<PAGE>
Annual Report
[LOGO] Year Ended
INVESTMENT MANAGEMENT September 30, 1996
MFS(R) UNION STANDARD(SM) EQUITY FUND
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Fund Manager's Overview .................................................... 2
Fund Manager's Profile ..................................................... 3
Fund Facts ................................................................. 3
Performance Summary ........................................................ 4
Portfolio Concentration .................................................... 5
Portfolio of Investments ................................................... 6
Financial Statements ....................................................... 9
Notes to Financial Statements .............................................. 13
Independent Auditors' Report ............................................... 16
Trustees and Officers ...................................................... 17
HIGHLIGHTS
* FOR THE PAST 12 MONTHS, THE FUND PROVIDED A TOTAL RETURN OF 20.96%,
COMPARED WITH A RETURN OF 19.82% FOR THE ACS LABOR SENSITIVITY INDEX.
* WE CONTINUE TO EMPHASIZE HIGH-QUALITY COMPANIES WITH STRONG OR
IMPROVING BALANCE SHEETS THAT HAVE THE ABILITY TO INCREASE EARNINGS
AND DIVIDENDS, EVEN IN A SLOWER ECONOMIC ENVIRONMENT.
* THE FUND'S LARGEST HOLDINGS ARE IN INDUSTRIAL GOODS AND SERVICES,
UTILITIES, CONSUMER STAPLES, ENERGY, AND RETAILING.
* WE BELIEVE THE CONSUMER STAPLES SECTOR, WITH COMPANIES SUCH AS COCA-
COLA, PHILIP MORRIS, ANHEUSER BUSCH, AND CAMPBELL SOUP, WILL SEE
STEADY, PREDICTABLE GROWTH.
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders:
[Photo of A. Keith Brodkin]
As we enter the last quarter of 1996, the U.S. economy appears to have settled
into a pattern of moderate growth and inflation -- two factors that we think
can be important contributors to a favorable long-term investment climate.
During the first quarter of 1996, real (inflation-adjusted) economic growth
was 2.3% on an annualized basis, followed by a rate of 4.7% in the second
quarter. Real growth in gross domestic product has surpassed our expectations
this year, and we now expect that growth for all of 1996 could exceed 2.5%.
Although individual consumers appear to be carrying an excessive debt load,
the consumer sector itself, which represents two-thirds of the economy,
continues to be impressive in its support of the automobile and housing
markets. Consumer spending has also been positively impacted by widespread job
growth and, more recently, rising wages. However, recent statistics appear to
be showing signs of a slowdown in consumer spending. This is particularly true
when considering overall retail sales, which have been flat for several
months. Furthermore, the economies of Europe and Japan continue to be in the
doldrums, weakening U.S. export markets while subduing the capital spending
plans of American corporations. Thus, while economic growth should continue,
we expect some slackening toward the end of the year.
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 market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in corporate earnings growth and interest rate
increases earlier in the year have raised some near-term concerns, as was seen
in July's stock market correction. 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 market in the near
term. However, to the extent that some earnings disappointments are taken as a
sign that the economy is not overheating, this may prove beneficial for the
equity market's longer-term health. 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, while we have some near-term concerns, we remain
quite constructive on the long-term viability of the equity market.
Finally, as you may notice, this report to shareholders incorporates a
number of changes which we hope you will find informative and useful.
Following the Fund Manager's Overview, we have added new information on the
Fund's holdings, including charts illustrating the portfolio's concentration
in the types of investments that meet its criteria. Near the back of the
report, telephone numbers and addresses are listed if you would like to
contact MFS.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
October 10, 1996
<PAGE>
FUND MANAGER'S OVERVIEW
Dear Shareholders:
[Photo of William F. Harris]
The stock market, as measured by the Standard & Poor's 500 Composite Index, a
popular, unmanaged index of common stock performance, and by the Dow Jones
Industrial Average, an unmanaged index of the performance of 30 large-company
stocks, posted gains of 13.49% and 16.95%, respectively, for the first nine
months of 1996. These results are particularly noteworthy in light of the 37%
increase for both of these indices in 1995.
