<PAGE>
SEMIANNUAL REPORT
MARCH 31, 1999
[Graphic Omitted]
VERTEX ALL CAP FUND(SM)
VERTEX U.S. ALL CAP FUND(SM)
VERTEX CONTRARIAN FUND(SM)
<PAGE>
<TABLE>
VERTEX ALL CAP FUND(SM)
VERTEX U.S. ALL CAP FUND(SM)
VERTEX CONTRARIAN FUND(SM)
<S> <C>
TRUSTEES CUSTODIAN
Jeffrey L. Shames* - Chairman, Chief Executive State Street Bank and Trust Company
Officer, and Director, Vertex Investment
Management, Inc. INVESTOR SERVICE
MFS Service Center, Inc.
Nelson J. Darling, Jr. - Professional Trustee P.O. Box 2281
Boston, MA 02107-9906
William R. Gutow - Vice Chairman, Capitol
Entertainment Management Company; Real Estate For additional information, contact your
Consultant financial adviser.
INVESTMENT ADVISER WORLD WIDE WEB
Vertex Investment Management, Inc. www.mfs.com
a wholly owned subsidiary of
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
John W. Ballen*
Paul M. McMahon*
Brian E. Stack*
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
Since we launched Massachusetts Investors Trust, the nation's first mutual
fund, 75 years ago, MFS has weathered numerous market and economic cycles,
from the occasional recession to long periods of growth and prosperity.
Throughout that time, we have tried to give investors a realistic assessment
of the investment markets and, when necessary, to sound a note of caution --
even when market conditions appear quite favorable.
Although the equity markets have overcome last year's volatility, we still
think stocks are overdue for a correction that will rid them of the excesses
that have developed. Perhaps the most glaring measure of those excesses is the
high level of valuations, that is, the amount equity investors are paying for
each dollar of earnings. By mid-March, the price-to-earnings (P/E) ratio of
the average stock in the Standard & Poor's 500 Composite Index, a popular,
unmanaged index of common stock total return performance, was almost 28%
higher than it was a year ago. While P/E ratios keep going up, earnings have
essentially been flat, and we believe they are likely to stay that way, for a
few months at least. This leaves stock prices vulnerable to negative events
such as a domestic or international crisis, a sudden increase in interest
rates, or a slowing economy, any of which could lead to lower corporate
earnings.
While risks in the overall market have increased, one industry calls for
particular attention. For several months, Internet-related stocks have
exhibited extreme price volatility. The Internet's potential impact on the way
individuals and companies communicate and conduct business is certainly great,
but we feel that most of the recent run-up in the share prices of these
companies is unjustified. Many of them have not yet reported any profits, and
there is no way of knowing which of today's "hot" Internet stocks will be
successful -- or even in existence -- a few years from now. Therefore, we
think the frenzy surrounding even the best-known Internet stocks is purely
speculative.
However, there are some established companies offering Internet-related
products and services that may generate revenue. These include companies that
provide networking equipment, that make servers to store information, and that
help customers make better use of Internet services. Because they already have
profitable businesses as well as the potential to use the Internet to increase
their opportunities to generate revenue, these companies have been the focus
of our research efforts.
Although we think valuations for the overall equity market, and especially for
Internet stocks, are excessive, we see this situation as an opportunity for
our portfolio managers to capitalize on MFS(R) Original Research(SM). This is
a fundamental, company-by-company process that helps us find investments that
we believe are most likely to achieve long-term earnings growth, through both
negative and positive market cycles.
We also rely heavily on our research process when investing in the fixed- income
markets. Last year, turmoil in emerging markets and volatility in the U.S. stock
market helped create a "flight to quality," meaning that investors moved toward
U.S. Treasury securities, which are seen as carrying less risk, and away from
almost everything else. As a result, yields on non-Treasury securities
increased, while yields on Treasuries fell. Some of these yield spreads, or
differentials, have narrowed, but they have not returned to the levels seen
before last year's market turmoil. We think this has created opportunities for
our portfolio managers to find attractive yields in these markets.
Individual investors, meanwhile, should keep in mind that the tremendous
increases in the broad stock market averages of the past several years are a
historical aberration and do not necessarily indicate future market
performance. If they are not already diversified across a range of
investments, including growth stock funds, value-oriented funds, and fixed-
income funds, investors may want to talk to their financial advisers about
developing well-diversified portfolios with greater potential to weather
unexpected changes in the markets. Doing so may help investors more
effectively meet their long-term financial goals. We appreciate your
confidence and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
Vertex Investment Management, Inc.
