses after expense reductions (f)

    1.33        1.24 (a)      1.25        1.22        1.23        1.24   

Net investment income

    1.97        1.69 (a)      1.37        1.74        1.85        1.74   

Portfolio turnover

    53        14 (n)      37        30        46        37   

Net assets at end of period (000 omitted)

    $15,981        $3,529        $962        $291        $279        $232   

See Notes to Financial Statements

 

16


Table of Contents

Financial Highlights – continued

 

Class B

 

   Year
ended
8/31/16
   

Period

ended

8/31/15 (z)

   

Year

ended

2/28/15 (i)

 

Net asset value, beginning of period

     $9.30        $10.38        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.12        $0.05        $(0.00 )(w) 

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.47 (g)      (0.90 )(g)      0.38 (g) 

Total from investment operations

     $1.59        $(0.85     $0.38   
Less distributions declared to shareholders                         

From net investment income

     $(0.21     $(0.07     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.80     $(0.23     $—   

Net asset value, end of period (x)

     $10.09        $9.30        $10.38   

Total return (%) (r)(s)(t)(x)

     18.25        (8.31 )(n)      3.80 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     2.16        2.01 (a)      2.07 (a) 

Expenses after expense reductions (f)

     2.07        2.00 (a)      2.06 (a) 

Net investment income (loss)

     1.31        0.97 (a)      (0.14 )(a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $1,116        $676        $317   

Class C

 

   Year
ended
8/31/16
    Period
ended
8/31/15 (z)
   

Year

ended

2/28/15 (i)

 

Net asset value, beginning of period

     $9.29        $10.38        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.11        $0.04        $(0.00 )(w) 

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.49 (g)      (0.90 )(g)      0.38 (g) 

Total from investment operations

     $1.60        $(0.86     $0.38   
Less distributions declared to shareholders                         

From net investment income

     $(0.21     $(0.07     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.80     $(0.23     $—   

Net asset value, end of period (x)

     $10.09        $9.29        $10.38   

Total return (%) (r)(s)(t)(x)

     18.32        (8.41 )(n)      3.80 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     2.17        2.01 (a)      2.07 (a) 

Expenses after expense reductions (f)

     2.08        2.00 (a)      2.06 (a) 

Net investment income (loss)

     1.19        0.89 (a)      (0.10 )(a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $2,676        $836        $330   

See Notes to Financial Statements

 

17


Table of Contents

Financial Highlights – continued

 

Class I  

Year

ended

8/31/16

   

Period

ended

8/31/15 (z)

    Years ended 2/28, 2/29  
        2015     2014     2013     2012  

Net asset value, beginning of period

    $14.86        $16.38        $14.73        $15.13        $13.52        $14.58   
Income (loss) from investment operations                                   

Net investment income (d)

    $0.32        $0.16        $0.27        $0.30        $0.44        $0.27   

Net realized and unrealized gain (loss)
on investments and foreign currency

    2.44        (1.44     2.08        0.33        2.23        (0.56

Total from investment operations

    $2.76        $(1.28     $2.35        $0.63        $2.67        $(0.29
Less distributions declared to shareholders                                   

From net investment income

    $(0.27     $(0.08     $(0.45     $(0.42     $(0.54     $(0.33

From net realized gain on investments

    (0.59     (0.16     (0.25     (0.61     (0.52     (0.44

Total distributions declared to shareholders

    $(0.86     $(0.24     $(0.70     $(1.03     $(1.06     $(0.77

Net asset value, end of period (x)

    $16.76        $14.86        $16.38        $14.73        $15.13        $13.52   

Total return (%) (r)(s)(x)

    19.38        (7.93 )(n)      16.17        4.50        20.41        (1.54
Ratios (%) (to average net assets)
and Supplemental data:
                                   

Expenses before expense reductions (f)

    1.17        1.00 (a)      1.00        0.97        0.98        0.99   

Expenses after expense reductions (f)

    1.09        1.00 (a)      1.00        0.97        0.98        0.99   

Net investment income

    1.99        2.05 (a)      1.67        1.99        3.30        1.98   

Portfolio turnover

    53        14 (n)      37        30        46        37   

Net assets at end of period (000 omitted)

    $41,108        $1,248        $477        $122        $117        $242,520   

 

Class R1

 

   Year
ended
8/31/16
   

Period

ended

8/31/15 (z)

   

Year

ended

2/28/15 (i)

 

Net asset value, beginning of period

     $9.31        $10.38        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.13        $0.05        $0.01   

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.48 (g)      (0.90 )(g)      0.37 (g) 

Total from investment operations

     $1.61        $(0.85     $0.38   
Less distributions declared to shareholders                         

From net investment income

     $(0.16     $(0.06     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.75     $(0.22     $—   

Net asset value, end of period (x)

     $10.17        $9.31        $10.38   

Total return (%) (r)(s)(x)

     18.32        (8.31 )(n)      3.80 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     2.15        2.01 (a)      2.06 (a) 

Expenses after expense reductions (f)

