<PAGE>
MFS
UNION
STANDARD(SM)
EQUITY
FUND
Annual Report
September 30, 1995
[A picture of three American flags.]
<PAGE>
MFS UNION STANDARD(SM) EQUITY FUND
TRUSTEES SHAREHOLDER SERVICE CENTER
A. Keith Brodkin* MFS Service Center, Inc.
Chairman and President P.O. Box 1400
Boston, MA 02104-9985
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises For general information, call toll free:
1-800-637-8730 any business day from
William R. Gutow 9 a.m. to 5 p.m. Eastern time.
Private Investor;
Senior Vice President,
Capitol Entertainment CUSTODIAN
State Street Bank and Trust Company
INVESTMENT ADVISER
Massachusetts Financial
Services Company AUDITORS
500 Boylston Street Deloitte & Touche LLP
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
William S. Harris*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
[Recycle Logo] This report is printed on recycled paper.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
For most of the 12 months ended September 30, 1995, the stock market made
impressive gains as investors reacted positively to the apparent success of the
Federal Reserve Board in engineering a "soft landing" of the domestic economy
through a more restrictive monetary policy. The Federal Reserve's credit
tightening measures in 1994 and early 1995 have resulted in a slowdown in
economic activity, marked by lower interest rates and low inflation.
For the year ended September 30, 1995, the Fund provided a total return of
+24.2%, compared to a total return over the same period of +27.5% for the ACS
Labor Sensitivity Index(SM) (the LSI(SM), an unmanaged index of common
stocks of companies selected on the basis of labor-sensitive criteria. A
discussion of the factors which contributed to the Fund's underperformance
relative to the LSI may be found in the Portfolio Performance and Strategy
section of this letter.
Economic Outlook
Moderate, but sustainable growth appears to be the hallmark of the economic
expansion's fifth year. After slowing earlier in the summer, homebuying was
making modest gains by September 30, although consumer spending was still
showing some areas of weakness. Businesses, meanwhile, continued to work off
excess inventories and reduce factory output. At the same time, overseas
economies, particularly those of Germany and Japan, have not recovered as
expected, limiting U.S. export growth. However, the Federal Reserve's consistent
and, so far, successful efforts to fight inflation seem to be giving consumers
and businesses enough confidence to help maintain 2 1/2% to 3% real (adjusted
for inflation) growth in gross domestic product, at least through 1995.
Interest Rates
Although the Federal Reserve implemented a one-quarter percentage point decrease
in short-term interest rates in July, the effects of its seven rate increases,
which began in early 1994 and ended in February of this year, are still being
felt throughout the economy. While there have been some increases in commodity
prices, companies have not been able to pass along most of those higher costs.
This is partly due to the need to keep fighting for market share, and also
because wages and benefits of U.S. workers are still growing at a pace that is
near, or perhaps below, the inflation rate, limiting consumer buying power. At
the end of July, the nation's employment cost index had risen at a rate of just
2.8% over the previous year, helping to contain cost pressures. At the same
time, however, the bond markets have apparently become convinced that economic
growth will be contained for the near future and have allowed long-term interest
rates to decline. Although previous monetary easing by the Federal Reserve has
been followed by additional rate reductions, prospects for further decreases in
the current environment are uncertain. Still, with long-term government bonds
yielding approximately 6.6%, in an environment of 2 1/2% to 3% inflation, real
rates of return in the fixed-income markets remain relatively attractive.
Stock Market
After several months of very strong performance in 1995, the stock market became
somewhat volatile in the last few weeks before September 30, as concerns about
selected earnings disappointments had a negative effect on stock prices. Still,
the longer-term outlook for a number of growth sectors, such as technology,
leisure and household products, remains favorable, as do the prospects for many
small-company stocks because of their growth potential relative to larger
companies. Also, companies' increasing emphasis on cost-containment, coupled
with their growing use of technology, has helped keep them competitive and
reasonably profitable. Finally, we have been watching with interest the recent
series of corporate mergers in such industries as banking, entertainment, health
care and consumer products. Unlike previous merger waves, which were often
intended to build conglomerates of loosely related or unrelated businesses, this
year's mergers of similar companies seem to be more rationally based on the goal
of helping the merged companies reduce costs and, in general, be more
competitive. Looking ahead, we believe these factors, along with a stabilizing
interest rate environment and a continuation of favorable earnings reports, will
help maintain the stock market's positive momentum.
Portfolio Performance and Strategy
While the Fund's returns lagged the LSI for the 12 months ended September 30,
much of that underperformance came during the Fund's first fiscal quarter, or
the last three months of 1994. This was partly the result of the Fund's
underweightings, relative to the LSI, of consumer staples and utility stocks.