April 16, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Vertex All Cap Fund
Dear Shareholders,
For the six months ended March 31, 1999, the Fund provided a total return of
58.18%. This return includes the reinvestment of distributions and compares to
a 27.23% return for the Standard & Poor's 500 Composite Index (the S&P 500), a
popular, unmanaged index of common stock total return performance.
The Fund seeks capital appreciation by investing at least 65% of assets in
equity securities. The Fund is flexibly managed and can pursue either growth-
or value-style investments in companies of all market capitalizations and
global industry sectors. The Fund, which can invest up to 100% of assets in
foreign securities, is nondiversified and will frequently maintain large
weightings in a small number of individual companies, countries, or regions.
The Fund uses a variety of short- and long-term investment techniques,
including short sales, long sales, derivatives, options, and futures
contracts. The Fund also may borrow up to 50% of its net assets to invest in
portfolio securities or for liquidity purposes.
The Fund's nondiversified nature, its ability to borrow money for investment
purposes, and its potential to engage in short sales all entail significant
risks.
Respectfully,
/s/ John W. Ballen
John W. Ballen
Portfolio Manager
Note to Shareholders: On February 24, 1999, John W. Ballen became portfolio
manager of the Fund, succeeding John F. Brennan, Jr.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
Vertex U.S. All Cap Fund
Dear Shareholders,
For the six months ended March 31, 1999, the Fund provided a total return of
50.99%. This return includes the reinvestment of distributions and compares to
a 27.23% return for the S&P 500.
The Fund seeks capital appreciation by investing at least 65% of assets in
equity securities. The Fund is flexibly managed and can invest in companies of
all market capitalizations. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities issued by U.S. companies
or traded on U.S. securities exchanges. The Fund is nondiversified and will
frequently maintain large weightings in a small number of individual companies,
countries, or regions.
The Fund uses a variety of short- and long-term investment techniques,
including short sales, long sales, derivatives, options, and futures
contracts. The Fund also may borrow up to 50% of its net assets to invest in
portfolio securities or for liquidity purposes.
The Fund's nondiversified nature, its ability to borrow money for investment
purposes, and its potential to engage in short sales all entail significant
risks.
Respectfully,
/s/ Paul M. McMahon
Paul M. McMahon
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
Vertex Contrarian Fund
Dear Shareholders,
For the six months ended March 31, 1999, the Fund provided a total return of
91.25%. This return includes the reinvestment of distributions and compares to a
27.23% return for the S&P 500.
The Fund seeks capital appreciation by investing at least 65% of assets in
equity securities. The Fund is flexibly managed and will seek investments in
companies that its manager considers to be undervalued due to market declines,
poor macroeconomic conditions, actual or anticipated developments that may
affect the issuing company or its industry, or market indifference. The Fund
is nondiversified and will frequently maintain large weightings in a small
number of individual companies.
The Fund uses a variety of short- and long-term investment techniques,
including short sales, long sales, derivatives, options, and futures
contracts. The Fund also may borrow up to 50% of its net assets to invest in
portfolio securities or for liquidity purposes.
The Fund's nondiversified nature, its ability to borrow money for investment
purposes, and its potential to engage in short sales all entail significant
risks.
Respectfully,
/s/ Brian E. Stack
Brian E. Stack
Portfolio Manager
Note to Shareholders: On October 30, 1998, Brian E. Stack became portfolio
manager of the Fund, succeeding John D. Laupheimer, Jr.
<PAGE>
PERFORMANCE SUMMARY
Currently each Fund offers only Class A shares, which are available for
purchase at net asset value only by employees of MFS and its affiliates,
certain of their family members who are also residents of the Commonwealth of
Massachusetts, and by trustees who oversee the MFS Funds.
CUMULATIVE TOTAL RATES OF RETURN AS OF MARCH 31, 1999
VERTEX ALL CAP FUND
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months Life of Fund*
- --------------------------------------------------------------------------------
Cumulative Total Return +58.18% +58.81%
- --------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, May
1, 1998, through March 31, 1999.
VERTEX U.S. ALL CAP FUND
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months Life of Fund*
- --------------------------------------------------------------------------------
Cumulative Total Return +50.99% +29.40%
- --------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, May
1, 1998, through March 31, 1999.
VERTEX CONTRARIAN FUND
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months Life of Fund*
- --------------------------------------------------------------------------------
Cumulative Total Return +91.25% +83.02%
- --------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, May
1, 1998, through March 31, 1999.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility. See the
prospectus for details.
Lower-rated securities may provide greater returns, but they are also
associated with greater-than-average risk. These risks may increase share
price volatility. See the prospectus for details.
Each Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
See the prospectus for details.