For the 12 months ended September 30, 1996, the Fund provided a total
return of 20.96%, compared with a return of 19.82% for the ACS Labor
Sensitivity Index (the LSI), an unmanaged index of companies selected on the
basis of labor-sensitive criteria.
As we have reported to you, we believe the stock market will continue to
respond favorably as long as the economy grows slowly, inflation remains
relatively low, and interest rates are flat to down. Recently, interest rates,
as measured by the benchmark 30-year Treasury bond, rose back over the 7%
level due to investors' fears that the economy was growing too fast and that
inflation would soon begin to rise. As long as this economic tug-of-war
between growth that is seen as too fast or too slow continues, we can expect
volatility in the financial markets. However, in our judgment, because the
consumer is so highly leveraged (as evidenced by rising credit card
delinquencies and personal bankruptcies), there does not appear to be enough
strength to create more than modest economic growth over the next several
quarters. Our portfolio strategy continues to emphasize high-quality companies
with strong or improving balance sheets that have the ability to increase both
earnings and dividends, even in a slower economic environment.
The Fund's largest holdings are in industrial goods and services,
utilities, consumer staples, energy, and retailing. The industrial goods and
services group is made up of four subsections: aerospace, agriculture,
pollution control, and large electrical equipment companies such as General
Electric, Emerson Electric, and Honeywell. The aerospace industry has
undergone a massive consolidation. The remaining large companies dominate
their markets and generate large free cash flows to enhance shareholder value
through increased dividends and share repurchases. Agriculture has its own
economic cycle and is currently enjoying strong growth which appears
sustainable for several years. The pollution control industry has suffered
from poor pricing and unsuccessful ventures into other businesses. The better
companies, such as USA Waste Services and WMX Technologies, have reversed
these trends. The three large electrical companies are, in our judgment, among
the best-managed companies we follow. The utilities, like the aerospace
industry, have undergone a large consolidation. Even the very large regional
Bell operating companies are merging. The electric utilities are not only
merging with other electric utilities, but with other producers of energy,
such as natural gas companies.
We believe the consumer staples sector, with companies such as Coca-Cola,
Philip Morris, Anheuser Busch, and Campbell Soup, will see steady, predictable
growth, even if the economy should weaken over the next several quarters. The
energy companies, such as Mobil and Exxon, are undergoing substantial
restructuring which we expect to lower costs and provide them with funds to
increase shareholder value. In retail, the supermarket chains, such as Safeway
and Kroger, have provided the Fund with excellent results over the past two
years. Additionally, we have taken positions in retailers that have grown
through acquisitions, namely Federated Department Stores and TJX Companies.
Respectfully,
/s/ William S. Harris
William S. Harris
Fund Manager
<PAGE>
FUND MANAGER'S 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. A MEMBER OF
THE BOSTON SECURITY ANALYSTS SOCIETY, INC., MR. HARRIS HAS MANAGED MFS
UNION STANDARD TRUST SINCE ITS INCEPTION IN 1994.
LARGEST INDUSTRIES
Retailing ......................... 10.4%
Energy ............................ 12.7%
Utilities & Communications ........ 15.6%
Consumer Staples .................. 16.5%
Industrial Goods & Services ....... 20.2%
Other ............................. 24.6%
FUND FACTS
STRATEGY: 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). SHARES OF THE FUND ARE PURCHASED AT NET ASSET
VALUE. THE MINIMUM INITIAL INVESTMENT GENERALLY IS $3
MILLION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 14, 1994
SIZE: $49.3 MILLION NET ASSETS AS OF SEPTEMBER 30, 1996
<PAGE>
PERFORMANCE SUMMARY
The information below 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.
