<PAGE>
[Logo] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) UNION STANDARD(R)
EQUITY FUND
SEMIANNUAL REPORT o MARCH 31, 1998
NOW TWO MFS IRA CHOICES (see page 27)
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such as
the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation. While
it may be a few years before some of these countries return to solid economic
footing, and while there will probably be a relatively short-term impact on the
U.S. economy, we believe the long-term outlook for the region is quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first few months of 1998, there
have been brief bouts of volatility associated with the Asian turmoil, as well
as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable, we
also believe we are overdue for a market correction in which prices will remain
relatively flat or decline, possibly for an extended period of time. Since no
one can predict market cycles, that makes it even more important to find
companies that can keep growing in the face of the occasional downturn and even
gain market share. For us, this means using original, bottom-up research to
examine each company's earnings potential and position as well as the overall
prospects for its industry. To that end, MFS continues to increase the research
support available to portfolio managers of MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity and
fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
April 14, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED MFS IN 1983. AFTER
FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO MANAGER, HE WAS NAMED CHIEF
EQUITY OFFICER IN 1987 AND PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS IN
1993. MR. SHAMES WAS APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY
1998.
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Mitchell D. Dynan]
Mitchell D. Dynan
For the six months ended March 31, 1998, Class A shares of the Fund provided a
total return of 18.08%, Class B shares 17.74%, Class C shares 17.73%, and Class
I shares 18.30%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 19.10% 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 returns
also compare to a 17.22% return for the Standard & Poor's 500 Composite Index
(the S&P 500), a popular, unmanaged index of common stock total return
performance.
Q. WHAT DO YOU SEE AS SOME OF THE THINGS THAT CONTRIBUTED TO THE FUND'S RECENT
PERFORMANCE?
A. In the fourth quarter of 1997, the Fund's performance benefited from
overweightings in health care and consumer staples as well as from
significant holdings in utilities and communications. Conversely, the Fund
was underweighted in basic materials, autos, and technology. These sectors
performed poorly in the fourth quarter because of investor concerns that the
turmoil in the Asia/Pacific region would adversely impact the U.S. economy
and the earnings of economically sensitive companies.
Q. WHAT ABOUT THE FIRST QUARTER OF THIS YEAR?
A. The Fund lagged the LSI and the S&P 500 because we continued to stay fairly
defensive while technology and some cyclical stocks did very well. Although
we have more flexibility to invest in technology and financial services,
we've been careful how we use that flexibility because we don't want to
change the conservative character of this Fund. We increased the Fund's
financial services holdings in the first quarter, but these positions
haven't added materially to performance. While the Fund was helped by large
holdings in some of the pharmaceutical, software, and industrial goods
companies, the large utilities weighting has been a drag on the overall
return this year. A lot of money flowed into utilities in the fourth quarter
as investors sought to preserve their gains for the year. However, in the
first quarter this year, money flowed out of this sector.
Q. YOU SAID THE FUND HAS BEEN INVESTING IN TECHNOLOGY AND FINANCIAL SERVICES.
AREN'T THOSE NEW SECTORS TO THE PORTFOLIO?
A. Yes. Until the middle of December 1997, the Fund's holdings were restricted
to companies listed in the LSI. Technology and financial services account
for only about 4% of this index. In December, the Labor Advisory Board
decided that we could go outside the LSI and put up to 35% of the Fund's
assets in technology and financial services. The intent of this increased
flexibility was to improve performance. Although companies in these
industries have little unionization, they generally aren't taking away union
jobs. The Fund now holds Microsoft, Computer Associates, and BMC Software.
In financial services, we already owned BankAmerica and Firstar, and we've
added seven other companies: Allstate, Hartford Financial, National City, US
Bancorp, Washington Mutual, Lincoln National, and Associates First Capital.
We think the growth rates in financial services companies are attractive and
that their valuations are reasonable. We view them as good long-term
holdings.
Q. COULD YOU DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY?
A. We try to be relatively conservative by diversifying across a number of
industries and stocks. We make decisions about stocks based on their risk-
reward tradeoff. We also believe yield is important and that it can add to
the Fund's return while offering some downside protection. The Fund is
focused on valuation, using a strategy of seeking growth at the right price.