For the first nine months of 1995, however, the Fund reported a total return of
+27.2%, compared with a +27.3% return for the LSI. Part of the reason for the
strength of the LSI versus the Fund is that over 20% of the LSI is made up of
General Electric, AT&T, Exxon, Coca-Cola, Philip Morris, and Merck. However,
these stocks, whose performance exceeded expectations in this year's strong
market, only represented 13% of the Fund's portfolio.
Going forward, our portfolio strategy -- like our economic assumptions --
has not changed materially since our last report in April. We believe the
economy will remain relatively sluggish in response to the Federal Reserve's
actions, with relatively low inflation and lower interest rates, but no
recession. Also, in addition to weakness in the automobile, housing and retail
industries cited in our last report, construction equipment and heavy truck
companies have reported substantially lower sales numbers than expected. If the
dollar continues to strengthen, exports may begin to suffer. Meanwhile, the
outlook for inflation remains positive, with the possible exception of food
prices; poor weather has resulted in reduced crop forecasts and left stocks of
surplus grain near record low levels. Based on these assumptions, we have
continued to reduce the portfolio's exposure to cyclical or economically
sensitive industries. At the same time, we have increased our positions in
interest-sensitive utilities, especially regional telephone companies such as
BellSouth and Ameritech, while adding to our positions in the leisure,
agriculture and aerospace industries.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ William S. Harris
A. Keith Brodkin William S. Harris
Chairman and President Portfolio Manager
October 13, 1995
<PAGE>
PORTFOLIO MANAGER PROFILE
William Harris joined the MFS Research Department in 1967 as an industry
specialist. A graduate of the University of Virginia, he was named Investment
Officer in 1969, Vice President - Investments in 1970, Senior Vice President in
1979 and Executive Vice President in 1982. Mr. Harris is a member of The
Boston Security Analysts Society, Inc.
OBJECTIVE AND POLICIES
The Fund's investment objective is to provide long-term growth of capital that,
net of Fund expenses, exceeds the performance of the ACS Labor Sensitivity Index
(the LSI). Dividend and interest income from portfolio securities, if any, is
incidental to long-term growth of capital.
The Fund invests primarily in equity securities of companies possessing
opportunities for long-term capital growth which are contained in the LSI. The
Fund may also invest in securities convertible into common or preferred stock.
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Percent of Percent of
Five Largest Industries Net Assets Ten Largest Holdings Net Assets
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Food and Beverage Products 12.6 American Telephone & Telegraph Co. 3.7
- ------------------------------------------------ -------------------------------------------------
Utilities - Telephone 12.0 General Electric Co. 3.6
- ------------------------------------------------ -------------------------------------------------
Utilities - Electric 8.6 Exxon Corp. 3.0
- ------------------------------------------------ -------------------------------------------------
Oils 7.3 Coca-Cola Co. 2.9
- ------------------------------------------------ -------------------------------------------------
Consumer Goods and Services 6.7 Philip Morris Cos., Inc. 2.8
- ------------------------------------------------ -------------------------------------------------
Merck & Co., Inc. 2.7
-------------------------------------------------
BellSouth Corp. 2.5
-------------------------------------------------
Ameritech Corp. 2.2
-------------------------------------------------
Citicorp 2.0
-------------------------------------------------
du Pont (E.I.) de Nemours & Co., Inc. 1.9
-------------------------------------------------
</TABLE>
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS Union Standard Equity Fund in comparison to various market indicators.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. You
cannot invest in an index. All results reflect the reinvestment of all dividends
and capital gains.
<PAGE>
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the Period from February 1, 1994 to September 30, 1995)
Line graph representing the growth of a $5,000,000 investment for the period
from February 1, 1994 to September 30, 1995. The graph is scaled from $4,000,000
to $6,500,000 in $500,000 segments. The years are marked in 3-month segments
from 1990 to 1995. There are three lines drawn to scale. One is a solid line
representing MFS Union Standard Equity Fund, a second line of short dashes
represents the S&P 500, and a third line of medium-short dashes represents the
Consumer Price Index.
MFS Union Standard Equity Fund $5,863,570
S&P 500 $6,356,000
Consumer Price Index $5,239,500
AVERAGE ANNUAL TOTAL RETURNS
1/14/94*-
1 Year 9/30/95
- ------------------------------------------------------------------------------
MFS Union Standard Equity Fund +24.21% +11.11%
- ------------------------------------------------------------------------------
ACS Labor Sensitivity Index (LSI) +27.53% +14.17%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +29.71% +15.48%
- ------------------------------------------------------------------------------
Consumer Price Index(S) + 2.54% + 2.85%
- ------------------------------------------------------------------------------
* Commencement of investment operations. Benchmark comparisons begin on
February 1, 1994 except for ACS LSI, which is from January 14, 1994.