Each Fund may enter into short sales. A short sale transaction involves
selling a security which a Fund does not own with the intent of purchasing it
later at a lower price. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - March 31, 1999
VERTEX ALL CAP FUND
Stocks - 100.4%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 93.0%
Banks and Credit Companies - 8.0%
AmSouth Bancorp# 600 $ 27,300
BankBoston Corp.# 2,000 86,625
Fleet Financial Group, Inc.# 1,000 37,625
PNC Bank Corp.# 300 16,669
US Bancorp# 400 13,625
----------
$ 181,844
- ------------------------------------------------------------------------------------------------------
Business Machines - 3.0%
Kulicke & Soffa Industries, Inc.*# 2,700 $ 68,175
- ------------------------------------------------------------------------------------------------------
Business Services - 5.8%
DST Systems, Inc.*# 200 $ 12,013
IMRglobal Corp.*# 6,800 120,700
----------
$ 132,713
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 8.9%
BMC Software, Inc.*# 1,200 $ 44,475
Cadence Design Systems, Inc.*# 1,600 41,200
Compuware Corp.*# 1,800 42,975
Network Associates, Inc.* 260 7,979
Oracle Corp.*# 2,500 65,937
----------
$ 202,566
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 6.9%
Sportsline USA, Inc.*# 2,000 $ 91,250
Tyco International Ltd. 900 64,575
----------
$ 155,825
- ------------------------------------------------------------------------------------------------------
Containers - 2.2%
Gaylord Container Corp.* 6,800 $ 51,000
- ------------------------------------------------------------------------------------------------------
Electronics - 6.4%
Altera Corp.*# 1,000 $ 59,500
AMP, Inc.# 1,000 53,687
LSI Logic Corp.*# 1,000 31,188
----------
$ 144,375
- ------------------------------------------------------------------------------------------------------
Entertainment - 11.9%
Gemstar International Group Ltd.*# 2,000 $ 150,500
Jacor Communications, Inc.*# 400 30,400
MediaOne Group, Inc.*# 1,400 88,900
----------
$ 269,800
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 4.5%
Associates First Capital Corp., "A"# 800 $ 36,000
Federal Home Loan Mortgage Corp.# 1,000 57,125
Merrill Lynch & Co., Inc. 100 8,844
----------
$ 101,969
- ------------------------------------------------------------------------------------------------------
Insurance - 0.2%
Hartford Financial Services Group, Inc. 100 $ 5,681
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 1.1%
American Home Products Corp.# 400 $ 26,100
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 13.1%
Cytyc Corp.*# 4,400 $ 61,050
Total Renal Care Holdings, Inc.*# 15,300 168,300
United Healthcare Corp.# 1,300 68,412
----------
$ 297,762
- ------------------------------------------------------------------------------------------------------
Oils - 0.5%
Mobil Corp. 130 $ 11,440
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 1.9%
Scripps (E.W.) Howard, Inc., "A"# 400 $ 17,700
Ziff-Davis Inc. - ZD* 1,000 21,500
Ziff-Davis Inc. - ZDNet* 100 3,600
----------
$ 42,800
- ------------------------------------------------------------------------------------------------------
Railroads - 2.3%
Kansas City Southern Industries, Inc.# 900 $ 51,300
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 5.7%
Cendant Corp.*# 4,000 $ 63,000
Sonic Corp.*# 2,500 67,344
----------
$ 130,344
- ------------------------------------------------------------------------------------------------------
Stores - 4.3%
Rite Aid Corp.# 3,900 $ 97,500
- ------------------------------------------------------------------------------------------------------
Supermarkets - 2.6%
Meyer (Fred), Inc.*# 1,000 $ 58,875
- ------------------------------------------------------------------------------------------------------
Telecommunications - 3.7%
Alltel Corp.# 150 $ 9,356
Sprint Corp. (PCS Group)* 1,700 75,331
----------
$ 84,687
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,114,756
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 7.4%
Finland - 1.8%
Helsingin Puhelin Oyj (Telecommunications)* 3 $ 9,335
Nokia Corp., ADR (Telecommunications) 200 31,150
----------
$ 40,485
- ------------------------------------------------------------------------------------------------------
France - 0.8%
Sanofi S.A. (Medical and Health Products) 110 $ 18,546
- ------------------------------------------------------------------------------------------------------
Germany - 1.3%
Mannesmann AG (Conglomerate) 225 $ 28,768
- ------------------------------------------------------------------------------------------------------
Greece - 0.3%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 300 $ 7,303
- ------------------------------------------------------------------------------------------------------
Japan - 2.2%
NTT Mobile Communication Network, Inc.