The Fund's volatility, compared to the S&P 500, is also low, as is its
turnover. We like to buy and hold stocks for the long term, because we don't
believe it's possible to time the market.
Q. CONSUMER STAPLES IS THE FUND'S LARGEST SECTOR. WHAT COMPANIES DO YOU LIKE IN
THIS INDUSTRY?
A. The overweighting in consumer staples fits with the Fund's defensive
positioning. We have holdings in Coca-Cola, Colgate-Palmolive, PepsiCo., and
Philip Morris, although our position in the latter company is neutral to the
LSI. We also have a number of holdings in the food business. That's a big
weighting in the LSI. In addition, the Fund has positions in household
products companies such as Kimberly Clark, Clorox, and Dial Corp.
Q. THE NEXT-LARGEST SECTOR IS INDUSTRIAL GOODS AND SERVICES. WHAT COMPANIES DO
YOU LIKE HERE?
A. We have a large holding in General Electric; it represents over 6% of the
Fund's assets, mainly because it's a big component of the LSI and we like
its fundamental outlook. Aerospace and defense stocks are also significant
positions, while Deere and Martin Marietta Materials round out our
industrial holdings. Martin Marietta is particularly attractive; it's a sand
and gravel company that we expect to benefit from the highway construction
bill that has been proposed in Congress. The company is an industry
consolidator, has good cash flow, strong management, and a favorable
earnings outlook.
Q. THEN, YOU HAVE UTILITIES AND COMMUNICATIONS.
A. We continue to like this sector for defensive reasons. It makes up about 15%
of the portfolio. This weighting is considerably more than the S&P 500, but
three percentage points less than the LSI. The Fund owns a number of
electric utilities, a gas pipeline (Columbia Energy Group), as well as
telephone companies such as AT&T, SBC, BellSouth, Bell Atlantic, and Sprint.
Q. YOU SAID THE FUND IS POSITIONED DEFENSIVELY. COULD YOU EXPAND ON THAT?
A. We try to structure the portfolio based, in part, on a macroeconomic
outlook. At some point the economy has to slow down, which is why, over the
past few years, we have become more defensive. Later, when the downturn does
come, we can start thinking about becoming more cyclically oriented in
anticipation of an upturn. At this point, however, it seems premature to
position the portfolio for such a scenario.
Q. COULD YOU TALK ABOUT SOME STOCKS THAT HAVE PERFORMED BETTER THAN EXPECTED?
A. Both General Electric's industrial and financial services sides have done a
lot better than I would have thought, and the stock was up 18% in the first
quarter of this year. Microsoft and BMC have also been strong performers,
along with Sherwin Williams, which was up more than 30% in the first
quarter. Some of the supermarket companies in the Fund, such as Kroger, have
done well because their valuations have expanded more quickly than we would
have expected.
Q. WHAT ABOUT STOCKS OR SECTORS THAT HAVE NOT PERFORMED SO WELL?
A. Some of the food companies were disappointing in the first quarter,
particularly Interstate Baking, a bread company whose brands include Hostess
and Wonder Bread. We still think it's an attractive stock, and we think the
market will eventually come to recognize its value. Several financial
services stocks have done poorly. These include Allstate and Firstar, a
regional bank. The insurance companies all did well last year, particularly
in the fourth quarter, but they have been lackluster performers this year.
The electric utilities are experiencing the same trend. These stocks did
very well at the end of last year but, so far, investors aren't as worried
about the economy this year.
Q. LOOKING AHEAD, WHAT KIND OF MARKET OR ECONOMIC ENVIRONMENT DO YOU
ANTICIPATE, AND HOW MIGHT THIS AFFECT SOME OF YOUR INVESTMENTS FOR THE FUND?
A. We think the economy is going to slow and that the Asia/Pacific problems
will have an impact on U.S. companies as the year unfolds. From an
investment standpoint, this makes it important to be selective. As long as
interest rates are stable, price-to-earnings ratios should remain intact.
The key is corporate earnings. If they hold up, the market probably has the
potential to rise moderately during the balance of the year. However, if
interest rates rise or if we get a lot of earnings disappointments, we might
have achieved about all the gains we're going to get this year. That's why
we've focused on more defensive companies. In a slow-growth environment, we
expect their earnings to expand faster than those of other companies.
