<PAGE>
[Logo] MFS(SM) Semiannual Report
INVESTMENT MANAGEMENT March 31, 1997
MFS(R) UNION STANDARD(SM) EQUITY FUND
[Graphic Omitted]
AMERICA LEARNS HOW "WE INVENTED THE MUTUAL FUND" (see page 15)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Portfolio Manager's Overview ............................................... 2
Fund Facts ................................................................. 3
Performance Summary ........................................................ 3
Portfolio Concentration .................................................... 4
Portfolio of Investments ................................................... 5
Financial Statements ....................................................... 8
Notes to Financial Statements ..............................................12
America learns how "We invented the mutual fund"............................15
MFS Investment Opportunities ...............................................16
Trustees and Officers ......................................................17
HIGHLIGHTS
o FOR THE SIX MONTHS ENDED MARCH 31, 1997, THE FUND PROVIDED A TOTAL RETURN
AT NET ASSET VALUE OF 10.09%, COMPARED TO A 10.70% RETURN FOR THE ACS
LABOR SENSITIVITY INDEX AND TO AN 11.20% RETURN FOR THE STANDARD & POOR'S
500 COMPOSITE INDEX.
o THE FUND'S CURRENT INVESTMENT STRATEGY IS BASED ON THE ASSUMPTION THAT
U.S. ECONOMIC GROWTH WILL SLOW AS THE YEAR PROGRESSES. GIVEN THE LONGEVITY
OF THE CURRENT ECONOMIC RECOVERY AND THE HIGH LEVELS OF CONSUMER DEBT, WE
BELIEVE THE ECONOMIC RISKS ARE ON THE DOWNSIDE.
o THE FUND IS UNDERWEIGHTED IN THE BASIC MATERIALS AND AUTOMOTIVE SECTORS,
WHILE IT IS OVERWEIGHTED IN CONSUMER STAPLES AND HEALTH CARE. INDUSTRIAL
GOODS ARE ALSO OVERWEIGHTED BUT SKEWED TOWARD AEROSPACE AND DEFENSE
COMPANIES THAT WE BELIEVE SHOULD PERFORM RELATIVELY WELL IN A SLOW-GROWTH
ECONOMY.
<PAGE>
LETTER FROM THE CHAIRMAN
- ---------------------------
[Photo of A. Keith Brodkin]
- ---------------------------
Dear Shareholders:
After more than six years of expansion, the U.S. economy is experiencing another
year of moderate growth in 1997, although a few signs point to the possibility
of a modest rise in inflation during the year. On the positive side, the pattern
of moderate growth and inflation set over the past few years now seems fairly
well entrenched in the economy and, short of a major international or domestic
crisis, appears to have enough momentum to remain on track for some time. Also,
gains in such important sectors as housing, automobiles, industrial production,
and exports indicate a fair amount of underlying strength in the economy.
However, some reason for caution can be seen in the continuing high levels of
consumer debt and rising personal bankruptcies, as well as in the ongoing
tightness in the labor market, which could add some inflationary pressures to
the economy. Given these somewhat conflicting indicators, we expect real
(inflation-adjusted) growth to revolve around 2% in 1997, with more strength
occurring earlier in the year.
We continue to urge U.S. equity investors to lower their expectations for
1997. Just as the slowdown in corporate earnings growth and increases in
interest rates in 1996 raised some near-term concerns, further interest rate
increases and the fear of an acceleration of inflation have negatively affected
the stock market in 1997. However, while the U.S. equity market has enjoyed
several years without a major correction, we would like to point out that such
downturns are a natural part of the investment environment and, when they end,
they often result in more attractive valuations for stocks. Also, as the year
progresses, we expect to see some improvement in corporate earnings and a
leveling off of interest rates. As a result, we believe this year's correction
should help provide a more solid foundation for the long-term viability of the
equity market.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
April 14, 1997
<PAGE>
PORTFOLIO MANAGER'S OVERVIEW
- ----------------------------
[Photo of Mitchell D. Dynan]
- ----------------------------
Dear Shareholders:
For the six months ended March 31, 1997, the Fund provided a total return of
10.09%. This compares to a 10.70% return for the ACS Labor Sensitivity Index
(the LSI), an unmanaged common stock index developed and maintained by American
Capital Strategies Ltd. for use by the MFS Union Standard Equity Fund. It
represents the market weighted performance of common stocks of companies which
American Capital Strategies Ltd., and the Labor Advisory Board determine meet
certain labor sensitivity criteria and to an 11.20% return for the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock total return performance, for the same period.