     2.07        2.00 (a)      2.06 (a) 

Net investment income

     1.32        0.99 (a)      0.28 (a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $67        $105        $104   

See Notes to Financial Statements

 

18


Table of Contents

Financial Highlights – continued

 

Class R2

 

   Year
ended
8/31/16
    Period
ended
8/31/15 (z)
    Year
ended
2/28/15 (i)
 

Net asset value, beginning of period

     $9.33        $10.39        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.17        $0.08        $0.02   

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.49 (g)      (0.91 )(g)      0.37 (g) 

Total from investment operations

     $1.66        $(0.83     $0.39   
Less distributions declared to shareholders                         

From net investment income

     $(0.21     $(0.07     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.80     $(0.23     $—   

Net asset value, end of period (x)

     $10.19        $9.33        $10.39   

Total return (%) (r)(s)(x)

     18.92        (8.15 )(n)      3.90 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     1.65        1.51 (a)      1.56 (a) 

Expenses after expense reductions (f)

     1.57        1.50 (a)      1.56 (a) 

Net investment income

     1.77        1.53 (a)      0.78 (a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $84        $95        $104   

Class R3

 

   Year
ended
8/31/16
   

Period

ended

8/31/15 (z)

   

Year

ended

2/28/15 (i)

 

Net asset value, beginning of period

     $9.35        $10.39        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.18        $0.09        $0.02   

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.50 (g)      (0.90 )(g)      0.37 (g) 

Total from investment operations

     $1.68        $(0.81     $0.39   
Less distributions declared to shareholders                         

From net investment income

     $(0.24     $(0.07     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.83     $(0.23     $—   

Net asset value, end of period (x)

     $10.20        $9.35        $10.39   

Total return (%) (r)(s)(x)

     19.18        (7.92 )(n)      3.90 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     1.41        1.26 (a)      1.31 (a) 

Expenses after expense reductions (f)

     1.33        1.25 (a)      1.31 (a) 

Net investment income

     1.89        1.78 (a)      1.03 (a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $226        $96        $104   

See Notes to Financial Statements

 

19


Table of Contents

Financial Highlights – continued

 

Class R4

 

   Year
ended
8/31/16
    Period
ended
8/31/15 (z)
    Year
ended
2/28/15 (i)
 

Net asset value, beginning of period

     $9.36        $10.40        $10.00   
Income (loss) from investment operations                         

Net investment income (d)

     $0.21        $0.10        $0.03   

Net realized and unrealized gain (loss) on investments
and foreign currency

     1.49 (g)      (0.90 )(g)      0.37 (g) 

Total from investment operations

     $1.70        $(0.80     $0.40   
Less distributions declared to shareholders                         

From net investment income

     $(0.27     $(0.08     $—   

From net realized gain on investments

     (0.59     (0.16       

Total distributions declared to shareholders

     $(0.86     $(0.24     $—   

Net asset value, end of period (x)

     $10.20        $9.36        $10.40   

Total return (%) (r)(s)(x)

     19.47        (7.87 )(n)      4.00 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                        

Expenses before expense reductions (f)

     1.16        1.01 (a)      1.06 (a) 

Expenses after expense reductions (f)

     1.08        1.00 (a)      1.06 (a) 

Net investment income

     2.14        2.03 (a)      1.28 (a) 

Portfolio turnover

     53        14 (n)      37   

Net assets at end of period (000 omitted)

     $763        $96        $104   

 

Class R6 (formerly Class R5)

 

 

Year

ended

8/31/16

   

Period

ended

8/31/15 (z)

    Years ended 2/28  
      2015     2014     2013 (i)  

Net asset value, beginning of period

    $14.86        $16.38        $14.73        $15.13        $13.74   
Income (loss) from investment operations                           

Net investment income (d)

    $0.37        $0.16        $0.29        $0.29        $0.14   

Net realized and unrealized gain (loss)
on investments and foreign currency

    2.41        (1.44     2.06        0.34        2.10   

Total from investment operations

    $2.78        $(1.28     $2.35        $0.63        $2.24   
Less distributions declared to shareholders                           

From net investment income

    $(0.27     $(0.08     $(0.45     $(0.42     $(0.50

From net realized gain on investments

    (0.59     (0.16     (0.25     (0.61     (0.35

Total distributions declared to shareholders

    $(0.86     $(0.24     $(0.70     $(1.03     $(0.85

Net asset value, end of period (x)

    $16.78        $14.86        $16.38        $14.73        $15.13   

Total return (%) (r)(s)(x)

    19.54        (7.93 )(n)      16.17        4.50        16.56 (n) 
Ratios (%) (to average net assets)
and Supplemental data:
                           

Expenses before expense reductions (f)

    1.10        1.00 (a)      0.99        0.97        0.98 (a) 

Expenses after expense reductions (f)

    1.03        0.99 (a)      0.99        0.97        0.98 (a) 

Net investment income

    2.39        2.04 (a)      1.81        1.94        1.48 (a) 

Portfolio turnover

    53        14 (n)      37        30        46   

Net assets at end of period (000 omitted)

    $464,282        $438,517        $450,828        $409,923        $302,900   

See Notes to Financial Statements

 

20


Table of Contents

Financial Highlights – continued

 

 

(a) Annualized.
(d) Per share data is based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly, if applicable.
(g) The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(i) For the period from the class inception, July 2, 2012 (Class R6) and December 19, 2014 (Class B, Class C, Class R1, Class R2, Class R3, and Class R4), through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
(x) The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.
(z) For the period March 1, 2015 through August 31, 2015. Effective March 1, 2015, the fund changed its fiscal year-end from February 28 to August 31.