/s/ Mitchell D. Dynan
Mitchell D. Dynan
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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MITCHELL D. DYNAN IS A VICE PRESIDENT -- INVESTMENTS OF MFS INVESTMENT
MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND. HE
ALSO IS A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM OF MASSACHUSETTS INVESTORS
TRUST, AMERICA'S OLDEST MUTUAL FUND, AS WELL AS MFS(R) MERIDIAN(SM) U.S. EQUITY
FUND, MFS(R) AMERICAN U.S. EQUITY FUND AND THE CONSERVATIVE GROWTH SERIES
OFFERED THROUGH MFS/SUN LIFE ANNUITY PRODUCTS.
HE JOINED MFS IN 1986 AS A MEMBER OF THE RESEARCH DEPARTMENT AND WAS NAMED AN
ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1987, A VICE PRESIDENT -- INVESTMENTS
IN 1988, AND A PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST IN 1995. FROM
1983 TO 1986 MR. DYNAN WORKED AS A SECURITIES ANALYST ON WALL STREET. HE STARTED
HIS CAREER AS A BANK LENDING OFFICER IN 1979. A GRADUATE OF TUFTS UNIVERSITY, HE
IS A MEMBER OF THE BOSTON SOCIETY OF SECURITY ANALYSTS FEDERATION AND IS A
CHARTERED FINANCIAL ANALYST.
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: LONG-TERM GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 14, 1994
CLASS INCEPTION: CLASS A AUGUST 8, 1997
CLASS B AUGUST 11, 1997
CLASS C AUGUST 11, 1997
CLASS I JANUARY 14, 1994
SIZE: $91.8 MILLION NET ASSETS AS OF MARCH 31, 1998
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 Class A, Class B, Class C, and Class I
shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF MARCH 31, 1998
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 3 Years Life of Fund*
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Cumulative Total Return +18.08% +41.87% +121.22% +130.23%
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Average Annual Total Return -- +41.87% + 30.30% + 21.90%
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SEC Results -- +33.71% + 27.75% + 20.20%
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CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 3 Years Life of Fund*
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Cumulative Total Return +17.74% +41.72% +120.97% +127.77%
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Average Annual Total Return -- +41.72% + 30.25% + 21.59%
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SEC Results -- +36.96% + 29.15% + 21.11%
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* For the period from the commencement of the Fund's investment operations,
January 14, 1994, through March 31, 1998.
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 3 Years Life of Fund*
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Cumulative Total Return +17.73% +41.70% +120.97% +127.77%
- ------------------------------------------------------------------------------
Average Annual Total Return -- +41.70% + 30.25% + 21.59%
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SEC Results -- +40.51% + 30.25% + 21.59%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 3 Years Life of Fund*
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Cumulative Total Return +18.30% +42.40% +122.04% +127.14%
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Average Annual Total Return -- +42.40% + 30.46% + 21.51%
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* For the period from the commencement of the Fund's investment operations,
January 14, 1994, through March 31, 1998.
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, along with B, have higher annual fees and expenses
than A. C SEC results reflect the 1% CDSC applicable to shares redeemed within
12 months. Class I shares ("I") have no sales charge or Rule 12b-1 fees and are
only available to certain institutional investors.
A, B, and C results include the performance and the operating expenses of I for
periods prior to the inception of A, B, and C. Because operating expenses of I
are lower than those of A, B, and C, A, B, and C performance generally would
have been lower than I performance. The I performance included within the A SEC
performance has been adjusted to reflect the maximum initial sales charge
generally applicable to A. The I performance included within the B and C SEC
performance has been adjusted to reflect the CDSC generally applicable to B and
C.