The current investment strategy of the Fund is based on our belief that the
growth rate of the U.S. economy will slow as the year progresses. Given the
longevity of the current economic recovery and the high levels of consumer debt,
we think the economic risks are on the downside. During the second half of 1997,
investors could become increasingly concerned about slower growth or a recession
during 1998. Although interest rates are currently rising, if the above scenario
unfolds, rates could move downward in late 1997 or 1998. The Fund is positioned
to anticipate this potential change in perception, with the bulk of its
investments in companies that we feel should be able to sustain double-digit
earnings growth in this type of environment. It is our view that earnings
ultimately drive stock prices, and we expect investors to bid up share prices of
companies that can achieve above-average earnings growth.
The Fund's current industry weightings reflect a fairly defensive posture
that is consistent with this economic scenario. While certain sectors have been
overweighted and others underweighted, the Fund's holdings are diverse and
spread across many industries. For example, relative to the LSI, the Fund is
significantly underweighted in the basic materials and automotive sectors.
Conversely, it is overweighted in consumer staples and health care. Industrial
goods are overweighted but skewed toward aerospace and defense companies that we
believe should perform relatively well in a slow-growth economy. Similarly, the
retail weighting is greater than that of the LSI, but all of these holdings are
in supermarkets and drug stores.
As the year progresses, we expect that the U.S. equity market is likely to
remain volatile. In this environment, we plan to continue to use market dips to
increase positions in what we regard as high-quality, large-capitalization
companies and to maintain a defensive posture.
Respectfully,
/s/ Mitchell D. Dynan
Mitchell D. Dynan
Portfolio Manager
Note to Shareholders: On March 1, 1997, Mitchell D. Dynan became Portfolio
Manager of the Fund, succeeding William S. Harris, who has retired. Mr. Dynan
joined the MFS Research Department in 1986. A graduate of Tufts University, he
was named Assistant Vice President - Investments in 1987 and Vice President -
Investments in 1988. Since 1995, Mr. Dynan has also been a Portfolio Manager
of Massachusetts Investors Trust.
<PAGE>
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 IS GENERALLY $3 MILLION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 14, 1994
SIZE: $55.2 MILLION NET ASSETS AS OF MARCH 31, 1997
PERFORMANCE SUMMARY
Because mutual funds like MFS(R) Union Standard(SM) 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. The minimum
initial investment is generally $3 million.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
FOR PERIODS ENDED MARCH 31, 1997
(net asset value change including reinvested distributions)
6 Months 1 Year 3 Years Life of Fund*
- -------------------------------------------------------------------------------
Cumulative Total Return +10.09% +16.04% +68.73% +59.45%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +16.04% +19.05% +15.64%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations,
January 14, 1994, to March 31, 1997.
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. Shares of the Fund
have no initial sales charge or contingent deferred sales charge but have annual
fees and expenses. Performance results reflect any applicable expense subsidies
and waivers, without which the results would have been less favorable. Current
subsidies and waivers may be discontinued at any time. All results are
historical and assume the reinvestment of dividends and capital gains.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MARCH 31, 1997
TOP 10 EQUITY HOLDINGS
GENERAL ELECTRIC CO. BRISTOL-MYERS SQUIBB CO.
Diversified manufacturing and Pharmaceutical products company
services conglomerate
MOBIL CORP.
COCA-COLA CO. International oil and gas company
International food and beverage
company PHILIP MORRIS COS., INC.
EXXON CORP. Tobacco, food, and beverage conglomerate
International oil and gas company
CHEVRON CORP.
MERCK & CO., INC. International oil and gas company
Pharmaceutical products company
DU PONT (E.I.) DE NEMOURS & CO., INC.
