<PAGE>
MFS
Union
Standard(SM)
Equity
Fund
Semiannual Report
March 31, 1996
[Graphic Omitted]
<PAGE>
MFS(R) UNION STANDARD(SM) EQUITY FUND
<TABLE>
<CAPTION>
<S> <C>
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
500 Boylston Street
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 [Logo] This report is printed on recycled paper.
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
The U.S. stock market, as measured by both the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock performance,
and the Dow Jones Industrial Average, an unmanaged index of the performance of
30 large-company stocks, recorded gains of over 37% in 1995. It would seem
logical to expect the stock market to pause after such an extraordinary year;
however, the first quarter of 1996 has continued on a positive course, as the
S&P 500 and the Dow produced gains of 5.4% and 9.8%, respectively, while the
Fund provided a total return of 5.5% for the same three-month period.
For the six months ended March 31, 1996, the Fund provided a total return
of 14.8%, compared with a 13.9% return over the same period for the ACS Labor
Sensitivity Index (the LSI), an unmanaged index of companies selected on the
basis of labor-sensitive criteria. The Fund's three-month total return matched
the 5.5% return of the LSI.
Economic Environment
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to
quarter. Thus, while one quarter may experience an annualized rate of growth
in Gross Domestic Product (GDP) of less than 1%, another quarter may see
annualized growth in excess of 3% -- but, for the year, we believe growth
could stay within our expected range of 2% to 2 1/2%. While some increase in
consumer spending has taken place in the early months of this year, consumers,
who represent two-thirds of the economy, remain in a somewhat weakened
position, due in part to an increase in consumer installment debt in excess of
30% over the past two years. Meanwhile, growth is also being constrained by
ongoing economic doldrums in Europe and Japan, important markets for U.S.
exports. Here again, we are seeing a few tentative signs, particularly in
Japan, of modest recoveries that could lead to improved prospects for U.S.
exporters. Also, the "lag effect" of increases in short-term interest rates by
the Federal Reserve Board in 1994 and into 1995 is helping to keep growth in
check. This lag effect can last up to two years, and although the Fed did
reduce short-term rates late last year and earlier this year, we expect it to
continue its diligent anti-inflationary policies. Finally, it appears that
inflation is likely to remain under control this year, due in part to a
continued moderation in wage pressures and the subdued level of economic
growth. At the same time, we believe the current upward pressure on energy
prices bears close scrutiny, as energy is an important component of the
inflation outlook.
Stock Market
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity markets this
year. Although we believe the equity markets represent fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates, and an acceleration of
inflation coupled with an additional slowdown in corporate earnings growth,
could have a negative effect on the stock markets. However, to the extent that
some earnings disappointments can be taken as a sign that the economy is not
overheating, this may prove beneficial for the longer-term health of the
equity markets. We continue to believe that many of the technology-driven
productivity gains that U.S. companies have made in recent years will continue
to enhance corporate America's competitiveness and profitability. Therefore,
we remain quite positive on the long-term viability of the equity markets.
Portfolio Strategy
In our judgment, the stock market will continue to respond favorably as the
economy grows slowly, inflation remains relatively low, and interest rates are
flat to declining. Recently, bond yields have risen more than 100 basis points
(1.00%), as fixed-income investors have become increasingly concerned that
higher employment numbers are a sign of more-rapid growth which could lead to
increased inflation.
We believe this fear could soon fade, as we continue to forecast a
sluggish economic environment. However, we have modified our portfolio
strategy by increasing our exposure to more cyclical, or economically
sensitive, industries. This includes such groups as automobile, railroad,
airline, chemical, and machinery companies. To help provide funds for these
new holdings, we have reduced our positions in such industries as utilities,
food and beverages, medical and health care, and consumer goods and services.
We have undertaken these changes in an attempt to bring more balance to the
portfolio, as we are becoming convinced that late in 1996 or early in 1997 the
economy may begin to show signs of recovery. As a result of these changes,
some of our larger holdings at this time include General Electric, Coca-Cola,
Exxon, AT&T, and Merck.
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
April 12, 1996
<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 contained in the
LSI possessing opportunities for long-term capital growth. The Fund may also
invest in securities convertible into common or preferred stock. Shares of the
Fund are purchased at net asset value.