Peformance results reflect any applicable expense subsidies and waivers, without
which the results would have been less favorable. Subsidies and waivers may be
rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
PORTFOLIO CONCENTRATION AS OF MARCH 31, 1998
LARGEST STOCK SECTORS
Consumer Staples 18.2%
Industrial Goods and Services 16.6%
Utilities and Communications 15.3%
Health Care 12.7%
Other Sectors 10.7%
Energy 9.1%
Financial Services 9.1%
Retail 5.7%
Miscellaneous (Conglomerates, 2.6%
special products/services)
For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 STOCK HOLDINGS
GENERAL ELECTRIC CO. 6.5% JOHNSON & JOHNSON 2.6%
Diversified manufacturing Health care and pharmaceutical
and financial services conglomerate products company
BRISTOL-MYERS SQUIBB CO. 4.4% TYCO INTERNATIONAL LTD. 2.6%
Pharmaceutical products company Fire protection, packaging,
and electronic equipment manufacturer
MERCK & CO. 4.3%
Pharmaceutical products company AT&T CORP. 2.4%
Telecommunications and services company
EXXON CORP. 3.9%
International oil and gas company KROGER CO. 2.4%
Supermarket company
COCA-COLA CO. 3.2%
International soft drink company PHILIP MORRIS COS., INC. 2.3%
Tobacco, food, and beverage conglomerate
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- March 31, 1998
Stocks - 98.8%
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ISSUER SHARES VALUE
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Aerospace - 5.9%
General Dynamics Corp. 14,240 $ 1,226,420
Goodrich (B.F.) Co. 16,690 852,233
Lockheed-Martin Corp. 14,501 1,631,362
Raytheon Co., "A" 15,100 858,813
United Technologies Corp. 9,090 839,121
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$ 5,407,949
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Banks and Credit Companies - 4.0%
BankAmerica Corp. 12,550 $ 1,036,944
Firstar Corp. 18,640 736,280
National City Corp. 13,300 975,056
US Bancorp 7,600 948,100
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$ 3,696,380
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Building - 0.7%
Sherwin Williams Co. 19,060 $ 676,630
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Chemicals - 2.0%
Air Products & Chemicals, Inc. 10,970 $ 909,139
duPont (E. I.) de Nemours & Co., Inc. 13,400 911,200
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$ 1,820,339
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Computer Software - Personal Computers - 1.2%
Microsoft Corp.* 11,800 $ 1,056,100
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Computer Software - Systems - 2.1%
BMC Software, Inc.* 11,500 $ 963,844
Computer Associates International, Inc. 17,300 999,075
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$ 1,962,919
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Construction Services - 2.1%
Martin Marietta Materials, Inc. 44,479 $ 1,920,937
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Consumer Goods and Services - 8.5%
Clorox Co. 12,970 $ 1,111,367
Colgate-Palmolive Co. 14,530 1,258,661
Dial Corp. 38,700 926,381
Philip Morris Cos., Inc. 50,950 2,123,978
Tyco International Ltd. 43,120 2,355,430
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$ 7,775,817
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Electrical Equipment - 7.4%
General Electric Co. 68,240 $ 5,881,435
Honeywell, Inc. 11,420 944,291
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$ 6,825,726
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Entertainment - 1.0%
CBS Corp. 13,200 $ 447,975
Disney (Walt) Co. 4,100 437,675
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$ 885,650
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Financial Services - 2.0%
Associates First Capital Corp., "A" 11,700 $ 924,300
Washington Mutual, Inc. 12,800 918,000
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$ 1,842,300
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Food and Beverage Products - 11.2%
Campbell Soup Co. 14,720 $ 835,360
Coca-Cola Co. 37,650 2,915,522
Heinz (H.J.) Co. 15,740 918,823
Hershey Foods Corp. 13,580 972,667
Interstate Bakeries Corp. 48,900 1,580,081
Nabisco Holdings Corp., "A" 17,800 834,375
PepsiCo., Inc. 29,420 1,255,866
Ralston-Ralston Purina Co. 8,880 941,280
Vlasic Foods International, Inc. 1,472 37,628
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$10,291,602
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Forest and Paper Products - 0.9%
Kimberly-Clark Corp. 16,240 $ 814,030
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Insurance - 2.9%
Allstate Corp. 9,200 $ 845,825
Hartford Financial Services Group, Inc. 8,900 965,650
Lincoln National Corp. 10,200 865,725
-----------
$ 2,677,200
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Machinery - 1.0%
Deere & Co., Inc. 14,100 $ 873,319
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Medical and Health Products - 12.5%
American Home Products Corp. 13,460 $ 1,283,748
Bristol-Myers Squibb Co. 37,990 3,962,832
Johnson & Johnson 32,160 2,357,730
Merck & Co., Inc. 30,420 3,905,167
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$11,509,477