JOHNSON & JOHNSON Diversified chemical company
Health care and pharmaceutical
products company
LARGEST SECTORS
Consumer Staples 19.3%
Miscellaneous 18.6%
Industrial Goods & Services 17.6%
Utilities & Communications 15.7%
Health Care 12.0%
Energy 10.9%
Retailing 5.9%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - March 31, 1997
Stocks - 99.9%
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Aerospace - 7.1%
Allied Signal, Inc. 8,700 $ 619,875
Boeing Co. 7,900 779,137
General Dynamics Corp. 8,500 572,688
Lockheed-Martin Corp. 9,361 786,324
McDonnell Douglas Corp. 10,400 634,400
United Technologies Corp. 7,000 526,750
-----------
$ 3,919,174
- -------------------------------------------------------------------------------
Automotive - 1.2%
Goodrich (B.F.) Co. 18,400 $ 673,900
- -------------------------------------------------------------------------------
Banks and Credit Companies - 2.8%
BankAmerica Corp. 8,700 $ 876,525
Firstar Corp. 23,600 649,000
-----------
$ 1,525,525
- -------------------------------------------------------------------------------
Chemicals - 3.3%
Air Products & Chemicals, Inc. 9,600 $ 651,600
du Pont (E.I.) de Nemours & Co., Inc. 11,200 1,187,200
-----------
$ 1,838,800
- -------------------------------------------------------------------------------
Construction Services - 1.0%
Martin Marietta Materials, Inc. 21,699 $ 558,749
- -------------------------------------------------------------------------------
Consumer Goods and Services - 7.0%
Colgate-Palmolive Co. 7,600 $ 757,150
Philip Morris Cos., Inc. 12,550 1,432,269
Revco DS, Inc.* 15,000 607,500
Tyco International Ltd. 19,000 1,045,000
-----------
$ 3,841,919
- -------------------------------------------------------------------------------
Containers - 1.3%
Corning, Inc. 16,500 $ 732,188
- -------------------------------------------------------------------------------
Electrical Equipment - 7.3%
Emerson Electric Co. 11,400 $ 513,000
General Electric Co. 30,000 2,977,500
Honeywell, Inc. 8,200 556,575
-----------
$ 4,047,075
- -------------------------------------------------------------------------------
Entertainment - 1.0%
Disney (Walt) Co. 7,500 $ 547,500
- -------------------------------------------------------------------------------
Food and Beverage Products - 13.9%
Anheuser Busch Cos. 17,200 $ 724,550
Campbell Soup Co. 13,000 602,875
Coca-Cola Co. 52,300 2,922,262
Heinz (H.J.) Co. 14,000 553,000
Hershey Foods Corp. 20,000 1,000,000
Interstate Bakeries Corp. 21,600 1,020,600
PepsiCo, Inc. 25,900 844,988
-----------
$ 7,668,275
- -------------------------------------------------------------------------------
Forest and Paper Products - 1.5%
Kimberly-Clark Corp. 8,100 $ 804,938
- -------------------------------------------------------------------------------
Medical and Health Products - 12.0%
American Home Products Corp. 17,600 $ 1,056,000
Bristol-Myers Squibb Co. 27,900 1,646,100
Johnson & Johnson 34,100 1,803,037
Merck & Co., Inc. 25,100 2,114,675
-----------
$ 6,619,812
- -------------------------------------------------------------------------------
Oils - 10.9%
Chevron Corp. 17,400 $ 1,211,475
Exxon Corp. 22,300 2,402,825
Mobil Corp. 11,000 1,436,875
Texaco, Inc. 8,700 952,650
-----------
$ 6,003,825
- -------------------------------------------------------------------------------
Pollution Control - 2.1%
USA Waste Services, Inc.* 21,600 $ 766,800
WMX Technologies, Inc. 12,100 370,563
-----------
$ 1,137,363
- -------------------------------------------------------------------------------
Printing and Publishing - 1.5%
Gannett Co., Inc. 6,800 $ 583,950
Pulitzer Publishing Co. 6,200 268,150
-----------
$ 852,100
- -------------------------------------------------------------------------------
Railroads - 1.1%
Burlington Northern Santa Fe Railway
Co. 8,000 $ 592,000
- -------------------------------------------------------------------------------
Restaurants and Lodging - 3.1%
HFS, Inc.* 10,900 $ 641,737
Hilton Hotels Corp. 20,000 485,000
Promus Hotel Corp.* 18,000 598,500
-----------
$ 1,725,237
- -------------------------------------------------------------------------------
Stores - 1.6%
American Stores Co. 3,900 $ 173,550
Rite Aid Corp. 16,800 705,600
-----------
$ 879,150
- -------------------------------------------------------------------------------
Supermarkets - 3.2%
Kroger Co.* 13,000 $ 659,750
Safeway, Inc.* 24,200 1,122,275
-----------
$ 1,782,025
- -------------------------------------------------------------------------------
Telecommunications - 1.3%
Lucent Technologies, Inc. 14,000 $ 738,500
- -------------------------------------------------------------------------------
Utilities - Electric - 6.3%
Cinergy Corp. 19,000 $ 648,375
CMS Energy Corp. 23,000 756,125
FPL Group, Inc. 13,000 573,625
Nipsco Industries, Inc. 13,800 541,650
Pinnacle West Capital Corp. 15,500 466,937
Public Service Co. - New Mexico* 28,000 483,000
-----------
$ 3,469,712
- -------------------------------------------------------------------------------
Utilities - Gas - 2.3%
Columbia Gas Systems, Inc. 11,800 $ 682,925
Consolidated Natural Gas Co. 12,000 604,500
-----------
$ 1,287,425
- -------------------------------------------------------------------------------
Utilities - Telephone - 7.1%
Ameritech Corp. 8,700 $ 535,050
BellSouth Corp. 26,500 1,119,625
GTE Corp. 22,600 1,053,725