+ The Standard & Poor's 500 Composite Index is a popular, unmanaged index of
common stock performance.
(S) The Consumer Price Index is a popular measure of change in prices.
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual fund
will vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost. Shares of the Fund have no initial
sales charge or contingent deferred sales charge but have annual fees and
expenses. All Fund results reflect the applicable expense subsidy which is
explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be rescinded
by MFS at the earlier of the date of repayment of reimbursement in its entirety,
or December 31, 1998.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 1995
Common Stocks and Warrants - 98.2%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Aerospace - 5.6%
Boeing Co. 6,000 $ 409,500
Lockheed Martin Corp. 9,000 604,125
McDonnell Douglas Corp. 8,000 662,000
Raytheon Co. 4,000 340,000
-----------
$ 2,015,625
- -----------------------------------------------------------------------------
Agricultural Products - 2.3%
AGCO Corp. 10,000 $ 455,000
Case Corp. 10,000 367,500
-----------
$ 822,500
- -----------------------------------------------------------------------------
Airlines - 2.4%
Northwest Airlines Corp. 10,000 $ 425,000
Southwest Airlines Co. 17,000 429,250
-----------
$ 854,250
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.7%
Hartmarx Corp. 40,000 $ 240,000
- -----------------------------------------------------------------------------
Automotive - 1.3%
Ford Motor Co. 15,000 $ 466,875
- -----------------------------------------------------------------------------
Banks and Credit Companies - 3.6%
BankAmerica Corp. 10,000 $ 598,750
Citicorp 10,000 707,500
-----------
$ 1,306,250
- -----------------------------------------------------------------------------
Chemicals - 3.0%
du Pont (E.I.) de Nemours & Co., Inc. 10,000 $ 687,500
Monsanto Co. 4,000 403,000
-----------
$ 1,090,500
- -----------------------------------------------------------------------------
Consumer Goods and Services - 6.7%
Department 56, Inc.* 10,000 $ 467,500
Philip Morris Cos., Inc. 12,000 1,002,000
Seagrams Ltd. 10,000 358,750
Tyco International Ltd. 9,000 567,000
-------------
$ 2,395,250
- -----------------------------------------------------------------------------
Defense Electronics - 1.9%
Loral Corp. 12,000 $ 684,000
- -----------------------------------------------------------------------------
Electrical Equipment - 6.0%
General Electric Co. 20,000 $ 1,275,000
Honeywell, Inc. 12,000 514,500
Westinghouse Electric Corp. 25,000 375,000
-----------
$ 2,164,500
- -----------------------------------------------------------------------------
Entertainment - 3.9%
Circus Circus Enterprises, Inc.* 10,000 $ 280,000
Disney (Walt) Co. 7,500 430,313
Harrah's Entertainment, Inc.* 12,000 351,000
Mirage Resorts, Inc.* 10,000 328,750
-------------
$ 1,390,063
- -----------------------------------------------------------------------------
Food and Beverage Products - 12.6%
Campbell Soup Co. 7,100 $ 356,775
Coca-Cola Co. 15,000 1,035,000
General Mills, Inc. 10,000 557,500
Hershey Foods Corp. 7,500 482,813
Interstate Bakeries Corp. 20,000 422,500
Kellogg Co. 5,000 361,875
PepsiCo, Inc. 12,000 612,000
Ralston Purina Co. 12,000 694,500
-----------
$ 4,522,963
- -----------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Scott Paper Co. 8,000 $ 388,000
- -----------------------------------------------------------------------------
Machinery - 2.9%
Deere & Co., Inc. 4,000 $ 325,500
Ingersoll Rand Co. 10,000 375,000
York International Corp. 8,100 341,212
-----------
$ 1,041,712
- -----------------------------------------------------------------------------
Medical and Health Products - 6.2%
American Home Products Corp. 8,000 $ 679,000
Johnson & Johnson 8,000 593,000
Merck & Co., Inc. 17,000 952,000
-----------
$ 2,224,000
- -----------------------------------------------------------------------------
Oils - 7.3%
Amoco Corp. 8,000 $ 513,000
Chevron Corp. 9,000 437,625
Exxon Corp. 15,000 1,083,750
Mobil Corp. 6,000 597,750
-----------
$ 2,632,125
- -----------------------------------------------------------------------------
Pollution Control - 1.1%
USA Waste Services, Inc.* 20,000 $ 390,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.1%
Pulitzer Publishing Co. 7,500 $ 388,125
- -----------------------------------------------------------------------------
Restaurants and Lodging - 1.3%
Promus Hotel Corp.* 20,100 $ 457,275
- -----------------------------------------------------------------------------
Stores - 1.4%
Federated Department Stores, Inc.* 18,000 $ 510,750
- -----------------------------------------------------------------------------
Supermarkets - 3.1%
Kroger Co.* 18,000 $ 614,250
Safeway, Inc. 12,000 501,000
-----------
$ 1,115,250
- -----------------------------------------------------------------------------
Utilities - Electric - 8.6%
Cinergy Corp. 20,000 $ 557,500
DPL, Inc. 20,000 462,500
FPL Group, Inc. 12,000 490,500
Illinova Corp. 20,000 542,500
Nipsco Industries, Inc. 16,000 558,000
Pinnacle West Capital Corp. 18,000 472,500
-----------
$ 3,083,500
- -----------------------------------------------------------------------------