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Oils - 9.0%
Chevron Corp. 19,860 $ 1,595,006
Exxon Corp. 52,880 3,576,010
Mobil Corp. 25,060 1,920,223
Texaco, Inc. 19,740 1,189,335
-----------
$ 8,280,574
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Printing and Publishing - 1.2%
Gannett Co., Inc. 14,700 $ 1,056,562
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Railroads - 1.0%
Burlington Northern Santa Fe Railway Co. 9,090 $ 945,360
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Restaurants and Lodging - 1.5%
Cendant Corp.* 34,366 $ 1,361,753
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Stores - 1.0%
Rite Aid Corp. 27,580 $ 944,615
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Supermarkets - 4.6%
Kroger Co.* 47,240 $ 2,181,897
Safeway, Inc.* 54,920 2,028,608
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$ 4,210,505
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Telecommunications - 8.9%
AT&T Corp. 33,240 $ 2,181,375
Bell Atlantic Corp. 8,900 912,250
BellSouth Corp. 29,900 2,020,119
SBC Communications, Inc. 48,308 2,107,436
Sprint Corp. 14,370 972,669
-----------
$ 8,193,849
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Utilities - Electric - 5.1%
Cinergy Corp. 21,450 $ 793,650
CMS Energy Corp. 26,350 1,236,803
FPL Group, Inc. 14,770 948,973
Nipsco Industries, Inc. 31,500 882,000
Pinnacle West Capital Corp. 17,530 778,989
-----------
$ 4,640,415
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Utilities - Gas - 1.1%
Columbia Energy Group 13,380 $ 1,040,295
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Total Stocks (Identified Cost, $61,651,765) $90,710,303
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Short-Term Obligations - 1.1%
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PRINCIPAL AMOUNT
(000 OMITTED)
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Federal National Mortgage Assn.,
due 4/01/98, at Amortized Cost $ 950 $ 950,000
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Total Investments (Identified Cost, $62,601,765) $91,660,303
Other Assets, Less Liabilities - 0.1% 132,621
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Net Assets - 100.0% $91,792,924
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* Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
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MARCH 31, 1998
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Assets:
Investments, at value (identified cost, $62,601,765) $91,660,303
Cash 5,441
Receivable for Fund shares sold 24,805
Dividends receivable 109,036
Deferred organization expenses 4,100
Other assets 681
-----------
Total assets $91,804,366
-----------
Liabilities:
Payable to affiliates -
Management fee $ 4,841
Shareholder servicing agent fee 820
Distribution and service fee 780
Administrative fee 109
Accrued expenses and other liabilities 4,892
-----------
Total liabilities $ 11,442
-----------
Net assets $91,792,924
===========
Net assets consist of:
Paid-in capital $60,154,736
Unrealized appreciation on investments 29,058,538
Accumulated undistributed net realized gain on investments 2,492,303
Accumulated undistributed net investment income 87,347
-----------
Total $91,792,924
===========
Shares of beneficial interest outstanding 5,208,794
=========
Net assets:
Class A shares:
Net asset value per share
(net assets of $6,847,454 / 389,930 shares of beneficial
interest outstanding) $17.56
======
Offering price per share (100 / 94.25) $18.63
======
Class B shares:
Net asset value and offering price per share
(net assets of $1,860,291 / 105,907 shares of beneficial
interest outstanding) $17.57
======
Class C shares:
Net asset value and offering price per share
(net assets of $756,588 / 43,097 shares of beneficial
interest outstanding) $17.56
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $82,328,591 / 4,669,860 shares of
beneficial interest outstanding) $17.63
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
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SIX MONTHS ENDED MARCH 31, 1998
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Net investment income:
Income -
Dividends $ 663,143
Interest 76,781
-----------
Total investment income $ 739,924
-----------
Expenses -
Management fee $ 251,737
Trustees' compensation 2,500
Shareholder servicing agent fee 48,549
Distribution and service fee (Class A) 6,124
Distribution and service fee (Class B) 6,084
Distribution and service fee (Class C) 1,863
Administrative fee 5,146
Custodian fee 14,563
Printing 27,536
Auditing fees 8,330
Legal fees 1,091
Amortization of organization expenses 2,468
Postage 179
Miscellaneous 42,634
-----------
Total expenses $ 418,804
Preliminary reduction of expenses by investment adviser (72,572)
Fees paid indirectly (2,968)
-----------
Net expenses $ 343,264
-----------
Net investment income $ 396,660
-----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $ 3,165,727
Change in unrealized appreciation on investments 10,148,313
-----------
Net realized and unrealized gain on investments $13,314,040
-----------
