Table of Contents
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 811-21780
MFS SERIES TRUST XII
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Christopher R. Bohane
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agents for service)
Registrant’s telephone number, including area code: (617) 954-5000
Date of fiscal year end: October 31*
Date of reporting period: October 31, 2016
* | This Form N-CSR pertains to the following series of the Registrant: MFS Equity Opportunities Fund. The remaining series of the Registrant have fiscal year ends of April 30. |
Table of Contents
ITEM 1. | REPORTS TO STOCKHOLDERS. |
Table of Contents
ANNUAL REPORT
October 31, 2016
MFS® EQUITY OPPORTUNITIES FUND
MSR-ANN
Table of Contents
MFS® EQUITY OPPORTUNITIES FUND
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
Dear Shareholders:
Despite June’s unexpected vote by the United Kingdom to leave the European Union and the surprising result in the U.S. presidential election, most markets proved resilient
in the wake of these events. U.S. shares quickly reversed post-Brexit declines and rallied 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. Low interest rates continue to benefit risky assets such as equities, as investors are forced to accept greater risks in search of satisfactory returns in a low-return environment. U.S. investment-grade and high-yield bonds have benefited from low, and even negative, yields overseas.
Emblematic of the sluggish global growth environment is a pronounced slowdown in the growth of global trade. Despite the slowdown, emerging market equities have held up well, withstanding geopolitical shocks such as an attempted coup in Turkey and the impeachment and removal of the president of Brazil. The U.S. Federal Reserve’s go-slow approach to rate hikes and economic stimulus abroad have helped support markets.
At MFS®, we believe in a patient, long-term approach to investing. Viewing investments with a long lens makes it possible to filter out short-term market noise and focus on achieving solid risk-adjusted returns over a full market cycle.
In our view, such an approach, along with the professional guidance of a financial advisor, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
December 15, 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.
1
Table of Contents
Portfolio structure
Top ten holdings | ||||
Amazon.com, Inc. | 3.5% | |||
Northrop Grumman Corp. | 3.2% | |||
Store Capital Corp., REIT | 3.1% | |||
WEX, Inc. | 3.1% | |||
AutoZone, Inc. | 3.0% | |||
Hewlett Packard Enterprise | 3.0% | |||
Gap, Inc. | 3.0% | |||
Priceline Group, Inc. | 2.9% | |||
Archer Daniels Midland Co. | 2.9% | |||
Bank of America Corp. | 2.9% |
Equity sectors | ||||
Financial Services | 24.0% | |||
Special Products & Services | 13.3% | |||
Retailing | 12.0% | |||
Industrial Goods & Services | 9.6% | |||
Utilities & Communications | 7.8% | |||
Consumer Staples | 7.1% | |||
Health Care | 6.8% | |||
Technology | 5.5% | |||
Energy | 5.1% | |||
Autos & Housing | 5.0% | |||
Leisure | 2.8% |
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 10/31/16.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
Summary of results
For the twelve months ended October 31, 2016, Class A shares of the MFS Equity Opportunities Fund (“fund”) provided a total return of 5.88%, at net asset value. This compares with a return of 4.26% for the fund’s benchmark, the Russell 1000® 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. During the second half 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 much of the reporting period, US earnings headwinds expanded beyond the energy, materials and industrial sectors, to include most sectors of the market. Headwinds eased somewhat at the end of the period as stabilizing oil prices pushed energy earnings higher relative to expectations. The sharp rise in the US dollar also weighed on earnings early in the period, though the dollar largely stabilized 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 low gasoline prices. Demand for autos reached near-record territory before plateauing 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
An underweight allocation and stock selection in the health care sector were primary factors that benefited performance relative to the Russell 1000® Index. The fund’s position in medical technology company Masimo (b)(h) contributed to relative returns. Shares of Masimo rose after the company’s management reported earnings that beat consensus expectations driven by strong performance in its SET (Signal Extraction Technology) business and growth in Rainbow product sales.
Security selection in the special products & services sector further lifted relative performance. An overweight position in payment processing and information management solutions company WEX contributed to relative returns as the stock outperformed the benchmark during the reporting period. Shares of WEX benefited from earnings that exceeded analyst estimates, driven by recent fee increases and higher gas prices.
3
Table of Contents
Management Review – continued
Elsewhere, the fund’s overweight positions in food producer Tyson Foods (h), information technology products distributor Ingram Micro (h), real estate investment trust Store Capital, enterprise information technology provider Hewlett-Packard, global security company Northrop Grumman, clothing retailer Gap, broadband communications and networking services company Broadcom (h) and utility services provider Exelon all contributed positively towards relative performance. Shares of Tyson Foods rose as the company reported results well ahead of street consensus. The positive earnings per share were primarily driven by strong results in the company’s key Chicken, Beef and Pork segments.
Detractors from performance
Weak stock selection in the energy sector held back relative performance. The fund’s overweight position in shares of independent petroleum products company Marathon Petroleum (h) and independent oil refiner Valero Energy (h) weighed on relative performance. Shares of Marathon Petroleum declined during the reporting period as earnings per share were substantially below expectations, primarily driven by weaker refining & marketing results.
Security selection in the utilities & communications sector further detracted from relative returns. An overweight position in shares of power generation company NRG Energy (h) held back relative returns. Despite the company reporting solid earnings results, management took a conservative approach on guidance following higher-than-expected wind output that resulted in minimal scarcity pricing.
Elsewhere, the fund’s overweight position in shares of self-storage property operator Life Storage (h) held back relative returns. Shares of Life Storage declined as concerns over industry fundamentals appeared to have increased following competitor Sovran Self Storage lowering its 2016 forecast. Additionally, overweight positions in non-urban hospital operator Community Health Systems (h), engineering solutions firm SPX Flow (h), bakery foods producer Flowers Foods, global cruise line operator Norwegian Cruise Lines (h) and automotive replacement parts distributor AutoZone also detracted from relative performance. The timing of the fund’s ownership in shares of food company J.M. Smucker further weighed on relative returns.