Utilities - Gas - 2.0%
Pacific Enterprises 18,000 $ 452,250
Panhandle Eastern Corp. 10,000 272,500
-----------
$ 724,750
- -----------------------------------------------------------------------------
Utilities - Telephone - 12.0%
American Telephone & Telegraph Co. 20,000 $ 1,315,000
Ameritech Corp. 15,000 781,875
BellSouth Corp. 12,000 877,500
Frontier Corp. 20,000 532,500
GTE Corp. 10,000 392,500
SBC Communications, Inc. 7,000 385,000
-----------
$ 4,284,375
- -----------------------------------------------------------------------------
Total Common Stocks and Warrants (Identified Cost,
$29,305,231) $35,192,638
- -----------------------------------------------------------------------------
Short-Term Obligation - 0.8%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 10/04/95,
at Amortized Cost $ 300 $ 299,860
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $29,605,091) $35,492,498
Other Assets, Less Liabilities - 1.0% 349,414
- -----------------------------------------------------------------------------
Net Assets - 100.0% $35,841,912
- -----------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
September 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $29,605,091) $35,492,498
Cash 94,038
Receivable for investments sold 2,611,381
Dividends receivable 60,800
Deferred organization expenses 19,100
Other assets 299
-----------
Total assets $38,278,116
-----------
Liabilities:
Payable for investments purchased $ 2,414,567
Payable to affiliates -
Management fee 1,656
Distribution fee 292
Accrued expenses and other liabilities 19,689
-----------
Total liabilities $ 2,436,204
-----------
Net assets $35,841,912
===========
Net assets consist of:
Paid-in capital $28,923,445
Unrealized appreciation on investments 5,887,407
Accumulated undistributed net realized gain on investments 636,154
Accumulated undistributed net investment income 394,906
-----------
Total $35,841,912
===========
Shares of beneficial interest outstanding 3,023,850
===========
Net asset value, offering price, and redemption price per
share (net assets of $35,841,912 / 3,023,850 shares of
beneficial interest outstanding) $11.85
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended September 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 704,104
Interest 58,430
----------
Total investment income $ 762,534
----------
Expenses -
Management fee $ 193,107
Trustees' compensation 6,200
Shareholder servicing agent fee 1,306
Distribution fee 44,473
Auditing fees 31,900
Printing 28,856
Custodian fee 17,072
Amortization of organization expenses 4,949
Legal fees 1,523
Miscellaneous 2,071
----------
Total expenses $ 331,457
Reduction of expenses by investment adviser (25,470)
Fees paid indirectly (9,478)
----------
Net expenses $ 296,509
----------
Net investment income $ 466,025
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $ 806,897
Change in unrealized appreciation on investments 5,900,373
----------
Net realized and unrealized gain on investments $6,707,270
----------
Increase in net assets from operations $7,173,295
==========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Period Ended
September 30, 1995 September 30, 1994*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations - $ 466,025 $ 153,346
Net investment income
Net realized gain (loss) on investments 806,897 (170,743)
Net unrealized gain (loss) on investments 5,900,373 (12,966)
----------- -----------
Increase (decrease) in net assets from operations $ 7,173,295 $ (30,363)
----------- -----------
Distributions declared to shareholders from net investment income $ (224,465) $ --
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 9,572,700 $22,212,350
Net asset value of shares issued to shareholders in reinvestment of distributions 224,465 --
Cost of shares reacquired (3,088,531) (47,539)
----------- -----------
Increase in net assets from Fund share transactions $ 6,708,634 $22,164,811
----------- -----------
Total increase in net assets $13,657,464 $22,134,448
Net assets:
At beginning of period 22,184,448 50,000
----------- -----------
At end of period (including accumulated undistributed net investment income of $394,906 $35,841,912 $22,184,448
and $153,346, respectively) =========== ===========
*For the period from the commencement of investment operations, January 14,
1994 to September 30, 1994.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Year Ended Period Ended
September 30, 1995 September 30, 1994*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.64 $10.00
------- ------
Income from investment operations++-
Net investment income** $ 0.17 $ 0.12
Net realized and unrealized gain
(loss) on investments 2.14 (0.48)
------- ------
Total from investment operations $ 2.31 $(0.36)
------- ------
Less distributions declared to
shareholders from net investment income $ (0.10) $ --
------- ------
Net asset value - end of period $ 11.85 $ 9.64
======= ======
Total return 24.21% (3.60)%
Ratios (to average net assets)/
Supplemental data**:
Expenses## 1.00% 1.00%+
Net investment income 1.58% 1.55%+
Portfolio turnover 125% 48%
Net assets at end of period (000 omitted) $35,842 $22,184
*For the period from the commencement of investment operations, January 14,
1994 to September 30, 1994.