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the period from February 1, 1994 to September 30, 1996)
PLOT POINTS -- MFS Union Standard Equity Fund
UNE - Net performance
Starting with $5 MM on 2/1/94
Start 5,000
Feb 1994 4,907
Mar 1994 4,627
Apr 1994 4,642
May 1994 4,632
Jun 1994 4,525
Jul 1994 4,686
Aug 1994 4,912
Sep 1994 4,721
Oct 1994 4,770
Nov 1994 4,535
Dec 1994 4,612
Jan 1995 4,720
Feb 1995 4,894
Mar 1995 5,007
Apr 1995 5,141
May 1995 5,334
Jun 1995 5,468
Jul 1995 5,656
Aug 1995 5,646
Sep 1995 5,864
Oct 1995 5,878
Nov 1995 6,136
Dec 1995 6,376
Jan 1996 6,585
Feb 1996 6,626
Mar 1996 6,729
Apr 1996 6,770
May 1996 6,995
Jun 1996 7,072
Jul 1996 6,673
Aug 1996 6,786
Sep 1996 7,093
AVERAGE ANNUAL TOTAL RETURNS
1/14/94+ -
1 Year 9/30/96
- -------------------------------------------------------------------------------
MFS Union Standard Equity Fund +20.96% +14.63%
- -------------------------------------------------------------------------------
ACS Labor Sensitivity Index (LSI) +19.82% +15.79%
- -------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index +20.24% +17.19%
- -------------------------------------------------------------------------------
Consumer Price Index* + 2.87% + 2.86%
- -------------------------------------------------------------------------------
+ Commencement of investment operations. Benchmark comparisons begin on February
1, 1994 except for the ACS LSI, which is from January 14, 1994.
*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 at the earlier of repayment of reimbursement in its entirety, or
until December 31, 1998.
<PAGE>
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1996
TOP TEN HOLDINGS
GENERAL ELECTRIC CO. AT&T CORP.
Diversified manufacturing and services Telecommunications and services
conglomerate company
COCA-COLA CO. JOHNSON & JOHNSON
International soft drink company Health care and pharmaceutical
products company
EXXON CORP.
International oil and gas company DU PONT (E.I.) DE NEMOURS & CO.
Diversified chemical company
PHILIP MORRIS COS., INC.
Tobacco, food, and beverage conglomerate BRISTOL-MYERS SQUIBB CO.
Pharmaceutical products company
MERCK & CO., INC.
Pharmaceutical products company BOEING CO.
Aircraft manufacturer
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1996.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED SEPTEMBER 30, 1996, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS
CAME TO 63.36%.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 1996
Common Stocks - 97.5%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Aerospace - 6.1%
Allied Signal, Inc. 8,700 $ 573,112
Boeing Co. 10,000 945,000
Lockheed-Martin Corp. 6,100 549,762
McDonnell Douglas Corp. 10,400 546,000
United Technologies Corp. 3,500 420,438
------------
$ 3,034,312
- -----------------------------------------------------------------------------
Agricultural Products - 1.3%
Case Corp. 13,000 $ 633,750
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.5%
Hartmarx Corp.* 51,700 $ 252,038
- -----------------------------------------------------------------------------
Automotive - 0.9%
Goodrich (B.F.) Co. 10,000 $ 451,250
- -----------------------------------------------------------------------------
Banks and Credit Companies - 2.3%
BankAmerica Corp. 8,700 $ 714,488
Firstar Corp. 8,700 419,775
------------
$ 1,134,263
- -----------------------------------------------------------------------------
Beverages - 1.3%
Anheuser Busch Cos., Inc. 17,200 $ 647,150
- -----------------------------------------------------------------------------
Chemicals - 3.3%
du Pont (E.I.) de Nemours & Co., Inc. 11,200 $ 988,400
Monsanto Co. 17,400 635,100
------------
$ 1,623,500
- -----------------------------------------------------------------------------
Consumer Goods and Services - 6.4%
Colgate-Palmolive Co. 7,600 $ 660,250
Heinz (H.J.) Co. 14,000 472,500
Philip Morris Cos., Inc. 15,000 1,346,250
Tyco International Ltd. 15,500 668,437
------------
$ 3,147,437
- -----------------------------------------------------------------------------
Electrical Equipment - 9.4%
Emerson Electric 50,000 $ 450,625
General Electric Co. 30,000 2,730,000
Honeywell, Inc. 13,000 820,625
Westinghouse Electric Corp. 35,600 663,050
------------
$ 4,664,300