Respectfully,
Jim Fallon | Matt Krummell | Jonathan Sage | Jed Stocks | |||
Portfolio Manager | Portfolio Manager | Portfolio Manager | 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 managers 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.
4
Table of Contents
PERFORMANCE SUMMARY THROUGH 10/31/16
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
5
Table of Contents
Performance Summary – continued
Total Returns through 10/31/16
Average annual without sales charge
Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr | Life (t) | |||||||||
A | 8/30/00 | 5.88% | 13.53% | 6.73% | N/A | |||||||||
B | 1/03/07 | 5.07% | 12.66% | N/A | 5.67% | |||||||||
C | 3/01/04 | 5.07% | 12.68% | 5.97% | N/A | |||||||||
I | 2/28/11 | 6.17% | 13.81% | N/A | 10.85% | |||||||||
R1 | 5/01/08 | 5.09% | 12.68% | N/A | 5.69% | |||||||||
R2 | 5/01/08 | 5.64% | 13.24% | N/A | 6.22% | |||||||||
R3 | 5/01/08 | 5.87% | 13.53% | N/A | 6.48% | |||||||||
R4 | 5/01/08 | 6.11% | 13.80% | N/A | 6.75% | |||||||||
R6 (formerly Class R5) | 3/03/08 | 6.25% | 13.88% | N/A | 7.07% | |||||||||
Comparative benchmark | �� | |||||||||||||
Russell 1000® Index (f) | 4.26% | 13.51% | 6.83% | N/A | ||||||||||
Average annual with sales charge | ||||||||||||||
A With Initial Sales Charge (5.75%) | (0.21)% | 12.19% | 6.10% | N/A | ||||||||||
B With CDSC (Declining over six years from 4% to 0%) (v) | 1.07% | 12.41% | N/A | 5.67% | ||||||||||
C With CDSC (1% for 12 months) (v) | 4.07% | 12.68% | 5.97% | N/A |
CDSC – Contingent Deferred Sales Charge.
Class I, R1, R2, R3, R4, and R6 shares do not have a sales charge.
On May 30, 2012, Class W shares were redesignated Class R5 shares. Total returns for Class R5 shares prior to May 30, 2012 reflect the performance history of Class W shares which had different fees and expenses than Class R5 shares. 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 (for those share classes with less than 10 years of performance history). No comparative benchmark performance information is provided for “life” periods. (See Notes to Performance Summary.) |
(v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition
Russell 1000® Index – constructed to provide a comprehensive barometer for the large-cap segment of the U.S. equity universe based on total market capitalization, which represents approximately 92% of the investable U.S. equity market. The Russell 1000® Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.
It is not possible to invest directly in an index.
6
Table of Contents
Performance Summary – continued
Notes to Performance Summary
Performance information in the chart and tables for periods prior to January 3, 2007, reflect performance information of the Penn Street Advisors Sector Rotational Portfolio, the fund’s predecessor (the “Predecessor Fund”). On January 3, 2007, the fund acquired all of the assets of the Predecessor Fund pursuant to an agreement and plan of reorganization, in exchange for Class A and Class C shares of the fund. The dates in the table are the inception dates for the predecessor fund’s Class A and C shares.
Prior to February 1, 2010, Valley Forge Capital Advisors, Inc. (Valley Forge) served as the sub-adviser for the fund. Effective February 1, 2010, Valley Forge no longer served as the sub-adviser of the fund and MFS assumed responsibility for the day-to-day management of the fund’s portfolio in its capacity as the fund’s investment adviser.
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. As a result, no comparative benchmark performance information is provided for life periods.
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
Table of Contents
Fund expenses borne by the shareholders during the period, May 1, 2016 through October 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 May 1, 2016 through October 31, 2016.
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
Table of Contents
Expense Table – continued
Share Class | Annualized Expense Ratio | Beginning Account Value 5/01/16 | Ending Account Value 10/31/16 | Expenses Paid During Period (p) 5/01/16-10/31/16 | ||||||||||||||
A | Actual | 1.20% | $1,000.00 | $1,031.58 | $6.13 | |||||||||||||
Hypothetical (h) | 1.20% | $1,000.00 | $1,019.10 | $6.09 | ||||||||||||||
B | Actual | 1.95% | $1,000.00 | $1,027.65 | $9.94 | |||||||||||||
Hypothetical (h) | 1.95% | $1,000.00 | $1,015.33 | $9.88 | ||||||||||||||
C | Actual | 1.95% | $1,000.00 | $1,027.62 | $9.94 | |||||||||||||
Hypothetical (h) | 1.95% | $1,000.00 | $1,015.33 | $9.88 | ||||||||||||||
I | Actual | 0.95% | $1,000.00 | $1,033.21 | $4.86 | |||||||||||||
Hypothetical (h) | 0.95% | $1,000.00 | $1,020.36 | $4.82 | ||||||||||||||
R1 | Actual | 1.95% | $1,000.00 | $1,028.07 | $9.94 | |||||||||||||
Hypothetical (h) | 1.95% | $1,000.00 | $1,015.33 | $9.88 | ||||||||||||||
R2 | Actual | 1.45% | $1,000.00 | $1,030.66 | $7.40 | |||||||||||||
Hypothetical (h) | 1.45% | $1,000.00 | $1,017.85 | $7.35 | ||||||||||||||
R3 | Actual | 1.20% | $1,000.00 | $1,031.69 | $6.13 | |||||||||||||
Hypothetical (h) | 1.20% | $1,000.00 | $1,019.10 | $6.09 | ||||||||||||||
R4 | Actual | 0.95% | $1,000.00 | $1,032.83 | $4.85 | |||||||||||||
Hypothetical (h) | 0.95% | $1,000.00 | $1,020.36 | $4.82 | ||||||||||||||
R6 (formerly Class R5) | Actual | 0.85% | $1,000.00 | $1,033.69 | $4.35 | |||||||||||||
Hypothetical (h) |
|
0.85% |
|
|
$1,000.00 |
|
|
$1,020.86 |
|
|
$4.32 |
|
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
9
Table of Contents
10/31/16
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Common Stocks - 99.0% | ||||||||