See Notes to Financial Statements

 

21


Table of Contents

NOTES TO FINANCIAL STATEMENTS

(1) Business and Organization

MFS Global Real Estate Fund (the fund) is a diversified series of MFS Series Trust XIII (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 a significant amount of its net assets in U.S. and foreign real estate related investments and as a result is subject to certain risks associated with the direct ownership of real estate and the real estate industry in general. These include risks related to general, regional and local economic conditions; fluctuations in interest rates; property tax rates, zoning laws, environmental regulations and other governmental action; cash flow dependency; increased operating expenses; lack of availability of mortgage funds; losses due to natural disasters; changes in property values and rental rates; and other factors. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.

Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.

Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there

 

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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. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.

The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases,

 

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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 August 31, 2016 in valuing the fund’s assets or liabilities:

 

Investments at Value    Level 1      Level 2      Level 3      Total  
Equity Securities      $507,463,299         $—         $—         $507,463,299   
Mutual Funds      17,908,364                         17,908,364   
Total Investments      $525,371,663         $—         $—         $525,371,663   

For further information regarding security characteristics, see the Portfolio of Investments.

Of the level 1 investments presented above, equity investments amounting to $23,990,791 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.

Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.

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

 

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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.

Fees Paid Indirectly – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the year ended August 31, 2016, custody fees were not reduced.

Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.

Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income, or distributions for financial statement and tax purposes.

Book/tax differences primarily relate to passive foreign investment companies, wash sale loss deferrals, and treating a portion of the proceeds from redemptions as a distribution for tax purposes.

 

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The tax character of distributions declared to shareholders for the last three fiscal years is as follows:

 

     8/31/16      8/31/15 (z)      2/28/15  
Ordinary income (including any
short-term capital gains)
     $9,711,197         $5,235,941         $13,093,218   
Long-term capital gains      15,791,273         1,727,527         5,789,124   
Total distributions      $25,502,470         $6,963,468         $18,882,342   

 

(z) For the period March 1, 2015 through August 31, 2015. Effective March 1, 2015, the fund changed its fiscal year-end from February 28 to August 31.

The federal tax cost and the tax basis components of distributable earnings were as follows:

 

As of 8/31/16       
Cost of investments      $440,533,716   
Gross appreciation      98,357,297   
Gross depreciation      (13,519,350
Net unrealized appreciation (depreciation)      $84,837,947   
Undistributed ordinary income      19,267,115   
Undistributed long-term capital gain      22,334,470   
Other temporary differences      (10,547

Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. Class B shares will convert to Class A shares approximately eight years after purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:

 

    From net investment
income
    From net realized gain on
investments
 
    Year
ended
8/31/16
    Period
ended
8/31/15 (z)
    Year
ended
2/28/15
    Year
ended
8/31/16
    Period
ended
8/31/15 (z)
    Year
ended
2/28/15
 
Class A     $90,952        $15,740        $8,135        $214,145        $32,744        $4,989   
Class B     18,609        5,341               52,627        11,647          
Class C     18,220        6,257               52,671        13,535          
Class I     20,318        8,130        3,728        44,894        16,642        2,090   
Class R1     1,006        681               3,848        1,740          
Class R2     1,102        684               3,186        1,576          
Class R3     1,279        726               3,194        1,576          
Class R4     1,445        768               3,176        1,576          
Class R6 (formerly Class R5)     7,847,218        2,246,743        12,088,313        17,124,580        4,597,362        6,775,087   
Total     $8,000,149        $2,285,070        $12,100,176        $17,502,321        $4,678,398        $6,782,166   

Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.

 

(z) For the period March 1, 2015 through August 31, 2015.

 

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(3) Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:

 

First $1 billion of average daily net assets      0.90
Next $1.5 billion of average daily net assets      0.75
Average daily net assets in excess of $2.5 billion      0.65

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 August 31, 2016, this management fee reduction amounted to $33,888, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended August 31, 2016 was equivalent to an annual effective rate of 0.89% of the fund’s average daily net assets.

Effective January 1, 2016 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
(formerly
Class R5)
 
1.35%     2.10%        2.10%        1.10%        2.10%        1.60%        1.35%        1.10%        1.05%   

This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until December 31, 2017. For the period January 1, 2016 through August 31, 2016, this reduction amounted to $318,717, which is included in the reduction of total expenses in the Statement of Operations.

Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $33,325 for the year ended August 31, 2016, 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.

 

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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%         $20,652   
Class B      0.75%         0.25%         1.00%         1.00%         9,060   
Class C      0.75%         0.25%         1.00%         1.00%         13,162   
Class R1      0.75%         0.25%         1.00%         1.00%         659   
Class R2      0.25%         0.25%         0.50%         0.50%         302   
Class R3              0.25%         0.25%         0.25%         233   
Total Distribution and Service Fees         $44,068   

 

(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 August 31, 2016 based on each class’s average daily net assets. MFD has voluntarily agreed to rebate a portion of each class’s 0.25% service fee attributable to accounts for which MFD retains the 0.25% service fee except for accounts attributable to MFS or its affiliates’ seed money. For the year ended August 31, 2016, this rebate amounted to $74 and $9 for Class A and Class B, respectively, and is included in the reduction of total expenses in the Statement of Operations.

Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended August 31, 2016, were as follows:

 

     Amount  
Class A      $300   
Class B      2,177   
Class C      684   

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as determined periodically under the supervision of the fund’s Board of Trustees. For the year ended August 31, 2016, the fee was $4,118, which equated to 0.0009% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. Class R6 shares do not incur sub-accounting fees. For the year ended August 31, 2016, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $14,926.

Effective January 1, 2016, the fund was added to a Special Servicing Agreement among MFS, certain MFS funds which invest in other MFS funds (“MFS fund-of-funds”) and certain underlying funds in which a MFS fund-of-funds invests (“underlying funds”), under which each underlying fund may pay a portion of each MFS fund-of-fund’s transfer agent-related expenses, including sub-accounting fees payable

 

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to financial intermediaries, to the extent such payments do not exceed the benefits realized or expected to be realized by the underlying fund from the investment in the underlying fund by the MFS fund-of-fund. For the period January 1, 2016 through August 31, 2016, these costs for the fund amounted to $521,395 and are included in “Shareholder servicing costs” in the Statement of Operations.

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 August 31, 2016 was equivalent to an annual effective rate of 0.0177% of the fund’s average daily net assets.

Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended August 31, 2016, the fee paid by the fund under this agreement was $1,232 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.

On September 9, 2015, MFS redeemed 20,885, 4,856, 4,851, 8,767, 4,851, 4,869, 4,885, and 4,894 shares of Class A, Class B, Class C, Class I, Class R1, Class R2, Class R3, and Class R4 for an aggregate amount of $699,234.

On June 29, 2016, MFS redeemed 625, 5,862, 626, 649, 656, and 671 shares each of Class B, Class C, Class R1, Class R2, Class R3, and Class R4 for an aggregate amount of $90,314.

At August 31, 2016, MFS held approximately 78% and 63% of the outstanding shares of Class R1 and Class R2, respectively.

The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant

 

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to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the year ended August 31, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $478,037 and $330,010, respectively. The sales transactions resulted in net realized gains (losses) of $35,575.

(4) Portfolio Securities

For the year ended August 31, 2016, purchases and sales of investments, other short-term obligations, aggregated $245,014,227 and $245,938,102, respectively.

(5) Shares of Beneficial Interest

The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:

 

    Year ended
8/31/16
    Period ended
8/31/15 (z)
    Year ended
2/28/15 (i)
 
    Shares     Amount     Shares     Amount     Shares     Amount  
Shares sold            

Class A

    839,007        $13,281,159        190,551        $3,039,320        38,347        $629,817   

Class B

    61,244        589,280        52,901        535,663        30,562        314,021   

Class C

    199,187        1,929,070        67,105        675,727        31,773        327,370   

Class I

    2,817,273        45,091,685        94,866        1,536,130        20,510        337,581   

Class R1

    275        2,717        1,054        10,390        10,000        100,000   

Class R2

    3,100        30,477                      10,000        100,000   

Class R3

    17,426        172,035                      10,000        100,000   

Class R4

    70,206        690,820                      10,000        100,000   

Class R6
(formerly Class R5)

    986,769        15,481,844        1,866,839        29,887,613        1,806,201        28,335,887   
    4,994,487        $77,269,087        2,273,316        $35,684,843        1,967,393        $30,344,676   
Shares issued to shareholders in
reinvestment of distributions
       

Class A

    20,685        $305,097        3,086        $48,484        834        $13,124   

Class B

    7,959        71,236        1,725        16,988                 

Class C

    7,921        70,891        2,009        19,792                 

Class I

    4,385        64,728        1,566        24,635        369        5,818   

Class R1

    538        4,854        246        2,421                 

Class R2

    476        4,288        229        2,260                 

Class R3

    497        4,473        233        2,302                 

Class R4

    515        4,621        237        2,344                 

Class R6
(formerly Class R5)

    1,689,567        24,971,798        435,099        6,844,105        1,197,676        18,863,400   
    1,732,543        $25,501,986        444,430        $6,963,331        1,198,879        $18,882,342   

 