- -----------------------------------------------------------------------------
Entertainment - 3.2%
Circus Circus Enterprises, Inc.* 19,000 $ 672,125
Harrah's Entertainment, Inc.* 13,700 255,163
Mirage Resorts, Inc.* 25,000 640,625
------------
$ 1,567,913
- -----------------------------------------------------------------------------
Food and Beverage Products - 8.7%
Campbell Soup Co. 6,500 $ 507,000
Coca-Cola Co. 44,500 2,263,937
Interstate Bakeries Corp. 21,600 788,400
PepsiCo, Inc. 25,900 731,675
------------
$ 4,291,012
- -----------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Kimberly-Clark Corp. 6,000 $ 528,750
- -----------------------------------------------------------------------------
Machinery - 0.9%
Deere & Co., Inc. 10,400 $ 436,800
- -----------------------------------------------------------------------------
Medical and Health Products - 8.4%
American Home Products Corp. 13,900 $ 886,125
Bristol-Myers Squibb Co. 10,200 983,025
Johnson & Johnson 21,000 1,076,250
Merck & Co., Inc. 17,300 1,217,487
------------
$ 4,162,887
- -----------------------------------------------------------------------------
Oil Services - 1.0%
Pennzoil Co. 9,000 $ 475,875
- -----------------------------------------------------------------------------
Oils - 8.2%
Chevron Corp. 12,600 $ 789,075
Exxon Corp. 20,000 1,665,000
Mobil Corp. 7,000 810,250
Texaco, Inc. 8,700 800,400
------------
$ 4,064,725
- -----------------------------------------------------------------------------
Pollution Control - 2.2%
USA Waste Services, Inc.* 21,600 $ 680,400
WMX Technologies, Inc. 12,100 397,788
------------
$ 1,078,188
- -----------------------------------------------------------------------------
Printing and Publishing - 2.0%
Gannett Co., Inc. 6,800 $ 478,550
Pulitzer Publishing Co. 8,700 496,987
------------
$ 975,537
- -----------------------------------------------------------------------------
Restaurants and Lodging - 2.2%
Hilton Hotels Corp. 20,000 $ 567,500
Promus Hotel Corp.* 17,900 505,675
------------
$ 1,073,175
- -----------------------------------------------------------------------------
Stores - 4.2%
Federated Department Stores, Inc.* 8,700 $ 291,450
Penney (J.C.), Inc. 9,000 487,125
Sears, Roebuck & Co. 8,700 389,325
TJX Cos., Inc. 25,900 929,162
------------
$ 2,097,062
- -----------------------------------------------------------------------------
Supermarkets - 5.4%
Albertsons, Inc. 11,000 $ 463,375
Kroger Co.* 13,000 581,750
Safeway, Inc.* 20,700 882,337
Vons Cos., Inc.* 17,300 741,738
------------
$ 2,669,200
- -----------------------------------------------------------------------------
Utilities - Electric - 8.9%
Central & South West Corp. 17,000 $ 442,000
Cinergy Corp. 19,000 586,625
CMS Energy Corp. 15,500 466,937
FPL Group, Inc. 8,700 376,275
General Public Utilities Corp. 13,000 399,750
Illinova Corp. 28,600 757,900
Nipsco Industries, Inc. 13,800 493,350
Pinnacle West Capital Corp. 15,500 459,188
Texas Utilities Co. 10,000 396,250
------------
$ 4,378,275
- -----------------------------------------------------------------------------
Utilities - Gas - 3.2%
Columbia Gas Systems, Inc. 9,000 $ 504,000
Consolidated Natural Gas Co. 8,700 466,538
PanEnergy Corp. 17,300 599,013
------------
$ 1,569,551
- -----------------------------------------------------------------------------
Utilities - Telephone - 6.4%
Ameritech Corp. 8,700 $ 457,837
AT&T Corp. 21,600 1,128,600
BellSouth Corp. 17,300 640,100
GTE Corp. 13,000 500,500
SBC Communications, Inc. 8,700 418,688
------------
$ 3,145,725
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $39,431,328) $ 48,102,675
- -----------------------------------------------------------------------------
Short-Term Obligations - 2.3%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 10/03/96 $950 $ 949,720
Federal Home Loan Mortgage Assn., due
10/01/96 180 180,000
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 1,129,720
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $40,561,048) $ 49,232,395
Other Assets, Less Liabilities - 0.2% 85,369
- -----------------------------------------------------------------------------
Net Assets - 100.0% $ 49,317,764
- -----------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