Increase in net assets from operations $13,710,700
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
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SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
(UNAUDITED)
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<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 396,660 $ 665,634
Net realized gain on investments 3,165,727 5,385,099
Net unrealized gain on investments 10,148,313 10,238,878
----------- -----------
Increase in net assets from operations $13,710,700 $16,289,611
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (29,580) $ --
From net investment income (Class B) (11,127) --
From net investment income (Class C) (4,445) --
From net investment income (Class I) (760,399) (679,585)
From net realized gain on investments (Class A) (225,065) --
From net realized gain on investments (Class B) (97,691) --
From net realized gain on investments (Class C) (35,466) --
From net realized gain on investments (Class I) (5,806,765) (5,134,200)
----------- -----------
Total distributions declared to shareholders $(6,970,538) $(5,813,785)
----------- -----------
Net increase in net assets from Fund share transactions $15,969,219 $ 9,289,953
----------- -----------
Total increase in net assets $22,709,381 $19,765,779
Net assets:
At beginning of period 69,083,543 49,317,764
----------- -----------
At end of period (including accumulated undistributed net
investment income of $87,347 and $496,238, respectively) $91,792,924 $69,083,543
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $16.40 $16.13
------ ------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.03
Net realized and unrealized gain on investments 2.67 0.24
------ ------
Total from investment operations $ 2.73 $ 0.27
------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $ --
From net realized gain on investments (1.39) --
------ ------
Total distributions declared to shareholders $(1.57) $ --
------ ------
Net asset value - end of period $17.56 $16.40
====== ======
Total return(+) 18.08%++ 1.67%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.20%+ 1.20%+
Net investment income 0.70%+ 0.86%+
Portfolio turnover 20% 49%
Average commission rate $0.0577 $0.0589
Net assets at end of period (000 omitted) $ 6,847 $ 536
* For the period from the inception of Class A, August 8, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge
had been included, the results would have been lower.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses
of the Fund, exclusive of management, distribution, and service fees, at not more than 0.20% of
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 $ 0.04 $ 0.03
Ratios (to average net assets):
Expenses## 1.40%+ 1.34%+
Net investment income 0.50%+ 0.72%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997**
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $16.43 $16.24
------ ------
Income from investment operations# -
Net investment income (loss)(S) $ 0.01 $(0.01)
Net realized and unrealized gain on investments 2.68 0.20
------ ------
Total from investment operations $ 2.69 $ 0.19
------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $ --
From net realized gain on investments (1.39) --
------ ------
Total distributions declared to shareholders $(1.55) $ --
------ ------
Net asset value - end of period $17.57 $16.43
====== ======
Total return 17.74%++ 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.85%+ 1.85%+
Net investment income (loss) 0.10%+ (0.37)%+
Portfolio turnover 20% 49%
Average commission rate $0.0577 $0.0589
Net assets at end of period (000 omitted) $ 1,860 $ 17
** For the period from the inception of Class B, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the
Fund, exclusive of management, distribution, and service fees, at not more than 0.20% of 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 loss $(0.01) $(0.01)
Ratios (to average net assets):
Expenses## 2.05%+ 1.99%+
Net investment loss (0.10)%+ (0.52)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997***
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $16.43 $16.24
------ ------
Income from investment operations# -
Net investment income(S) $ -- $ 0.01
Net realized and unrealized gain on investments 2.69 0.18
------ ------
Total from investment operations $ 2.69 $ 0.19
------ ------
Less distributions declared to shareholders -
From net investment income $(0.17) $ --
From net realized gain on investments (1.39) --
------ ------
Total distributions declared to shareholders $(1.56) $ --
------ ------
Net asset value - end of period $17.56 $16.43
====== ======
Total return 17.73%++ 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.85%+ 1.85%+
Net investment income (loss) (0.04)%+ 0.63%+
Portfolio turnover 20% 49%
Average commission rate $0.0577 $0.0589
Net assets at end of period (000 omitted) $ 757 $ 4
*** For the period from the inception of Class C, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund,
exclusive of management, distribution, and service fees, at not more than 0.20% of average daily net assets. To