Issuer | Shares/Par | Value ($) | ||||||
Aerospace - 3.2% | ||||||||
Northrop Grumman Corp. | 65,127 | $ | 14,914,082 | |||||
Biotechnology - 2.4% | ||||||||
Celgene Corp. (a) | 109,287 | $ | 11,166,946 | |||||
Business Services - 10.4% | ||||||||
Fiserv, Inc. (a) | 111,970 | $ | 11,026,806 | |||||
Global Payments, Inc. | 159,088 | 11,537,062 | ||||||
Travelport Worldwide Ltd. | 807,445 | 11,401,123 | ||||||
WEX, Inc. (a) | 129,583 | 14,137,505 | ||||||
|
| |||||||
$ | 48,102,496 | |||||||
Computer Software - 2.5% | ||||||||
Intuit, Inc. | 107,077 | $ | 11,643,553 | |||||
Computer Software - Systems - 3.0% | ||||||||
Hewlett Packard Enterprise | 619,268 | $ | 13,914,952 | |||||
Construction - 5.0% | ||||||||
Owens Corning | 253,205 | $ | 12,351,340 | |||||
Toll Brothers, Inc. (a) | 387,451 | 10,631,655 | ||||||
|
| |||||||
$ | 22,982,995 | |||||||
Consumer Services - 2.9% | ||||||||
Priceline Group, Inc. (a) | 9,164 | $ | 13,509,844 | |||||
Electrical Equipment - 2.5% | ||||||||
WESCO International, Inc. (a) | 212,507 | $ | 11,517,879 | |||||
Energy - Independent - 5.1% | ||||||||
Anadarko Petroleum Corp. | 185,311 | $ | 11,014,886 | |||||
Rice Energy, Inc. (a) | 566,457 | 12,513,035 | ||||||
|
| |||||||
$ | 23,527,921 | |||||||
Food & Beverages - 7.1% | ||||||||
Archer Daniels Midland Co. | 309,218 | $ | 13,472,628 | |||||
Flowers Foods, Inc. | 594,384 | 9,224,840 | ||||||
J.M. Smucker Co. | 76,563 | 10,053,488 | ||||||
|
| |||||||
$ | 32,750,956 |
10
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Insurance - 6.2% | ||||||||
Hartford Financial Services Group, Inc. | 246,726 | $ | 10,883,084 | |||||
MetLife, Inc. | 139,941 | 6,571,629 | ||||||
Unum Group | 316,955 | 11,220,207 | ||||||
|
| |||||||
$ | 28,674,920 | |||||||
Leisure & Toys - 2.8% | ||||||||
Electronic Arts, Inc. (a) | 167,763 | $ | 13,172,751 | |||||
Machinery & Tools - 3.9% | ||||||||
Allison Transmission Holdings, Inc. | 340,440 | $ | 9,971,488 | |||||
Regal Beloit Corp. | 138,096 | 8,161,474 | ||||||
|
| |||||||
$ | 18,132,962 | |||||||
Major Banks - 2.9% | ||||||||
Bank of America Corp. | 808,055 | $ | 13,332,908 | |||||
Natural Gas - Pipeline - 2.6% | ||||||||
Western Gas Equity Partners LP | 218,168 | $ | 12,031,965 | |||||
Other Banks & Diversified Financials - 2.2% | ||||||||
Discover Financial Services | 183,792 | $ | 10,353,003 | |||||
Pharmaceuticals - 4.4% | ||||||||
Eli Lilly & Co. | 141,448 | $ | 10,444,520 | |||||
Merck & Co., Inc. | 165,233 | 9,702,482 | ||||||
|
| |||||||
$ | 20,147,002 | |||||||
Real Estate - 12.7% | ||||||||
Equity Lifestyle Properties, Inc., REIT | 149,213 | $ | 11,316,314 | |||||
Medical Properties Trust, Inc., REIT | 738,713 | 10,297,659 | ||||||
Mid-America Apartment Communities, Inc., REIT | 131,486 | 12,195,327 | ||||||
Store Capital Corp., REIT | 523,969 | 14,299,114 | ||||||
Washington Prime Group, Inc., REIT | 1,036,223 | 10,869,979 | ||||||
|
| |||||||
$ | 58,978,393 | |||||||
Specialty Stores - 12.0% | ||||||||
Amazon.com, Inc. (a) | 20,444 | $ | 16,147,080 | |||||
AutoZone, Inc. (a) | 18,969 | 14,078,033 | ||||||
Gap, Inc. | 498,924 | 13,765,313 | ||||||
Urban Outfitters, Inc. (a) | 352,663 | 11,796,577 | ||||||
|
| |||||||
$ | 55,787,003 |
11
Table of Contents
Portfolio of Investments – continued
Issuer | Shares/Par | Value ($) | ||||||
Common Stocks - continued | ||||||||
Utilities - Electric Power - 5.2% | ||||||||
DTE Energy Co. | 129,112 | $ | 12,396,043 | |||||
Exelon Corp. | 345,800 | 11,781,406 | ||||||
|
| |||||||
$ | 24,177,449 | |||||||
Total Common Stocks (Identified Cost, $432,392,099) | $ | 458,819,980 | ||||||
Money Market Funds - 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.44% (v) (Identified Cost, $2,516,944) | 2,516,944 | $ | 2,516,944 | |||||
Total Investments (Identified Cost, $434,909,043) | $ | 461,336,924 | ||||||
Other Assets, Less Liabilities - 0.5% | 2,108,347 | |||||||
Net Assets - 100.0% | $ | 463,445,271 |
(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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
12
Table of Contents
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/16
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, $432,392,099) | $458,819,980 | |||
Underlying affiliated funds, at value (identified cost, $2,516,944) | 2,516,944 | |||
Total investments, at value (identified cost, $434,909,043) | $461,336,924 | |||
Receivables for | ||||
Investments sold | 2,932,845 | |||
Fund shares sold | 638,952 | |||
Dividends | 295,147 | |||
Other assets | 3 | |||
Total assets | $465,203,871 | |||
Liabilities | ||||
Payable for fund shares reacquired | $1,457,617 | |||
Payable to affiliates | ||||
Investment adviser | 38,622 | |||
Shareholder servicing costs | 148,303 | |||
Distribution and service fees | 19,061 | |||
Payable for independent Trustees’ compensation | 1,424 | |||
Accrued expenses and other liabilities | 93,573 | |||
Total liabilities | $1,758,600 | |||
Net assets | $463,445,271 | |||
Net assets consist of | ||||
Paid-in capital | $431,424,998 | |||
Unrealized appreciation (depreciation) on investments | 26,427,881 | |||
Accumulated net realized gain (loss) on investments | 3,774,873 | |||
Undistributed net investment income | 1,817,519 | |||
Net assets | $463,445,271 | |||
Shares of beneficial interest outstanding | 15,421,098 |
13
Table of Contents
Statement of Assets and Liabilities – continued
Net assets | Shares outstanding | Net asset value per share (a) | ||||||||||
Class A | $210,857,646 | 6,940,683 | $30.38 | |||||||||
Class B | 13,894,621 | 479,236 | 28.99 | |||||||||