September 30, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $40,561,048) $49,232,395
Cash 4,767
Dividends receivable 84,315
Deferred organization expenses 11,517
Other assets 479
-----------
Total assets $49,333,473
-----------
Liabilities:
Payable to affiliates -
Management fee $ 2,634
Distribution fee 608
Accrued expenses and other liabilities 12,467
-----------
Total liabilities $ 15,709
-----------
Net assets $49,317,764
===========
Net assets consist of:
Paid-in capital $34,895,564
Unrealized appreciation on investments 8,671,347
Accumulated undistributed net realized gain on investments 5,240,664
Accumulated undistributed net investment income 510,189
-----------
Total $49,317,764
===========
Shares of beneficial interest outstanding 3,559,938
===========
Net asset value, offering price, and redemption price per share
(net assets of $49,317,764 / 3,559,938 shares of beneficial
interest outstanding) $13.85
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended September 30, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $1,041,048
Interest 88,613
----------
Total investment income $1,129,661
----------
Expenses -
Management fee $ 310,911
Trustees' compensation 5,600
Shareholder servicing agent fee 3,576
Distribution and service fee 71,836
Auditing fees 33,620
Printing 26,434
Custodian fee 20,641
Amortization of organization expenses 4,963
Legal fees 4,601
Miscellaneous 10,766
----------
Total expenses $ 492,948
Reduction of expenses by investment adviser (9,315)
Fees paid indirectly (4,725)
----------
Net expenses $ 478,908
----------
Net investment income $ 650,753
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $5,562,093
Change in unrealized appreciation on investments 2,783,940
----------
Net realized and unrealized gain on investments $8,346,033
----------
Increase in net assets from operations $8,996,786
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
Year Ended September 30, 1996 1995
- -------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 650,753 $ 466,025
Net realized gain on investments 5,562,093 806,897
Net unrealized gain on investments 2,783,940 5,900,373
----------- -----------
Increase in net assets from operations $ 8,996,786 $ 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 $20,580,394 $ 9,572,700
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,449,495 224,465
Cost of shares reacquired (16,057,770) (3,088,531)
----------- -----------
Increase in net assets from Fund share
transactions $ 5,972,119 $ 6,708,634
----------- -----------
Total increase in net assets $13,475,852 $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 $510,189 and $394,906, respectively) $49,317,764 $35,841,912
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Year Ended September 30, Period Ended
------------------------ September 30,
1996 1995 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) $ 0.18 $ 0.17 $ 0.12
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 2.25 2.14 (0.48)
------ ------ ------
Total from investment operations $ 2.43 $ 2.31 $(0.36)
------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.15) $(0.10) $ --
From net realized gain on investments (0.28) -- --
------ ------ ------
Total distributions declared to
shareholders $(0.43) $(0.10) $ --
------ ------ ------
Net asset value - end of period $13.85 $11.85 $ 9.64
====== ====== ======
Total return 20.96% 24.21% (3.60)%
Average commission rate### $0.0562 -- --
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 81% 125% 48%
Net assets at end of period (000
omitted) $49,318 $35,842 $22,184
* For the period from the commencement of investment operations, January 14,
1994 through 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 the Fund's average daily net assets. To the
extent actual expenses were over/under this limitation, the net investment
income per share and the ratios would have been:
Net investment income $ 0.18 $ 0.16 $ 0.07
Ratios (to average net assets):
Expenses## 1.03% 1.12% 1.64%+
Net investment income 1.33% 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
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 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 tax 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. This change had no effect on the net assets or net asset value
per share.