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    Year ended
8/31/16
    Period ended
8/31/15 (z)
    Year ended
2/28/15 (i)
 
    Shares     Amount     Shares     Amount     Shares     Amount  
Shares reacquired            

Class A

    (141,733     $(2,235,649     (14,605     $(226,873     (110     $(1,815

Class B

    (31,255     (295,371     (12,485     (123,077     (22     (227

Class C

    (31,808     (300,623     (10,946     (108,342     (1     (8

Class I

    (452,573     (7,037,549     (41,601     (656,157              

Class R1

    (5,481     (50,587                            

Class R2

    (5,522     (51,140                            

Class R3

    (5,948     (55,526                            

Class R4

    (6,187     (57,969                            

Class R6 (formerly Class R5)

    (4,511,262     (71,193,466     (330,454     (5,232,356     (3,307,443     (53,168,894
    (5,191,769     $(81,277,880     (410,091     $(6,346,805     (3,307,576     $(53,170,944
Net change            

Class A

    717,959        $11,350,607        179,032        $2,860,931        39,071        $641,126   

Class B

    37,948        365,145        42,141        429,574        30,540        313,794   

Class C

    175,300        1,699,338        58,168        587,177        31,772        327,362   

Class I

    2,369,085        38,118,864        54,831        904,608        20,879        343,399   

Class R1

    (4,668     (43,016     1,300        12,809        10,000        100,000   

Class R2

    (1,946     (16,375     229        2,260        10,000        100,000   

Class R3

    11,975        120,982        233        2,302        10,000        100,000   

Class R4

    64,534        637,472        237        2,344        10,000        100,000   

Class R6 (formerly Class R5)

    (1,834,926     (30,739,824     1,971,484        31,499,364        (303,566     (5,969,607
    1,535,261        $21,493,193        2,307,655        $36,301,369        (141,304     $(3,943,926

Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.

 

(i) For Classes B, C, R1, R2, R3, and R4, the period is from inception date December 19, 2014, through the stated period.
(z) For the period March 1, 2015 through August 31, 2015. Effective March 1, 2015, the fund changed its fiscal year-end from February 28 to August 31.

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Growth Allocation Fund, the MFS Moderate Allocation Fund, the MFS Aggressive Growth Allocation Fund, the MFS Conservative Allocation Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime 2050 Fund, the MFS Lifetime Income Fund, and the MFS Lifetime 2035 Fund were the owners of record of approximately 30%, 24%, 16%, 6%, 3%, 3%, 1%, 1%, and 1%, respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Global Multi-Asset Fund, the MFS Lifetime 2055 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime 2025 Fund, and the MFS Lifetime 2020 Fund were each the owners of record of less than 1% of the value of outstanding voting shares of the fund.

 

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Notes to Financial Statements – continued

 

(6) Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended August 31, 2016, the fund’s commitment fee and interest expense were $2,129 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

(7) Transactions in Underlying Affiliated Funds-Affiliated Issuers

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be an affiliated issuer:

 

Underlying Affiliated Fund    Beginning
Shares/Par
Amount
     Acquisitions
Shares/Par
Amount
     Dispositions
Shares/Par
Amount
    Ending
Shares/Par
Amount
 
MFS Institutional Money
Market Portfolio
     8,634,269         201,571,539         (192,297,444     17,908,364   
Underlying Affiliated Fund    Realized
Gain (Loss)
     Capital Gain
Distributions
     Dividend
Income
    Ending
Value
 
MFS Institutional Money
Market Portfolio
     $—         $—         $32,110        $17,908,364   

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Series Trust XIII and Shareholders of MFS Global Real Estate Fund:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of MFS Global Real Estate Fund (the Fund) (one of the series constituting the MFS Series Trust XIII) as of August 31, 2016, and the related statement of operations for the year then ended and the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2016, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of MFS Global Real Estate Fund (one of the series constituting the MFS Series Trust XIII) at August 31, 2016, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Boston, Massachusetts

October 17, 2016

 

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TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND

The Trustees and Officers of the Trust, as of October 1, 2016, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.

 

Name, Age

 

Position(s) Held

with Fund

  Trustee/Officer
Since (h)
 

Principal
Occupations During

the Past Five Years

 

Other

Directorships (j)

INTERESTED TRUSTEES
Robert J. Manning (k)
(age 52)
  Trustee   February 2004   Massachusetts Financial Services Company, Chairman, Co-Chief Executive Officer and Director   N/A

Robin A. Stelmach (k)

(age 55)

  Trustee and
President
  January 2014  

Massachusetts Financial

Services Company,

Executive Vice President and Chief Operating Officer

  N/A
INDEPENDENT TRUSTEES
David H. Gunning
(age 74)
  Trustee and Chair of Trustees   January 2004   Private investor   Lincoln Electric Holdings, Inc., Director; Development Alternatives, Inc., Director/Non-Executive Chairman

Steven E. Buller

(age 65)