Pacific Telesis Group 10,000 377,500
SBC Communications, Inc. 15,800 831,475
-----------
$ 3,917,375
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $43,982,955) $55,162,567
- -------------------------------------------------------------------------------
Short-Term Obligation - 1.7%
- -------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 4/01/97,
at Amortized Cost $950 $ 950,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $44,932,955) $56,112,567
Other Assets, Less Liabilities - (1.6)% (904,228)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $55,208,339
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
March 31, 1997
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $44,932,955) $56,112,567
Cash 7,717
Receivable for investments sold 149,367
Dividends receivable 92,726
Deferred organization expenses 8,909
Other assets 2,947
-----------
Total assets $56,374,233
-----------
Liabilities:
Payable for investments purchased $ 1,148,179
Payable to affiliates -
Management fee 4,028
Distribution fee 930
Accrued expenses and other liabilities 12,757
-----------
Total liabilities $ 1,165,894
-----------
Net assets $55,208,339
===========
Net assets consist of:
Paid-in capital $41,546,778
Unrealized appreciation on investments 11,179,612
Accumulated undistributed net realized gain on investments 2,327,329
Accumulated undistributed net investment income 154,620
-----------
Total $55,208,339
===========
Shares of beneficial interest outstanding 4,043,797
========
Net asset value, offering price, and redemption price per share
(net assets of $55,208,339 / 4,043,797 shares of beneficial
interest outstanding) $13.65
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended March 31, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 564,678
Interest 33,988
----------
Total investment income $ 598,666
----------
Expenses -
Management fee $ 178,520
Trustees' compensation 3,750
Shareholder servicing agent fee 2,044
Distribution and service fee 41,197
Administrative fee 663
Printing 15,684
Custodian fee 14,282
Auditing fees 11,890
Amortization of organization expenses 2,608
Miscellaneous 4,487
----------
Total expenses $ 275,125
Preliminary refund of expenses pursuant to reimbursement
agreement 1,465
Fees paid indirectly (1,941)
----------
Net expenses $ 274,649
----------
Net investment income $ 324,017
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $2,220,865
Change in unrealized appreciation on investments 2,508,265
----------
Net realized and unrealized gain on investments $4,729,130
----------
Increase in net assets from operations $5,053,147
==========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1997 Year Ended
(Unaudited) September 30, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 324,017 $ 650,753
Net realized gain on investments 2,220,865 5,562,093
Net unrealized gain on investments 2,508,265 2,783,940
----------- -----------
Increase in net assets from operations $ 5,053,147 $ 8,996,786
----------- -----------
Distributions declared to shareholders -
From net investment income $ (679,586) $ (535,470)
From net realized gain on investments (5,134,200) (957,583)
----------- -----------
Total distributions declared to shareholders $(5,813,786) $(1,493,053)
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 2,051,403 $20,580,394
Net asset value of shares issued to
shareholders in reinvestment of distributions 5,717,146 1,449,495
Cost of shares reacquired (1,117,335) (16,057,770)
----------- -----------
Increase in net assets from Fund share
transactions $ 6,651,214 $ 5,972,119
----------- -----------
Total increase in net assets $ 5,890,575 $13,475,852
Net assets:
At beginning of period 49,317,764 35,841,912
----------- -----------
At end of period (including accumulated
undistributed net investment income of
$154,620 and $510,189, respectively) $55,208,339 $49,317,764
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ---------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended September 30, Period Ended
March 31, 1997 ------------------------ September 30,
(Unaudited) 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of
period $13.85 $11.85 $ 9.64 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.08 $ 0.18 $ 0.17 $ 0.12
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions 1.31 2.25 2.14 (0.48)
------ ------ ------ ------
Total from investment
operations $ 1.39 $ 2.43 $ 2.31 $(0.36)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.19) $(0.15) $(0.10) $ --
From net realized gain on
investments (1.40) (0.28) -- --
------ ------ ------ ------
Total distributions declared
to shareholders $(1.59) $(0.43) $(0.10) $ --
------ ------ ------ ------
Net asset value - end of period $13.65 $13.85 $11.85 $ 9.64
====== ====== ====== ======
Total return 10.09% 20.96% 24.21% (3.60)%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.00%+ 1.00% 1.00% 1.00%+
Net investment income 1.18%+ 1.36% 1.58% 1.55%+
Portfolio turnover 27% 81% 125% 48%
Average commission rate### $0.0599 $0.0562 -- --
Net assets at end of period (000
omitted) $55,208 $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 $ 0.08 $ 0.18 $ 0.16 $ 0.07
Ratios (to average net assets):
Expenses## 0.99%+ 1.03% 1.12% 1.64%+
Net investment income 1.19%+ 1.33% 1.49% 0.91%+
</TABLE>
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 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.