the extent actual expenses were over/under this limitation, the net investment income loss per share and the ratios
would have been:
Net investment income (loss) $(0.02) $ 0.01
Ratios (to average net assets):
Expenses## 2.05%+ 1.99%+
Net investment income (loss) (0.24)%+ 0.49%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ENDED SEPTEMBER 30, PERIOD ENDED
MARCH 31, ----------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995 1994****
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.43 $13.85 $11.85 $ 9.64 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.09 $ 0.17 $ 0.18 $ 0.17 $ 0.12
Net realized and unrealized gain (loss)
on investments 2.68 4.01 2.25 2.14 (0.48)
------ ------ ------ ------ ------
Total from investment operations $ 2.77 $ 4.18 $ 2.43 $ 2.31 $(0.36)
------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.18) $(0.19) $(0.15) $(0.10) $ --
From net realized gain on investments (1.39) (1.41) (0.28) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.57) $(1.60) $(0.43) $(0.10) $ --
------ ------ ------ ------ ------
Net asset value - end of period $17.63 $16.43 $13.85 $11.85 $ 9.64
====== ====== ====== ====== ======
Total return 18.30%++ 32.51% 20.96% 24.21% (3.60)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses 0.85%+ 0.97% 1.00% 1.00% 1.00%+
Net investment income 1.06%+ 1.12% 1.36% 1.58% 1.55%+
Portfolio turnover 20% 49% 81% 125% 48%
Average commission rate### $0.0577 $0.0589 $0.0562 $ -- $ --
Net assets at end of period (000 omitted) $82,329 $68,527 $49,318 $35,842 $22,184
**** For the period from the commencement of the Fund's investment operations, January 14, 1994, through September 30, 1994.
+ Annualized.
++ Not annualized.
# Per share data are 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 fiscal years beginning on or after September 1, 1995.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund, exclusive of
management, distribution, and service fees, at not more than 0.20% of 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 $ 0.07 $ 0.15 $ 0.18 $ 0.16 $ 0.07
Ratios (to average net assets):
Expenses## 1.05+ 1.11% 1.03% 1.12% 1.64%+
Net investment income 0.86%+ 0.98% 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 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 reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using 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 Fund
operations.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Dividends received in
cash are recorded on the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month-end net assets. The fee is reduced according to an arrangement
that measures 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 net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(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. The Fund has a temporary expense reimbursement
agreement whereby MFS has voluntarily agreed to pay all of the Fund's expenses,
exclusive of management, distribution, and service fees. The Fund in turn will
pay MFS an expense reimbursement fee of 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 the amounts paid by MFS in prior
years. At March 31, 1998, the aggregate unreimbursed expenses owed to MFS by the
Fund amounted to $245,173.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 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, as distributor, received
$2,080 for the six months ended March 31, 1998, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $1,018 for the six months ended March 31,
1998. Fees incurred under the distribution plan during the six months ended
March 31, 1998, were 0.35% of average daily net assets attributable to Class A
shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $0 for both Class B and Class C shares for the six months ended
March 31, 1998. Fees incurred under the distribution plan during the six months
ended March 31, 1998, were 1.00% of average daily net assets attributable to
both Class B and Class C shares.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended March 31,
1998, were $212, $0, and $0 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of the
average daily net assets at an effective annual rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$25,687,293 and $15,118,738, 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 $62,601,765
-----------
Gross unrealized appreciation $29,075,563
Gross unrealized depreciation (17,025)
-----------
Net unrealized appreciation $29,058,538
===========
(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>
Class A Shares
SIX MONTHS ENDED MARCH 31, 1998 PERIOD ENDED SEPTEMBER 30, 1997*
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 358,636 $ 5,841,706 32,873 $ 527,833
Shares issued to shareholders in
reinvestment of distributions 1,935 29,542 -- --
Shares reacquired (3,331) (54,714) (183) (2,893)
------- ------------ ------- ------------
Net increase 357,240 $ 5,816,534 32,690 $ 524,940
======= ============ ======= ============
* For the period from the inception of Class A, August 8, 1997, through September 30, 1997.