Class C | 105,431,588 | 3,633,007 | 29.02 | |||||||||
Class I | 112,860,444 | 3,702,093 | 30.49 | |||||||||
Class R1 | 258,087 | 8,922 | 28.93 | |||||||||
Class R2 | 1,715,927 | 58,019 | 29.58 | |||||||||
Class R3 | 1,593,421 | 52,622 | 30.28 | |||||||||
Class R4 | 6,655,828 | 218,051 | 30.52 | |||||||||
Class R6 (formerly Class R5) | 10,177,709 | 328,465 | 30.99 |
(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 $32.23 [100 / 94.25 x $30.38]. 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
14
Table of Contents
Financial Statements
Year ended 10/31/16
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 | $8,645,537 | |||
Dividends from underlying affiliated funds | 12,796 | |||
Total investment income | $8,658,333 | |||
Expenses | ||||
Management fee | $3,558,242 | |||
Distribution and service fees | 1,810,439 | |||
Shareholder servicing costs | 556,910 | |||
Administrative services fee | 83,207 | |||
Independent Trustees’ compensation | 11,839 | |||
Custodian fee | 42,471 | |||
Shareholder communications | 41,747 | |||
Audit and tax fees | 45,957 | |||
Legal fees | 5,099 | |||
Miscellaneous | 171,489 | |||
Total expenses | $6,327,400 | |||
Reduction of expenses by investment adviser and distributor | (43,589 | ) | ||
Net expenses | $6,283,811 | |||
Net investment income | $2,374,522 | |||
Realized and unrealized gain (loss) on investments | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments: | ||||
Non-affiliated issuers | $25,168,039 | |||
Underlying affiliated funds | 37 | |||
Net realized gain (loss) on investments | $25,168,076 | |||
Change in unrealized appreciation (depreciation) on investments | $(2,677,228 | ) | ||
Net realized and unrealized gain (loss) on investments | $22,490,848 | |||
Change in net assets from operations | $24,865,370 |
See Notes to Financial Statements
15
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.
Years ended 10/31 | ||||||||
2016 | 2015 | |||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $2,374,522 | $1,424,904 | ||||||
Net realized gain (loss) on investments | 25,168,076 | 9,986,785 | ||||||
Net unrealized gain (loss) on investments | (2,677,228 | ) | (740,709 | ) | ||||
Change in net assets from operations | $24,865,370 | $10,670,980 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $(1,400,027 | ) | $(1,495,031 | ) | ||||
Change in net assets from fund share transactions | $(33,218,359 | ) | $(80,944,399 | ) | ||||
Total change in net assets | $(9,753,016 | ) | $(71,768,450 | ) | ||||
Net assets | ||||||||
At beginning of period | 473,198,287 | 544,966,737 | ||||||
At end of period (including undistributed net investment income of $1,817,519 and $843,024, respectively) | $463,445,271 | $473,198,287 |
See Notes to Financial Statements
16
Table of Contents
Financial Statements
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 | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $28.78 | $28.25 | $25.54 | $18.99 | $16.66 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.19 | $0.12 | $0.09 | $0.20 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.50 | 0.49 | 2.69 | 6.58 | 2.40 | |||||||||||||||
Total from investment operations | $1.69 | $0.61 | $2.78 | $6.78 | $2.54 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.09 | ) | $(0.08 | ) | $(0.07 | ) | $(0.23 | ) | $(0.21 | ) | ||||||||||
Net asset value, end of period (x) | $30.38 | $28.78 | $28.25 | $25.54 | $18.99 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.88 | 2.17 | 10.90 | 36.11 | 15.50 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.20 | 1.21 | 1.19 | 1.28 | 1.34 | |||||||||||||||
Expenses after expense reductions (f) | 1.19 | 1.20 | 1.19 | 1.27 | 1.34 | |||||||||||||||
Net investment income | 0.63 | 0.41 | 0.32 | 0.93 | 0.80 | |||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $210,858 | $218,412 | $257,948 | $155,571 | $87,130 |
See Notes to Financial Statements
17
Table of Contents
Financial Highlights – continued
Class B | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $27.59 | $27.21 | $24.72 | $18.38 | $16.12 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $(0.10 | ) | $(0.11 | ) | $0.05 | $0.01 | ||||||||||||
Net realized and unrealized gain (loss) | 1.43 | 0.48 | 2.60 | 6.37 | 2.32 | |||||||||||||||
Total from investment operations | $1.40 | $0.38 | $2.49 | $6.42 | $2.33 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $— | $— | $— | $(0.08 | ) | $(0.07 | ) | |||||||||||||
Net asset value, end of period (x) | $28.99 | $27.59 | $27.21 | $24.72 | $18.38 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.07 | 1.40 | 10.07 | 35.11 | 14.56 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.95 | 1.96 | 1.95 | 2.03 | 2.09 | |||||||||||||||
Expenses after expense reductions (f) | 1.95 | 1.95 | 1.94 | 2.03 | 2.09 | |||||||||||||||
Net investment income (loss) | (0.11 | ) | (0.35 | ) | (0.43 | ) | 0.24 | 0.05 | ||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $13,895 | $17,022 | $18,480 | $12,876 | $10,056 |
Class C | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $27.62 | $27.23 | $24.74 | $18.40 | $16.13 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $(0.03 | ) | $(0.10 | ) | $(0.12 | ) | $0.04 | $0.01 | ||||||||||||
Net realized and unrealized gain (loss) | 1.43 | 0.49 | 2.61 | 6.38 | 2.34 | |||||||||||||||
Total from investment operations | $1.40 | $0.39 | $2.49 | $6.42 | $2.35 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $— | $— | $— | $(0.08 | ) | $(0.08 | ) | |||||||||||||
Net asset value, end of period (x) | $29.02 | $27.62 | $27.23 | $24.74 | $18.40 | |||||||||||||||