PORTFOLIO CONCENTRATION AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Percent of Percent of
Five Largest Industries Net Assets Ten Largest Holdings Net Assets
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Food and Beverage Products 11.1 General Electric Co. 4.6
- ----------------------------------------------------- -------------------------------------------------
Utilities - Telephone 9.2 Coca-Cola Co. 3.2
- ----------------------------------------------------- -------------------------------------------------
Electrical Equipment 7.2 Exxon Corp. 3.2
- ----------------------------------------------------- -------------------------------------------------
Medical and Health Products 7.2 AT&T Corp. 3.0
- ----------------------------------------------------- -------------------------------------------------
Utilities - Electric 7.2 Philip Morris Cos., Inc. 2.6
- ----------------------------------------------------- -------------------------------------------------
Merck & Co., Inc. 2.5
-------------------------------------------------
Johnson & Johnson 2.0
-------------------------------------------------
PepsiCo, Inc. 1.9
-------------------------------------------------
Mobil Corp. 1.8
-------------------------------------------------
American Home Products Corp. 1.7
-------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY
Because mutual funds like MFS Union Standard Equity Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
(net asset value change including reinvested distributions)
1/14/94+ -
6 Months 1 Year 3/31/96
- ------------------------------------------------------------------------------
Cumulative Total Return +14.76% +34.38% +37.41%
- ------------------------------------------------------------------------------
Average Annual Total Return -- +34.38% +15.46%
- ------------------------------------------------------------------------------
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares,
when redeemed, may be worth more or less than their original cost. 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 at any time.
+ Commencement of investment operations.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - March 31, 1996
Common Stocks - 97.9%
- ---------------------------------------------------------------------------
Issuer Shares Value
- ---------------------------------------------------------------------------
Aerospace - 6.1%
Allied Signal, Inc. 10,000 $ 591,250
Boeing Co. 6,000 519,750
Lockheed Martin Corp. 4,500 341,437
McDonnell Douglas Co. 6,000 549,750
Raytheon Co. 12,000 615,000
United Technologies Corp. 4,000 449,000
-----------
$ 3,066,187
- ---------------------------------------------------------------------------
Agricultural Products - 2.7%
AGCO Corp. 24,000 $ 579,000
Case Corp. 15,000 763,125
-----------
$ 1,342,125
- ---------------------------------------------------------------------------
Airlines - 2.0%
AMR Corp.* 4,000 $ 358,000
Continental Airlines, Inc., "B"* 5,000 281,875
Delta Airlines, Inc. 5,000 384,375
-----------
$ 1,024,250
- ---------------------------------------------------------------------------
Apparel and Textiles - 1.4%
Hartmarx Corp.* 40,000 $ 190,000
Liz Claiborne, Inc. 15,000 513,750
-----------
$ 703,750
- ---------------------------------------------------------------------------
Automotive - 3.0%
Chrysler Corp. 10,000 $ 622,500
Ford Motor Co. 15,000 515,625
General Motors Corp. 7,500 399,375
-----------
$ 1,537,500
- ---------------------------------------------------------------------------
Banks and Credit Companies - 2.4%
BankAmerica Corp. 10,000 $ 775,000
Firstar Corp. 10,000 447,500
-----------
$ 1,222,500
- ---------------------------------------------------------------------------
Chemicals - 4.0%
du Pont (E. I.) de Nemours & Co. 10,000 $ 830,000
Monsanto Corp. 4,000 614,000
Union Carbide Corp. 12,000 595,500
-----------
$ 2,039,500
- ---------------------------------------------------------------------------
Consumer Goods and Services - 3.9%
Philip Morris Cos., Inc. 15,000 $ 1,316,250
Tyco International Ltd. 18,000 643,500
-----------
$ 1,959,750
- ---------------------------------------------------------------------------
Electrical Equipment - 7.2%
General Electric Co. 30,000 $ 2,336,250
Honeywell, Inc. 15,000 828,750
Westinghouse Electric Corp. 25,000 481,250
-----------
$ 3,646,250
- ---------------------------------------------------------------------------
Entertainment - 3.8%
Circus Circus Enterprises, Inc.* 15,000 $ 504,375
Disney (Walt) Co. 10,000 638,750
Harrah's Entertainment, Inc.* 12,000 352,500
Mirage Resorts, Inc.* 10,000 438,750
-----------
$ 1,934,375
- ---------------------------------------------------------------------------
Food and Beverage Products - 11.1%
Campbell Soup Co. 10,000 $ 608,750
Coca-Cola Co. 20,000 1,652,500
General Mills, Inc. 10,000 583,750
Interstate Bakeries Corp. 25,000 612,500
Kellogg Co. 5,000 378,750
PepsiCo, Inc. 15,000 948,750
Ralston-Purina, Inc. 12,000 802,500
-----------
$ 5,587,500