+Annualized.
++Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly. The ratio of net
expenses to average net assets is 1.00%.
**The investment adviser voluntarily agreed to maintain the expenses of the Fund
at not more than 1.00% of average daily net assets. If this agreement had not
been in effect, the net investment income per share and the ratios would have
been:
Net investment income $0.16 $0.07
Ratios (to average net assets):
Expenses## 1.12% 1.64%+
Net investment income 1.49% 0.91%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a diversified series of MFS Union
Standard Trust (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.
(2) Significant Accounting Policies
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Securities for which there are no such quotations
or valuations are valued at fair value as determined in good faith by or at
the direction of the Trustees.
Deferred Organization Expenses - Costs incurred by the Fund in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of operations of the Fund.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of
net investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return, and
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of average daily net assets. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to bear all of the Fund's
operating expenses until December 31, 1998. The Fund in turn will pay MFS an
expense reimbursement fee not greater than 1.00% of average daily net assets.
To the extent that the expense reimbursement fee exceeds the Fund's actual
expenses, the excess will be applied to the amount paid by MFS in prior years.
At September 30, 1995, the aggregate unreimbursed expenses owed to MFS by the
Fund amounted to $87,141, including $25,470 incurred in the current year. The
Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC).
Distributor - MFD, a wholly owned subsidiary of MFS, is distributor of the
Fund. The Trustees have adopted a separate distribution plan pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The distribution plan provides that the Fund will pay MFD up to 0.25% per
annum of the Fund's average daily net assets in order that MFD may pay
expenses on behalf of the Fund related to the distribution and servicing of
its shares. This rate has been set at 0.15% for an indefinite period.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated
based on the number of shareholder accounts in the Fund.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, aggregated $42,142,301 and $34,968,423,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $29,605,091
===========
Gross unrealized appreciation $ 6,015,717
Gross unrealized depreciation (128,310)
-----------
Net unrealized appreciation $ 5,887,407
===========
(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 (without par
value). Transactions in Fund shares were as follows:
Year Ended Period Ended
September 30, 1995 September 30, 1994*
---------------------- ------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 983,045 $9,572,700 2,301,136 $22,212,350
Shares issued to
shareholders in
reinvestment
of distributions 24,033 224,465 -- --
Shares reacquired (284,399) (3,088,531) (4,965) (47,539)
------- ---------- --------- -----------
Net increase 722,679 $6,708,634 2,296,171 $22,164,811
======= ========== ========= ===========
*For the period from commencement of investment operations, January 14, 1994
to September 30, 1994.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the year ended September
30, 1995 was $356.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Union Standard Trust and Shareholders of MFS Union
Standard Equity Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Union Standard Equity Fund (one
of the series constituting MFS Union Standard Trust) as of September 30, 1995,
the related statement of operations for the year then ended, and the statement
of changes in net assets, and financial highlights for the year ended
September 30, 1995 and for the period from January 14, 1994 (the commencement
of investment operations) through September 30, 1994. 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 generally accepted auditing
standards. 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at September 30, 1995 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Union Standard
Equity Fund at September 30, 1995, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 3, 1995
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This 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.
<PAGE>
MFS UNION STANDARD(SM)
EQUITY FUND
500 Boylston Street
Boston, MA 02116