Total return (%) (r)(s)(t)(x) | 5.07 | 1.43 | 10.06 | 35.07 | 14.63 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.95 | 1.96 | 1.95 | 2.03 | 2.09 | |||||||||||||||
Expenses after expense reductions (f) | 1.95 | 1.95 | 1.94 | 2.03 | 2.09 | |||||||||||||||
Net investment income (loss) | (0.12 | ) | (0.36 | ) | (0.45 | ) | 0.20 | 0.06 | ||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $105,432 | $108,122 | $106,272 | $49,276 | $31,014 |
See Notes to Financial Statements
18
Table of Contents
Financial Highlights – continued
Class I | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $28.88 | $28.35 | $25.61 | $19.05 | $16.72 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.26 | $0.19 | $0.15 | $0.23 | $0.17 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.51 | 0.49 | 2.71 | 6.61 | 2.42 | |||||||||||||||
Total from investment operations | $1.77 | $0.68 | $2.86 | $6.84 | $2.59 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.16 | ) | $(0.15 | ) | $(0.12 | ) | $(0.28 | ) | $(0.26 | ) | ||||||||||
Net asset value, end of period (x) | $30.49 | $28.88 | $28.35 | $25.61 | $19.05 | |||||||||||||||
Total return (%) (r)(s)(x) | 6.17 | 2.42 | 11.19 | 36.40 | 15.79 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.95 | 0.96 | 0.95 | 1.03 | 1.08 | |||||||||||||||
Expenses after expense reductions (f) | 0.95 | 0.95 | 0.95 | 1.02 | 1.08 | |||||||||||||||
Net investment income | 0.88 | 0.66 | 0.54 | 1.01 | 0.97 | |||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $112,860 | $110,990 | $146,339 | $56,117 | $14,921 | |||||||||||||||
Class R1 | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $27.53 | $27.14 | $24.66 | $18.36 | $16.11 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.10 | ) | $(0.13 | ) | $(0.00 | )(w) | $0.01 | |||||||||||
Net realized and unrealized gain (loss) | 1.42 | 0.49 | 2.61 | 6.40 | 2.33 | |||||||||||||||
Total from investment operations | $1.40 | $0.39 | $2.48 | $6.40 | $2.34 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $— | $— | $— | $(0.10 | ) | $(0.09 | ) | |||||||||||||
Net asset value, end of period (x) | $28.93 | $27.53 | $27.14 | $24.66 | $18.36 | |||||||||||||||
Total return (%) (r)(s)(x) | 5.09 | 1.44 | 10.06 | 35.04 | 14.66 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.95 | 1.96 | 1.95 | 2.02 | 2.09 | |||||||||||||||
Expenses after expense reductions (f) | 1.95 | 1.96 | 1.95 | 2.02 | 2.09 | |||||||||||||||
Net investment income (loss) | (0.08 | ) | (0.37 | ) | (0.48 | ) | (0.01 | ) | 0.06 | |||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $258 | $1,643 | $1,397 | $418 | $101 |
See Notes to Financial Statements
19
Table of Contents
Financial Highlights – continued
Class R2 | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $28.00 | $27.59 | $24.94 | $18.56 | $16.30 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (loss) (d) | $0.11 | $0.04 | $(0.02 | ) | $0.15 | $0.10 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.47 | 0.48 | 2.68 | 6.42 | 2.34 | |||||||||||||||
Total from investment operations | $1.58 | $0.52 | $2.66 | $6.57 | $2.44 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $— | $(0.11 | ) | $(0.01 | ) | $(0.19 | ) | $(0.18 | ) | |||||||||||
Net asset value, end of period (x) | $29.58 | $28.00 | $27.59 | $24.94 | $18.56 | |||||||||||||||
Total return (%) (r)(s)(x) | 5.64 | 1.89 | 10.66 | 35.75 | 15.16 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.45 | 1.46 | 1.48 | 1.53 | 1.59 | |||||||||||||||
Expenses after expense reductions (f) | 1.45 | 1.45 | 1.47 | 1.53 | 1.59 | |||||||||||||||
Net investment income (loss) | 0.38 | 0.14 | (0.09 | ) | 0.71 | 0.55 | ||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,716 | $1,894 | $1,728 | $185 | $117 |
Class R3 | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $28.68 | $28.19 | $25.49 | $18.96 | $16.65 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.18 | $0.11 | $0.07 | $0.16 | $0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.50 | 0.49 | 2.70 | 6.60 | 2.39 | |||||||||||||||
Total from investment operations | $1.68 | $0.60 | $2.77 | $6.76 | $2.53 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.08 | ) | $(0.11 | ) | $(0.07 | ) | $(0.23 | ) | $(0.22 | ) | ||||||||||
Net asset value, end of period (x) | $30.28 | $28.68 | $28.19 | $25.49 | $18.96 | |||||||||||||||
Total return (%) (r)(s)(x) | 5.87 | 2.17 | 10.90 | 36.09 | 15.44 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 1.20 | 1.21 | 1.20 | 1.27 | 1.34 | |||||||||||||||
Expenses after expense reductions (f) | 1.20 | 1.20 | 1.20 | 1.27 | 1.34 | |||||||||||||||
Net investment income | 0.63 | 0.38 | 0.26 | 0.69 | 0.80 | |||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,593 | $1,677 | $1,492 | $425 | $120 |
See Notes to Financial Statements
20
Table of Contents
Financial Highlights – continued
Class R4 | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $28.90 | $28.37 | $25.62 | $19.05 | $16.73 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.26 | $0.18 | $0.16 | $0.27 | $0.18 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.50 | 0.49 | 2.69 | 6.58 | 2.40 | |||||||||||||||
Total from investment operations | $1.76 | $0.67 | $2.85 | $6.85 | $2.58 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.14 | ) | $(0.14 | ) | $(0.10 | ) | $(0.28 | ) | $(0.26 | ) | ||||||||||
Net asset value, end of period (x) | $30.52 | $28.90 | $28.37 | $25.62 | $19.05 | |||||||||||||||
Total return (%) (r)(s)(x) | 6.11 | 2.41 | 11.18 | 36.45 | 15.72 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.95 | 0.96 | 0.94 | 1.03 | 1.09 | |||||||||||||||