- ---------------------------------------------------------------------------
Machinery - 2.8%
Deere & Co., Inc. 12,000 $ 501,000
Ingersoll Rand Co. 10,000 407,500
York International Corp. 10,000 490,000
-----------
$ 1,398,500
- ---------------------------------------------------------------------------
Medical and Health Products - 7.2%
American Home Products Corp. 8,000 $ 867,000
Bristol-Myers Squibb Co. 6,000 513,750
Johnson & Johnson 11,000 1,014,750
Merck & Co., Inc. 20,000 1,245,000
-----------
$ 3,640,500
- ---------------------------------------------------------------------------
Metals and Minerals - 1.0%
Aluminum Cos. of America 8,000 $ 501,000
- ---------------------------------------------------------------------------
Oils - 7.8%
Amoco Corp. 8,000 $ 578,000
Chevron Corp. 5,000 280,625
Exxon Corp. 20,000 1,632,500
Mobil Corp. 8,000 927,000
Texaco, Inc. 6,000 516,000
-----------
$ 3,934,125
- ---------------------------------------------------------------------------
Pollution Control - 1.3%
USA Waste Services, Inc.* 25,000 $ 637,500
- ---------------------------------------------------------------------------
Printing and Publishing - 1.0%
Pulitzer Publishing Co. 10,000 $ 520,000
- ---------------------------------------------------------------------------
Railroads - 1.8%
Burlington Northern, Inc. 6,000 $ 492,750
Conrail, Inc. 6,000 429,750
-----------
$ 922,500
- ---------------------------------------------------------------------------
Restaurants and Lodging - 1.1%
Promus Hotel Corp.* 20,600 $ 535,600
- ---------------------------------------------------------------------------
Stores - 4.0%
Federated Department Stores, Inc.* 10,000 $ 322,500
Rite Aid Corp. 15,000 463,125
Sears, Roebuck & Co. 10,000 487,500
TJX Cos., Inc. (The) (New) 30,000 753,750
-----------
$ 2,026,875
- ---------------------------------------------------------------------------
Supermarkets - 3.8%
Kroger Co.* 15,000 $ 607,500
Safeway, Inc.* 24,000 684,000
Von's Cos., Inc.* 20,000 622,500
-----------
$ 1,914,000
- ---------------------------------------------------------------------------
Utilities - Electric - 7.2%
CMS Energy Corp. 18,000 $ 531,000
Cinergy Corp. 15,000 450,000
DPL, Inc. 15,000 358,125
FPL Group, Inc. 10,000 452,500
Illinova Corp. 25,000 703,125
Nipsco Industries, Inc. 16,000 596,000
Pinnacle West Capital Corp. 18,000 519,750
-----------
$ 3,610,500
- ---------------------------------------------------------------------------
Utilities - Gas - 2.1%
Consolidated Natural Gas Co. 10,000 $ 435,000
Panhandle Eastern Corp. 20,000 622,500
-----------
$ 1,057,500
- ---------------------------------------------------------------------------
Utilities - Telephone - 9.2%
AT&T Corp. 25,000 $ 1,531,250
Ameritech Corp. 10,000 545,000
BellSouth Corp. 20,000 740,000
Frontier Corp. 20,000 630,000
GTE Corp. 15,000 658,125
SBC Communications, Inc. 10,000 526,250
-----------
$ 4,630,625
- ---------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $40,172,467) $49,392,912
- ---------------------------------------------------------------------------
Short-Term Obligation - 2.2%
- ---------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------
Federal Home Loan Bank, due 4/01/96,
at Amortized Cost $ 1,110 $ 1,110,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $41,282,467) $50,502,912
Other Assets, Less Liabilities - (0.1)% (54,253)
- ---------------------------------------------------------------------------
Net Assets - 100.0% $50,448,659
- ---------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
March 31, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $41,282,467) $50,502,912
Cash 2,322
Receivable for investments sold 443,910
Dividends receivable 70,360
Receivable from investment adviser 35,506
Deferred organization expenses 16,340
Other assets 299
-----------
Total assets $51,071,649
-----------
Liabilities:
Payable for investments purchased $ 566,850
Payable to affiliates -
Management fee 3,541
Distribution fee 625
Accrued expenses and other liabilities 51,974
-----------
Total liabilities $ 622,990
-----------
Net assets $50,448,659
===========
Net assets consist of:
Paid-in capital $39,049,051
Unrealized appreciation on investments 9,220,445
Accumulated undistributed net realized gain on investments 2,018,078
Accumulated undistributed net investment income 161,085
-----------
Total $50,448,659
===========
Shares of beneficial interest outstanding 3,838,527
===========
Net asset value, offering price, and redemption price per share
(net assets of $50,448,659 / 3,838,527 shares of beneficial
interest outstanding) $13.14
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended March 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividend $ 485,269
Interest 37,857
----------
Total investment income $ 523,126
----------
Expenses -
Management fee $ 144,411
Trustees' compensation 3,100
Shareholder servicing agent fee 1,645
Distribution fee 33,223
Auditing fees 16,370
Custodian fee 10,147
Printing 6,934
Amortization of organization expenses 2,481
Legal fees 2,446