  Trustee   February 2014   Chairman, Financial Accounting Standards Advisory Council (until 2015); Standing Advisory Group, Public Company Accounting Oversight Board, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)   N/A
Robert E. Butler
(age 74)
  Trustee   January 2006   Consultant – investment company industry regulatory and compliance matters   N/A

 

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Trustees and Officers – continued

 

Name, Age

 

Position(s) Held

with Fund

  Trustee/Officer
Since (h)
 

Principal
Occupations During

the Past Five Years

 

Other

Directorships (j)

Maureen R. Goldfarb

(age 61)

  Trustee   January 2009   Private investor   N/A
William R. Gutow
(age 75)
  Trustee   December 1993   Private investor and real estate consultant; Capitol Entertainment Management Company (video franchise), Vice Chairman (until 2014)   Texas Donuts, Vice Chairman (until 2010)
Michael Hegarty
(age 71)
  Trustee   December 2004   Private investor   Rouse Properties Inc., Director; Capmark Financial Group Inc., Director (until 2015)

John P. Kavanaugh

(age 61)

  Trustee   January 2009   Private investor   N/A

Maryanne L. Roepke

(age 60)

  Trustee   May 2014   American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)   N/A
Laurie J. Thomsen
(age 59)
  Trustee   March 2005   Private investor   The Travelers Companies, Director; Dycom Industries, Inc., Director
Robert W. Uek
(age 75)
  Trustee   January 2006   Consultant to investment company industry   N/A
OFFICERS
Christopher R. Bohane (k)
(age 42)
  Assistant
Secretary and Assistant Clerk
  July 2005   Massachusetts Financial Services Company, Vice President and Assistant General Counsel   N/A

Kino Clark (k)

(age 48)

 

Assistant

Treasurer

  January 2012  

Massachusetts Financial

Services Company,

Vice President

  N/A

Kristin V. Collins (k)

(age 43)

  Assistant
Secretary and Assistant Clerk
  September 2015   Massachusetts Financial Services Company, Vice President and Assistant General Counsel   N/A

 

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Trustees and Officers – continued

 

Name, Age

 

Position(s) Held

with Fund

  Trustee/Officer
Since (h)
 

Principal
Occupations During

the Past Five Years

 

Other

Directorships (j)

Thomas H. Connors (k)

(age 57)

 

Assistant

Secretary and Assistant Clerk

  September 2012  

Massachusetts Financial Services Company,

Vice President and Senior Counsel; Deutsche Investment Management Americas Inc. (financial service provider), Director and Senior Counsel (until 2012)

  N/A
Ethan D. Corey (k)
(age 52)
  Assistant
Secretary and Assistant Clerk
  July 2005  

Massachusetts Financial Services Company,

Senior Vice President and Associate General Counsel

  N/A
David L. DiLorenzo (k)
(age 48)
  Treasurer   July 2005   Massachusetts Financial Services Company, Senior Vice President   N/A

Brian E. Langenfeld (k)

(age 43)

  Assistant
Secretary and Assistant Clerk
  June 2006   Massachusetts Financial Services Company, Vice President and Senior Counsel   N/A
Susan A. Pereira (k)
(age 45)
  Assistant Secretary and Assistant Clerk   July 2005   Massachusetts Financial Services Company, Vice President and Senior Counsel   N/A

Kasey L. Phillips (k)

(age 45)

  Assistant
Treasurer
  September 2012   Massachusetts Financial Services Company, Vice President; Wells Fargo Funds Management, LLC, Senior Vice President, Fund Treasurer (until 2012)   N/A

 

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Trustees and Officers – continued

 

Name, Age

 

Position(s) Held

with Fund

  Trustee/Officer
Since (h)
 

Principal
Occupations During

the Past Five Years

 

Other

Directorships (j)

Mark N. Polebaum (k)
(age 64)
  Secretary and
Clerk
  January 2006   Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary   N/A

Matthew A. Stowe (k)

(age 41)

  Assistant
Secretary and Assistant Clerk
  October 2014   Massachusetts Financial Services Company, Vice President and Assistant General Counsel   N/A
Frank L. Tarantino
(age 72)
 

Independent

Senior Officer

  June 2004   Tarantino LLC (provider of compliance services), Principal   N/A
Richard S. Weitzel (k)
(age 46)
  Assistant
Secretary and Assistant Clerk
  October 2007   Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel   N/A

Martin J. Wolin (k)

(age 49)

  Chief Compliance Officer   July 2015   Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)   N/A
James O. Yost (k)
(age 56)
  Deputy Treasurer   September 1990   Massachusetts Financial Services Company, Senior Vice President   N/A

 

(h) Date first appointed to serve as Trustee/officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. Prior to January 2012, Messrs. DiLorenzo and Yost served as Assistant Treasurers of the Funds. Ms. Stelmach was appointed as President of the Funds as of October 1, 2014.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).
(k) “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.