Expenses after expense reductions (f) | 0.95 | 0.96 | 0.94 | 1.03 | 1.09 | |||||||||||||||
Net investment income | 0.87 | 0.61 | 0.57 | 1.23 | 1.04 | |||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $6,656 | $6,322 | $9,664 | $6,535 | $5,764 |
Class R6 (formerly Class R5) (y) | Years ended 10/31 | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Net asset value, beginning of period | $29.36 | $28.80 | $26.02 | $19.07 | $16.70 | |||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||
Net investment income (d) | $0.29 | $0.23 | $0.22 | $0.19 | $0.21 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.53 | 0.50 | 2.68 | 6.78 | 2.37 | |||||||||||||||
Total from investment operations | $1.82 | $0.73 | $2.90 | $6.97 | $2.58 | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||
From net investment income | $(0.19 | ) | $(0.17 | ) | $(0.12 | ) | $(0.02 | ) | $(0.21 | ) | ||||||||||
Net asset value, end of period (x) | $30.99 | $29.36 | $28.80 | $26.02 | $19.07 | |||||||||||||||
Total return (%) (r)(s)(x) | 6.25 | 2.58 | 11.20 | 36.60 | 15.68 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||
Expenses before expense reductions (f) | 0.85 | 0.85 | 0.86 | 0.92 | 1.22 | |||||||||||||||
Expenses after expense reductions (f) | 0.85 | 0.85 | 0.86 | 0.92 | 1.22 | |||||||||||||||
Net investment income | 0.95 | 0.81 | 0.79 | 0.79 | 1.19 | |||||||||||||||
Portfolio turnover | 109 | 119 | 106 | 115 | 123 | |||||||||||||||
Net assets at end of period (000 omitted) | $10,178 | $7,115 | $1,647 | $4,399 | $110 |
See Notes to Financial Statements
21
Table of Contents
Financial Highlights – continued
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(t) | Total returns do not include any applicable sales charges. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
(y) | On May 10, 2012, sales of Class W shares (including exchanges) were suspended. On May 11, 2012, certain Class W shares were automatically converted to Class I shares. Shareholders of certain Class W shares became shareholders of Class I and received Class I shares with a total net asset value equal to their Class W shares at the time of the conversion. On May 30, 2012, remaining Class W shares, which represented MFS seed money, were redesignated Class R5. On June 1, 2012, Class R5 shares were offered for sale to the public. Effective August 26, 2016, Class R5 shares were renamed Class R6 shares. |
See Notes to Financial Statements
22
Table of Contents
(1) Business and Organization
MFS Equity Opportunities Fund (the fund) is a diversified series of MFS Series Trust XII (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.
In October 2016, the Securities and Exchange Commission (SEC) released its Final Rule on Investment Company Reporting Modernization (the “Rule”). The Rule which introduces two new regulatory reporting forms for investment companies – Form N-PORT and Form N-CEN – also contains amendments to Regulation S-X which impact financial statement presentation, particularly the presentation of derivative investments. Although still evaluating the impacts of the Rule, management believes that many of the Regulation S-X amendments are consistent with the fund’s current financial statement presentation and expects that the fund will be able to comply with the Rule’s Regulation S-X amendments by the August 1, 2017 compliance date.
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 were no sales reported that day, are generally valued at the last quoted daily bid
23
Table of Contents
Notes to Financial Statements – continued
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 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, 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
24
Table of Contents
Notes to Financial Statements – continued
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 October 31, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $458,819,980 | $— | $— | $458,819,980 | ||||||||||||
Mutual Funds | 2,516,944 | — | — | 2,516,944 | ||||||||||||
Total Investments | $461,336,924 | $— | $— | $461,336,924 |
For further information regarding security characteristics, see the Portfolio of Investments.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
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 October 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.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which
25
Table of Contents
Notes to Financial Statements – continued
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 wash sale loss deferrals and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
10/31/16 | 10/31/15 | |||||||
Ordinary income (including any short-term capital gains) | $1,400,027 | $1,495,031 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 10/31/16 | ||||
Cost of investments | $435,235,075 | |||
Gross appreciation | 39,706,617 | |||
Gross depreciation | (13,604,768 | ) | ||
Net unrealized appreciation (depreciation) | $26,101,849 | |||
Undistributed ordinary income | 1,817,519 | |||
Undistributed long-term capital gain | 4,100,905 |
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 | ||||||||
Year ended 10/31/16 | Year ended 10/31/15 | |||||||
Class A | $658,580 | $702,064 | ||||||
Class I | 658,773 | 720,388 | ||||||
Class R2 | — | 9,477 | ||||||
Class R3 | 4,692 | 7,009 | ||||||
Class R4 | 30,310 | 46,657 | ||||||
Class R6 (formerly Class R5) | 47,672 | 9,436 | ||||||
Total | $1,400,027 | $1,495,031 |
26
Table of Contents
Notes to Financial Statements – continued
Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.