Miscellaneous 6,100
----------
Total expenses $ 226,857
Fees paid indirectly (3,575)
Reduction of expenses by investment adviser (1,805)
----------
Net expenses $ 221,477
----------
Net investment income $ 301,649
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $2,339,507
Change in unrealized appreciation on investments 3,333,038
----------
Net realized and unrealized gain on investments $5,672,545
----------
Increase in net assets from operations $5,974,194
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) September 30, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 301,649 $ 466,025
Net realized gain on investments 2,339,507 806,897
Net unrealized gain on investments 3,333,038 5,900,373
----------- -----------
Increase in net assets from operations $ 5,974,194 $ 7,173,295
----------- -----------
Distributions declared to shareholders -
From net investment income (535,470) (224,465)
From net realized gain on investments (957,583) --
----------- -----------
Total distributions declared to shareholders $(1,493,053) $ (224,465)
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 9,159,443 $ 9,572,700
Net asset value of shares issued to shareholders in
reinvestment of distributions 1,449,495 224,465
Cost of shares reacquired (483,332) (3,088,531)
----------- -----------
Increase in net assets from Fund share transactions $10,125,606 $ 6,708,634
----------- -----------
Total increase in net assets $14,606,747 $13,657,464
Net assets:
At beginning of period 35,841,912 22,184,448
----------- -----------
At end of period (including accumulated undistributed net
investment income of $161,085 and $394,906, respectively) $50,448,659 $35,841,912
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Six Months Ended
March 31, 1996 Year Ended Period Ended
(Unaudited) September 30, 1995 September 30, 1994*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $11.85 $ 9.64 $10.00
------ ------ ------
Income from investment
operations# -
Net investment income(S) $ 0.09 $ 0.17 $ 0.12
Net realized and
unrealized gain
(loss) on investments 1.64 2.14 (0.48)
------ ------ ------
Total from investment
operations $ 1.73 $ 2.31 $(0.36)
------ ------ ------
Less distributions declared to shareholders -
From net investment
income $(0.16) $(0.10) $ --
From net realized gain
on investments (0.28) -- --
------ ------ ------
Total distributions
declared to
shareholders $(0.44) $(0.10) $ --
------ ------ ------
Net asset value -
end of period $13.14 $11.85 $ 9.64
====== ====== ======
Total return 14.76% 24.21% (3.60)%
Average commission
rate### $0.0586 -- --
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.00% 1.00% 1.00%+
Net investment income 1.36% 1.58% 1.55%+
Portfolio turnover 24% 125% 48%
Net assets at end of
period (000 omitted) $50,449 $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.
### Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
(S) 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 $ 0.09 $ 0.16 $ 0.07
Ratios (to average net
assets):
Expenses## 1.00% 1.12% 1.64%+
Net investment income 1.36% 1.49% 0.91%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a diversified series of MFS Union
Standard Series 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
General - The preparation of financial statements in conformity with 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 an
expense offset 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 effective annual rate
of 0.65% of average daily net assets. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to pay all of the Fund's
operating expenses exclusive of management, distribution, and service fees
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 amounts paid by MFS in prior years. At March 31,
1996, the aggregate unreimbursed expenses owed to MFS by the Fund amounted to
$89,845, including $1,805 incurred in the current period.
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 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 of 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 $18,649,433 and $10,121,703,
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 $41,282,467
===========
Gross unrealized appreciation $ 9,419,132
Gross unrealized depreciation (198,687)
-----------
Net unrealized appreciation $ 9,220,445
===========
(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:
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) September 30, 1995
----------------------- ----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 735,930 $ 9,159,443 983,045 $ 9,572,700
Shares issued to
shareholders in
reinvestment
of distributions 116,989 1,449,495 24,033 224,465
Shares reacquired (38,242) (483,332) (284,399) (3,088,531)
------- ----------- ------- -----------
Net increase 814,677 $10,125,606 722,679 $ 6,708,634
======== =========== ======= ===========
(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 six months ended
March 31, 1996 was $264.
---------------------------------------------
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
5/96