(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
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
0.20% 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, 1997, the aggregate unreimbursed
expenses owed to MFS by the Fund amounted to $95,890 after $1,465 net
reimbursement 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).
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
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 $16,896,792 and $14,566,019, 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 $44,932,955
===========
Gross unrealized appreciation $11,698,398
Gross unrealized depreciation (518,786)
-----------
Net unrealized appreciation $11,179,612
===========
(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:
<TABLE>
<CAPTION>
Period Ended Year Ended
March 31, 1997 September 30, 1996
------------------------ ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 142,474 $2,051,403 1,592,667 $20,580,394
Shares issued to shareholders in
reinvestment of distributions 420,379 5,717,146 116,989 1,449,495
Shares reacquired (78,994) (1,117,335) (1,173,568) (16,057,770)
------- ---------- ---------- ------------
Net increase 483,859 $6,651,214 536,088 $ 5,972,119
======= ========== ========== ============
</TABLE>
(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 $400 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 period ended March 31,
1997 was $213.
---------------------------------------------
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(R) UNION STANDARD(SM) EQUITY FUND
TRUSTEES CUSTODIAN
A. Keith Brodkin* State Street Bank and Trust Company
Chairman and President
INVESTOR INFORMATION
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises For MFS stock and bond market
outlooks, call toll free:
William R. Gutow 1-800-637-4458 anytime from a
Private Investor; touch-tone telephone. For
Senior Vice President, information on MFS mutual funds,
Capitol Entertainment call your financial adviser or, for
an information kit, call toll free:
INVESTMENT ADVISER 1-800-637-2929 any business day
Massachusetts Financial Services Company from 9 a.m. to 5 p.m. Eastern time
500 Boylston Street (or leave a message anytime).
Boston, MA 02116-3741
INVESTOR SERVICE
DISTRIBUTOR MFS Service Center, Inc.
MFS Fund Distributors, Inc. P.O. Box 2281
500 Boylston Street Boston, MA 02107-9906
Boston, MA 02116-3741 For general information, call toll
free: 1-800-225-2606 any business
PORTFOLIO MANAGER day from 8 a.m. to 8 p.m. Eastern
Mitchell D. Dynan* time.
TREASURER For service to speech- or
W. Thomas London* hearing-impaired, call toll free:
1-800-637-6576 any business day
ASSISTANT TREASURER from 9 a.m. to 5 p.m. Eastern time.
James O. Yost* (To use this service, your phone
must be equipped with a
SECRETARY Telecommunications Device for the
Stephen E. Cavan* Deaf.)
ASSISTANT SECRETARY For share prices, account balances,
James R. Bordewick, Jr.* and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255)
anytime from a touch-tone
telephone.
WORLD WIDE WEB
www.mfs.com
For the third year in a
[DALBAR row, MFS earned a #1
LOGO] ranking in the DALBAR,
Inc. 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(R) UNION STANDARD(SM) [DALBAR LOGO]
EQUITY FUND TOP-RATED SERVICE
500 Boylston Street
Boston, MA 02116 02116-3741
[LOGO]
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(SM)
(C) 1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
[UNION LABEL]
5/97