(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 | 0.75 | % | ||
Next $1.5 billion of average daily net assets | 0.65 | % | ||
Next $2.5 billion of average daily net assets | 0.60 | % | ||
Average daily net assets in excess of $5 billion | 0.50 | % |
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 October 31, 2016, this management fee reduction amounted to $33,849, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended October 31, 2016 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses such that total fund operating expenses do not exceed the following rates annually of each class’s average daily net assets:
Classes | ||||||||||||||||||||||||||||||||
A | B | C | I | R1 | R2 | R3 | R4 | R6 (formerly Class R5) | ||||||||||||||||||||||||
1.40% | 2.15% | 2.15% | 1.15% | 2.15% | 1.65% | 1.40% | 1.15% | 1.09% |
This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until February 28, 2018. For the year ended October 31, 2016 the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $58,278 for the year ended October 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.
27
Table of Contents
Notes to Financial Statements – continued
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% | $544,275 | |||||||||||||||
Class B | 0.75% | 0.25% | 1.00% | 1.00% | 156,736 | |||||||||||||||
Class C | 0.75% | 0.25% | 1.00% | 1.00% | 1,082,308 | |||||||||||||||
Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 14,621 | |||||||||||||||
Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 8,464 | |||||||||||||||
Class R3 | — | 0.25% | 0.25% | 0.25% | 4,035 | |||||||||||||||
Total Distribution and Service Fees | $1,810,439 |
(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 October 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 October 31, 2016, this rebate amounted to $9,372 and $368 for Class A and Class C, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class 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 October 31, 2016, were as follows:
Amount | ||||
Class A | $465 | |||
Class B | 21,530 | |||
Class C | 5,313 |
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 October 31, 2016, the fee was $56,730, which equated to 0.0120% 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 October 31, 2016, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $500,180.
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
28
Table of Contents
Notes to Financial Statements – continued
average daily net assets. The administrative services fee incurred for the year ended October 31, 2016 was equivalent to an annual effective rate of 0.0175% 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 Octber 31, 2016, the fee paid by the fund under this agreement was $1,032 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. This money market fund does not pay a management fee to MFS.
MFS redeemed the following shares of the fund for the amounts and dates noted below:
Date | Share Class | Shares | Amount | |||||||||
9/09/15 | Class R1 | 5,530 | $147,319 | |||||||||
9/09/15 | Class R2 | 5,644 | 152,840 | |||||||||
9/09/15 | Class R3 | 5,615 | 155,704 | |||||||||
9/09/15 | Class R4 | 5,680 | 158,642 | |||||||||
9/09/15 | Class R5 | 5,838 | 165,624 | |||||||||
3/16/16 | Class R4 | 826 | 23,745 |
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 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 October 31, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $2,914,705 and $2,774,049, respectively. The sales transactions resulted in net realized gains (losses) of $(563,325).
29
Table of Contents
Notes to Financial Statements – continued
(4) Portfolio Securities
For the year ended October 31, 2016, purchases and sales of investments, other than short-term obligations, aggregated $514,323,876 and $529,927,473, 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 10/31/16 | Year ended 10/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 1,239,302 | $36,254,051 | 1,286,246 | $36,758,187 | ||||||||||||
Class B | 116,421 | 3,237,654 | 134,835 | 3,714,450 | ||||||||||||
Class C | 520,376 | 14,612,958 | 759,812 | 20,869,281 | ||||||||||||
Class I | 1,687,083 | 49,909,033 | 1,372,443 | 39,614,294 | ||||||||||||
Class R1 | 7,119 | 198,795 | 21,200 | 590,617 | ||||||||||||
Class R2 | 17,710 | 501,853 | 43,914 | 1,215,623 | ||||||||||||
Class R3 | 7,187 | 208,187 | 24,391 | 687,545 | ||||||||||||
Class R4 | 21,004 | 614,693 | 216,073 | 6,156,777 | ||||||||||||
Class R6 (formerly Class R5) | 139,576 | 3,929,804 | 246,389 | 6,996,099 | ||||||||||||
3,755,778 | $109,467,028 | 4,105,303 | $116,602,873 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 21,932 | $626,385 | 24,944 | $669,745 | ||||||||||||
Class I | 18,304 | 523,498 | 19,990 | 537,527 | ||||||||||||
Class R2 | — | — | 362 | 9,477 | ||||||||||||
Class R3 | 165 | 4,692 | 262 | 7,009 | ||||||||||||
Class R4 | 321 | 9,207 | 1,734 | 46,657 | ||||||||||||
Class R6 (formerly Class R5) | 55 | 1,603 | 346 | 9,436 | ||||||||||||
40,777 | $1,165,385 | 47,638 | $1,279,851 | |||||||||||||
Shares reacquired | ||||||||||||||||
Class A | (1,910,123 | ) | $(56,055,410 | ) | (2,854,128 | ) | $(81,654,088 | ) | ||||||||
Class B | (254,169 | ) | (7,173,103 | ) | (197,128 | ) | (5,476,756 | ) | ||||||||
Class C | (802,679 | ) | (22,521,148 | ) | (747,283 | ) | (20,611,090 | ) | ||||||||
Class I | (1,846,207 | ) | (53,025,104 | ) | (2,711,624 | ) | (77,708,856 | ) | ||||||||
Class R1 | (57,874 | ) | (1,673,595 | ) | (12,992 | ) | (349,656 | ) | ||||||||
Class R2 | (27,328 | ) | (751,977 | ) | (39,283 | ) | (1,072,064 | ) | ||||||||
Class R3 | (13,211 | ) | (381,193 | ) | (19,103 | ) | (541,935 | ) | ||||||||
Class R4 | (22,060 | ) | (654,209 | ) | (339,708 | ) | (9,563,037 | ) | ||||||||
Class R6 (formerly Class R5) | (53,553 | ) | (1,615,033 | ) | (61,541 | ) | (1,849,641 | ) | ||||||||
(4,987,204 | ) | $(143,850,772 | ) | (6,982,790 | ) | $(198,827,123 | ) |
30
Table of Contents
Notes to Financial Statements – continued
Year ended 10/31/16 | Year ended 10/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Class A | (648,889 | ) | $(19,174,974 | ) | (1,542,938 | ) | $(44,226,156 | ) | ||||||||
Class B | (137,748 | ) | (3,935,449 | ) | (62,293 | ) | (1,762,306 | ) | ||||||||
Class C | (282,303 | ) | (7,908,190 | ) | 12,529 | 258,191 | ||||||||||
Class I | (140,820 | ) | (2,592,573 | ) | (1,319,191 | ) | (37,557,035 | ) | ||||||||
Class R1 | (50,755 | ) | (1,474,800 | ) | 8,208 | 240,961 | ||||||||||
Class R2 | (9,618 | ) | (250,124 | ) | 4,993 | 153,036 | ||||||||||
Class R3 | (5,859 | ) | (168,314 | ) | 5,550 | 152,619 | ||||||||||
Class R4 | (735 | ) | (30,309 | ) | (121,901 | ) | (3,359,603 | ) | ||||||||
Class R6 (formerly Class R5) | 86,078 | 2,316,374 | 185,194 | 5,155,894 | ||||||||||||
(1,190,649 | ) | $(33,218,359 | ) | (2,829,849 | ) | $(80,944,399 | ) |
Effective August 26, 2016, Class R5 shares were renamed Class R6 shares.