(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 pay 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 amounts paid by MFS in prior years. At September
30, 1996, the aggregate unreimbursed expenses owed to MFS by the Fund amounted
to $97,355, including $9,315 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 $40,908,985 and $36,344,979,
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 $40,561,048
===========
Gross unrealized appreciation $ 9,208,535
Gross unrealized depreciation (537,188)
-----------
Net unrealized appreciation $ 8,671,347
===========
(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 September 30, 1996 1995
-------------------------- -----------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 1,592,667 $20,580,394 983,045 $9,572,700
Shares issued to shareholders
in reinvestment of
distributions 116,989 1,449,494 24,033 224,465
Shares reacquired (1,173,568) (16,057,770) (284,399) (3,088,531)
--------- ----------- ------- ----------
Net increase 536,088 $ 5,972,118 722,679 $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 year ended September
30, 1996 was $613.
<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, 1996,
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, 1996, September 30, 1995 and for the financial highlights 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, 1996 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, 1996, 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 1, 1996
---------------------------------------------
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
TRUSTEES ASSISTANT SECRETARY
A. Keith Brodkin* James R. Bordewick, Jr.*
Chairman and President
CUSTODIAN
Nelson J. Darling, Jr. State Street Bank and Trust Company
Trustee, Eastern Enterprises
AUDITOR
William R. Gutow Deloitte & Touche LLP
Private Investor;
Senior Vice President, Capitol INVESTOR INFORMATION
Entertainment For MFS stock and bond market
outlooks, call toll free:
INVESTMENT ADVISER 1-800-637-4458 anytime from a touch-tone
Massachusetts Financial Services telephone.
Company
500 Boylston Street For information on MFS mutual funds,
Boston, MA 02116-3741 call your financial adviser or, for
an information kit, call toll free:
DISTRIBUTOR 1-800-637-2929 any business day from
MFS Fund Distributors, Inc. 9 a.m. to 5 p.m. Eastern time (or
500 Boylston Street leave a message anytime).
Boston, MA 02116-3741
INVESTOR SERVICE
FUND MANAGER MFS Service Center, Inc.
William S. Harris* P.O. Box 2281
Boston, MA 02107-9906
TREASURER
W. Thomas London* For general information, call toll free:
1-800-225-2606 any business day from
ASSISTANT TREASURER 8 a.m. to 8 p.m. Eastern time.
James O. Yost*
SECRETARY For service to speech- or hearing-
Stephen E. Cavan* impaired, call toll free: 1-800-637-6576
any business day from 9 a.m. to 5 p.m.
Eastern time. (To use this service, your
phone must be equipped with a
Telecommunications Device for the Deaf.)
For share prices, account balances
and exchanges, call toll free: 1-800-
MFS-TALK
(1-800-637-8255) anytime from a
touch-tone telephone.
WEB SITE
http://www.mfs.com
TOP RATED SERVICE
For the third year in a row,
[DALBAR MFS earned a #1 ranking in
LOGO] DALBAR, Inc.'s Broker/Dealer
Survey, Main Office Operations
Service Quality Category. The
firm achieved a 3.48 overall score - on a
scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the
quality of service they received from 29
mutual fund companies nationwide. The survey
contained questions about service quality in
15 categories, including "knowledge of phone
service contracts," "accuracy of transaction
processing," and "overall ease of doing
business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
MFS UNION STANDARD(SM)
EQUITY FUND [DALBAR LOGO]
TOP-RATED SERVICE
500 Boylston Street
Boston, MA 02116
[LOGO]
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
(C)1996 MFS Fund Distributors, Inc., 11/96
500 Boylston Street Boston, MA 02116