 

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Trustees and Officers – continued

 

Each Trustee (except Ms. Stelmach, Mr. Buller and Ms. Roepke) has been elected by shareholders and each Trustee and officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Messrs. Buller, Butler, Kavanaugh, Uek and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Fund’s Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of October 1, 2016, the Trustees served as board members of 137 funds within the MFS Family of Funds.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.

 

Investment Adviser   Custodian
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, MA 02199-7618
 

State Street Bank and Trust Company

1 Lincoln Street

Boston, MA 02111-2900

Distributor   Independent Registered Public Accounting Firm
MFS Fund Distributors, Inc.
111 Huntington Avenue
Boston, MA 02199-7618
 

Ernst & Young LLP

200 Clarendon Street

Boston, MA 02116

Portfolio Manager  

Richard Gable

 

 

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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2016 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by the MFS Funds’ Independent Senior Officer, a senior officer appointed by and reporting to the independent Trustees.

In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.

In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2015 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Broadridge (the “Broadridge expense group”), (iii) information provided by MFS on the advisory fees of portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and

 

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Board Review of Investment Advisory Agreement – continued

 

other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.

The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.

Effective May 1, 2011, the Board of Trustees terminated the Fund’s sub-advisory investment agreement among MFS Series Trust XIII, on behalf of the Fund, MFS and Sun Capital Advisers LLC (“Sun Capital”), and MFS assumed responsibility for day-to-day management of the Fund. The Sun Capital portfolio manager who was responsible for the day-to-day management of the Fund became an employee of MFS on or about May 1, 2011 and continues to manage the Fund.

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Class A shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2015, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class A shares was in the 1st quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class A shares was in the 2nd quintile for the one-year period and the 1st quintile for the five-year period ended December 31, 2015 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.

In assessing the reasonableness of the Fund’s advisory fee, the Trustees also considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class A shares as a percentage of average daily net assets and the

 

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Board Review of Investment Advisory Agreement – continued

 

advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees also considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate was higher than the Broadridge expense group median, and the Fund’s total expense ratio was lower than the Broadridge expense group median.

The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is subject to contractual breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $1 billion and $2.5 billion. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoints and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.

In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel

 

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Board Review of Investment Advisory Agreement – continued

 

and to provide services to competing investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.

The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.

The Trustees also considered benefits to MFS from the use of the Fund’s portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.

Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2016.

 

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PROXY VOTING POLICIES AND INFORMATION

MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.

Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.

QUARTERLY PORTFOLIO DISCLOSURE

The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.

FURTHER INFORMATION

From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Mutual Funds” and then choose the fund’s name in the “Select a fund” menu.

 

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INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

FEDERAL TAX INFORMATION (unaudited)

The fund will notify shareholders of amounts for use in preparing 2016 income tax forms in January 2017. The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates the maximum amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.

The fund designates $19,222,000 as capital gain dividends paid during the fiscal year.

 

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rev. 3/16

 

 

FACTS

 

  WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?   LOGO

 

Why?   Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

 

What?  

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

 Social Security number and account balances

 Account transactions and transaction history

 Checking account information and wire transfer instructions

 

When you are no longer our customer, we continue to share your information as described in this notice.

 

How?   All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.

 

Reasons we can share your
personal information
  Does MFS
share?
  Can you limit
this sharing?

For our everyday business purposes –

such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus

  Yes   No

For our marketing purposes –

to offer our products and services to you

  No   We don’t share

For joint marketing with other

financial companies

  No   We don’t share

For our affiliates’ everyday business purposes –

information about your transactions and experiences

  No   We don’t share

For our affiliates’ everyday business purposes –

information about your creditworthiness

  No   We don’t share
For nonaffiliates to market to you   No   We don’t share

 

Questions?   Call 800-225-2606 or go to mfs.com.

 

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Page 2  

 


 

Who we are
Who is providing this notice?   MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.

 

What we do
How does MFS protect my personal information?   To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?  

We collect your personal information, for example, when you

 

 open an account or provide account information

 direct us to buy securities or direct us to sell your securities

 make a wire transfer

 

We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.

Why can’t I limit all sharing?  

Federal law gives you the right to limit only

 

 sharing for affiliates’ everyday business purposes – information about your creditworthiness

 affiliates from using your information to market to you

 sharing for nonaffiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

 

Definitions
Affiliates  

Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

 MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.

Nonaffiliates  

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

 MFS does not share with nonaffiliates so they can market to you.

Joint marketing  

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

 

 MFS doesnt jointly market.

 

 

Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

 

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reports, and proxies directly via e-mail so you will get information faster with less mailbox clutter.

To sign up:

1. Go to mfs.com.

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If you own your MFS fund shares through a financial institution or a retirement plan, MFS® TALK, MFS® Access, or eDelivery may not be available to you.

 

CONTACT

WEB SITE

mfs.com

MFS TALK

1-800-637-8255

24 hours a day

ACCOUNT SERVICE AND LITERATURE

Shareholders

1-800-225-2606

Financial advisors

1-800-343-2829

Retirement plan services

1-800-637-1255

MAILING ADDRESS

MFS Service Center, Inc.