(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 October 31, 2016, the fund’s commitment fee and interest expense were $2,526 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 | 3,281,357 | 99,763,015 | (100,527,428 | ) | 2,516,944 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $37 | $— | $12,796 | $2,516,944 |
31
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust XII and Shareholders of MFS Equity Opportunities Fund:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of MFS Equity Opportunities Fund (the Fund) (one of the series constituting the MFS Series Trust XII) as of October 31, 2016, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. 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 October 31, 2016, by correspondence with the custodian and others. 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 Equity Opportunities Fund (one of the series constituting the MFS Series Trust XII) at October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 19, 2016
32
Table of Contents
TRUSTEES AND OFFICERS — IDENTIFICATION AND BACKGROUND
The Trustees and Officers of the Trust, as of December 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 the Past Five Years | Other Directorships (j) | ||||
INTERESTED TRUSTEES | ||||||||
Robert J. Manning (k) (age 53) | 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 75) | Trustee | January 2006 | Consultant – investment company industry regulatory and compliance matters | N/A |
33
Table of Contents
Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal 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 62) | 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 |
34
Table of Contents
Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal 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 53) | 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 46) | 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 | ||||
Mark N. Polebaum (k) (age 64) | Secretary and Clerk | January 2006 | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary | N/A |
35
Table of Contents
Trustees and Officers – continued
Name, Age | Position(s) Held with Fund | Trustee/Officer Since (h) | Principal the Past Five Years | Other Directorships (j) | ||||
Matthew A. Stowe (k) (age 42) | 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. |
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.
36
Table of Contents
Trustees and Officers – continued
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 December 1, 2016, the Trustees served as board members of 138 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 Managers | ||
Jim Fallon Matt Krummell Jonathan Sage Jed Stocks |
37
Table of Contents
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
38
Table of Contents
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.
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 2nd 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 1st quintile for the one-year period and the 2nd 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 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 advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also 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 and total expense ratio were each lower than the Broadridge expense group median.
39
Table of Contents
Board Review of Investment Advisory Agreement – continued
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, $2.5 billion and $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 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
40
Table of Contents
Board Review of Investment Advisory Agreement – continued
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.
41
Table of Contents
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.
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.
42
Table of Contents
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 $440,494 as capital gain dividends paid during the fiscal year.
For corporate shareholders, 100% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.
43
Table of Contents
rev. 3/16
| WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? | ![]() |
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. |
44
Table of Contents
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 doesn’t 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. |
45
Table of Contents
Save paper with eDelivery.
MFS® will send you prospectuses, |
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.
2. Log in via MFS® Access.
3. Select eDelivery.
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.
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
Table of Contents
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 definitions 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 the series of the Registrant (the series referred to as the “Fund”). The tables below set forth the audit fees billed to 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 October 31, 2016 and 2015, audit fees billed to the Fund by E&Y were as follows:
Audit Fees | ||||||||
2016 | 2015 | |||||||
Fees billed by E&Y: | ||||||||
MFS Equity Opportunities Fund | 36,654 | 36,654 |
Table of Contents
For the fiscal years ended October 31, 2016 and 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 | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS Equity Opportunities Fund | 0 | 0 | 7,772 | 8,052 | 1,194 | 1,026 |
Audit-Related Fees1 | Tax Fees2 | All Other Fees3 | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
Fees billed by E&Y: | ||||||||||||||||||||||||
To MFS and MFS Related Entities of MFS Equity Opportunities Fund* | 1,612,499 | 920,675 | 0 | 0 | 116,023 | 99,446 |
Aggregate Fees for Non-audit Services | ||||||||
2016 | 2015 | |||||||
Fees Billed by E&Y: | ||||||||
To MFS Equity Opportunities Fund, MFS and MFS Related Entities# | 1,863,088 | 1,280,199 |
* | 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 Fund (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 Fund 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 review of Rule 38a-1 compliance program. |
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 Funds 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
Table of Contents
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 in each period between 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 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.
ITEM 6. | INVESTMENTS |
A schedule of investments of MFS Equity Opportunities 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.
Table of Contents
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. |
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 |
Table of Contents
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. |
Table of Contents
Notice
A copy of the 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.
Table of Contents
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 XII
By (Signature and Title)* | ROBIN A. STELMACH | |
Robin A. Stelmach, President |
Date: December 19, 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: December 19, 2016
By (Signature and Title)* | DAVID L.DILORENZO | |
David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: December 19, 2016
* | Print name and title of each signing officer under his or her signature. |