<CAPTION>
Class B Shares
SIX MONTHS ENDED MARCH 31, 1998 PERIOD ENDED SEPTEMBER 30, 1997**
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 105,306 $ 1,757,744 1,015 $ 16,553
Shares issued to shareholders in
reinvestment of distributions 1,113 17,027 -- --
Shares reacquired (1,527) (25,854) -- --
------- ------------ ------- ------------
Net increase 104,892 $ 1,748,917 1,015 $ 16,553
======= ============ ======= ============
<CAPTION>
Class C Shares
SIX MONTHS ENDED MARCH 31, 1998 PERIOD ENDED SEPTEMBER 30, 1997**
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 40,728 $ 679,696 234 $ 3,869
Shares issued to shareholders in
reinvestment of distributions 2,610 39,906 -- --
Shares reacquired (475) (7,849) -- --
------- ------------ ------- ------------
Net increase 42,863 $ 711,753 234 $ 3,869
======= ============ ======= ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED MARCH 31, 1998 YEAR ENDED SEPTEMBER 30, 1997
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 75,087 $ 1,224,946 271,272 $ 4,159,884
Shares issued to shareholders in
reinvestment of distributions 428,108 6,554,339 420,378 5,717,146
Shares reacquired (4,962) (87,270) (79,961) (1,132,439)
------- ------------ ------- ------------
Net increase 498,233 $ 7,692,015 611,689 $ 8,744,591
======= ============ ======= ============
** For the period from the inception of Class B and Class C, August 11, 1997, through September 30, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $805 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
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, 1998, was $222.
<PAGE>
MFS(R) UNION STANDARD(R) EQUITY FUND
TRUSTEES INVESTOR INFORMATION
Nelson J. Darling, Jr. - Trustee, For MFS stock and bond market
Eastern Enterprises outlooks, call toll free:
1-800-637-4458 anytime from a
William R. Gutow - Private Investor; touch-tone telephone.
Senior Vice President, Capital
Entertainment For information on MFS mutual funds,
call your financial adviser or, for an
Jeffrey L. Shames* information kit, call toll free:
Chairman, Chief Executive Officer, 1-800-637-2929 any business day from
and Director, MFS Investment 9 a.m. to 5 p.m. Eastern time (or leave
Mangement a message anytime).
INVESTMENT ADVISER INVESTOR SERVICE
Massachusetts Financial Services MFS Service Center, Inc.
Company P.O. Box 2281
500 Boylston Street Boston, MA 02107-9906
Boston, MA 02116-3741
For general information, call toll
DISTRIBUTOR free: 1-800-225-2606 any business day
MFS Fund Distributors, Inc. from 8 a.m. to 8 p.m. Eastern time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or
hearing-impaired, call toll free:
PORTFOLIO MANAGER 1-800-637-6576 any business day from
Mitchell D. Dynan* 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be
TREASURER equipped with a Telecommunications
W. Thomas London* Device for the Deaf.)
ASSISTANT TREASURERS For share prices, account balances,
Mark E. Bradley* and exchanges, call toll free:
Ellen Moynihan* 1-800-MFS-TALK (1-800-637-8255)
James O. Yost* anytime from a touch-tone telephone.
SECRETARY WORLD WIDE WEB
Stephen E. Cavan* www.mfs.com
ASSISTANT SECRETARY [DALBAR logo] For the fourth year in a
James R. Bordewick, Jr.* row, MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey,
CUSTODIAN Main Office Operations Service Quality
State Street Bank and Trust Company Category. The firm achieved a 3.42
overall score on a scale of 1 to 4 in
the 1997 survey. A total of 111 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 11 categories,
including "knowledge of operations
contact," "keeping you informed," and
"ease of doing business" with the
firm.
*Affiliated with the Investment Adviser
<PAGE>
MFS{R} UNION STANDARD(R) --------------
EQUITY FUND BULK RATE
U.S. POSTAGE
[Graphic omitted] MFS(SM) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(SM) --------------
500 Boylston Street
Boston, MA 02116-3741
[DALBAR Logo]
[UNION BUG]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
USE-3 5/98 5M 84/284/384/884