P.O. Box 55824

Boston, MA 02205-5824

OVERNIGHT MAIL

MFS Service Center, Inc.

c/o Boston Financial Data Services

30 Dan Road

Canton, MA 02021-2809

 


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ITEM 2. CODE OF ETHICS.

The Registrant has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant’s principal executive officer and principal financial and accounting officer. During the period covered by this report, the Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definition enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.

A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Messrs. Steven E. Buller, Robert E. Butler, John P. Kavanaugh and Robert W. Uek and Ms. Maryanne L. Roepke, members of the Audit Committee, have been determined by the Board of Trustees in their reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in Form N-CSR. In addition, Messrs. Buller, Butler, Kavanaugh and Uek and Ms. Roepke are “independent” members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Items 4(a) through 4(d) and 4(g):

The Board of Trustees has appointed Ernst & Young LLP (“E&Y”) to serve as independent accountants to each series of the Registrant. The tables below set forth the audit fees billed to the series of the Registrant with a fiscal year end of August 31, 2016 (the “Fund”) as well as fees for non-audit services provided to the Fund and/or to the Fund’s investment adviser, Massachusetts Financial Services Company (“MFS”), and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Fund (“MFS Related Entities”).

For the fiscal years ended August 31, 2016 and 2015^ and February 28, 2015, audit fees billed to the Fund by E&Y were as follows:

 

     Audit Fees  
   August
2016
     August
2015
     February
2015
 

Fees billed by E&Y:

        

MFS Global Real Estate Fund^

     51,148         48,148         45,148   


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For the fiscal years ended August 31, 2016 and 2015^ and February 28, 2015, fees billed by E&Y for audit-related, tax and other services provided to the Fund and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:

 

     Audit-Related Fees1      Tax Fees2      All Other Fees3  
   August
2016
     August
2015
     February
2015
     August
2016
     August
2015
     February
2015
     August
2016
     August
20154
     February
2015
 

Fees billed by E&Y:

                          

To MFS Global Real Estate Fund^

     0         0         0         9,987         9,917         9,900         1,183         1,024         0   
     Audit-Related Fees1      Tax Fees2      All Other Fees3  
   August
2016
     August
20154
     February
2015
     August
2016
     August
2015
     February
2015
     August
2016
     August
20154
     February
2015
 

Fees billed by E&Y:

                          

To MFS and MFS Related Entities of MFS Global Real Estate Fund ^, ^^, *

     1,612,499         920,675         0         0         0         0         99,446         49,723         0   

 

     Aggregate Fees for Non-audit
Services
 
   August
2016
     August
20154
     February
2015
 

Fees Billed by E&Y:

        

To MFS Global Real Estate Fund, MFS and MFS Related Entities^, ^^, #

     1,873,715         1,067,339         99,900   

 

^

Effective March 1, 2015, the fiscal year end of the Fund changed from February 28th to August 31st. Fees reported for the Fund for the fiscal year end August 31, 2015 only include fees billed during the period of March 1, 2015 through August 31, 2015.

^^ Fees reported for MFS and MFS Related Entities of the Fund for the Fund’s fiscal year end August 31, 2015 only include fees billed during the period of March 1, 2015 through August 31, 2015.
* 

This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Funds (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex).

# This amount reflects the aggregate fees billed by E&Y for non-audit services rendered to the Funds and for non-audit services rendered to MFS and the MFS Related Entities.
1 

The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under ‘‘Audit Fees,’’ including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews.

2 

The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis.

3 

The fees included under “All Other Fees” are fees for products and services provided by E&Y other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to review of internal controls and Rule 38a-1 compliance program.

4 

Certain fees reported in 2015 have been restated in this filing from those reported in the Registrant’s filing for the reporting period ended August 31, 2015.


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Item 4(e)(1):

Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services:

To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Fund and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 between such regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting.

Item 4(e)(2):

None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).

Item 4(f): Not applicable.

Item 4(h): The Registrant’s Audit Committee has considered whether the provision by a Registrant’s independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services were provided prior to the effectiveness of SEC rules requiring pre-approval or because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant’s principal auditors.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to the Registrant.


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ITEM 6. INVESTMENTS

A schedule of investments of MFS Global Real Estate Fund is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the Registrant.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the Registrant.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable to the Registrant.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

(a) Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b) There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.


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ITEM 12. EXHIBITS.

 

(a) File the exhibits listed below as part of this form. Letter or number the exhibits in the sequence indicated.

 

  (1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Code of Ethics attached hereto.

 

  (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.

 

(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto.


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Notice

A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) MFS SERIES TRUST XIII

 

By (Signature and Title)*    ROBIN A. STELMACH
  Robin A. Stelmach, President

Date: October 17, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*    ROBIN A. STELMACH
  Robin A. Stelmach, President (Principal Executive Officer)

Date: October 17, 2016

 

By (Signature and Title)*    DAVID L. DILORENZO
  David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer)

Date: October 17, 2016

 

* Print name and title of each signing officer under his or her signature.