(Telecommunications) 1 $ 49,409
- ------------------------------------------------------------------------------------------------------
United Kingdom - 1.0%
BP Amoco PLC, ADR (Oils)# 164 $ 16,554
Reuters Group PLC, ADR (Business Services) 80 6,950
----------
$ 23,504
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 168,015
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,040,085) $2,282,771
- ------------------------------------------------------------------------------------------------------
Preferred Stock - 5.6%
- ------------------------------------------------------------------------------------------------------
Supermarkets - 5.6%
Supermarkets General Holdings Corp.* (Identified Cost $80,500) 3,500 $ 127,750
- ------------------------------------------------------------------------------------------------------
Convertible Bond - 1.0%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 1.0%
Bell Atlantic Financial Services, Inc., 4.25s, 2005##
(Identified Cost $22,712) $ 20 $ 21,850
- ------------------------------------------------------------------------------------------------------
Call Options Purchased - 1.1%
- ------------------------------------------------------------------------------------------------------
ISSUER/EXPIRATION MONTH/STRIKE PRICE CONTRACTS
- ------------------------------------------------------------------------------------------------------
Tyco International Ltd./ January/47.5 (Premiums Paid, $12,402) 9 $ 24,638
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,155,699) $2,457,009
- ------------------------------------------------------------------------------------------------------
Securities Sold Short - (6.4)%
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - (1.2)%
Tupperware Corp. (1,500) $ (27,000)
- ------------------------------------------------------------------------------------------------------
Finance - (4.4)%
AmeriCredit Corp.* (3,200) $ (42,000)
E*TRADE Group, Inc.* (1,000) (58,313)
----------
$ (100,313)
- ------------------------------------------------------------------------------------------------------
Retail - (0.8)%
Wolverine World Wide, Inc. (2,000) (19,000)
- ------------------------------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received, $102,071) $ (146,313)
- ------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.7)% (37,988)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,272,708
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral requirements. At the period
end, the value of securities pledged amounted to $1,236,669.
## SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - March 31, 1999
VERTEX U.S. ALL CAP FUND
Stocks - 93.4%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 89.3%
Advertising - 2.3%
Outdoor Systems, Inc.* 700 $ 21,000
- ------------------------------------------------------------------------------------------------------
Business Services - 5.0%
First Data Corp. 1,100 $ 47,025
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 5.8%
Microsoft Corp.*# 600 $ 53,775
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 4.1%
EMC Corp.* 300 $ 38,325
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 3.4%
Oracle Corp.* 1,200 $ 31,650
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.0%
LoJack Corp.*# 3,600 $ 27,675
- ------------------------------------------------------------------------------------------------------
Entertainment - 16.7%
Comcast Corp., "A" 400 $ 25,175
Jacor Communications, Inc.*# 400 30,400
MediaOne Group, Inc.* 900 57,150
Time Warner, Inc. 600 42,637
--------
$155,362
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 19.5%
Associates First Capital Corp., "A" 1,100 $ 49,500
CIT Group, Inc., "A" 800 24,450
Donaldson, Lufkin & Jenrette, Inc. 600 41,850
Financial Federal Corp.*# 650 12,350
Merrill Lynch & Co., Inc. 600 53,062
--------
$181,212
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.6%
Health Management Associates, Inc., "A"* 1,900 $ 23,156
United Healthcare Corp. 200 10,525
--------
$ 33,681
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.4%
Ziff-Davis Inc. - ZDNet* 100 $ 3,600
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 3.0%
Wendy's International, Inc. 1,000 $ 28,438
- ------------------------------------------------------------------------------------------------------
Stores - 8.1%
Rite Aid Corp. 1,100 $ 27,500
TJX Cos., Inc. 1,400 47,600
--------
$ 75,100
- ------------------------------------------------------------------------------------------------------
Telecommunications - 14.4%
American Tower Corp., "A"* 1,400 $ 34,300
Cisco Systems, Inc.* 300 32,869
MCI WorldCom, Inc.* 400 35,425
Sprint Corp. (PCS Group)*# 700 31,019
--------
$133,613
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $830,456
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 4.1%
Germany
Mannesmann AG (Conglomerate) 300 $ 38,358
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $807,062) $868,814
- ------------------------------------------------------------------------------------------------------
Warrants - 4.8%
- ------------------------------------------------------------------------------------------------------
BJ Services Co. (Oil Services) (Identified Cost, $44,126) 2,300 $ 44,562
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $851,188) $913,376
- ------------------------------------------------------------------------------------------------------
Securities Sold Short - (6.3)%
- ------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - (2.2)%
Dell Computer Corp.* (500) $(20,437)
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - (2.0)%
Wrigley, (WM) Junior Co. (200) $(18,088)
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - (2.1)%
Warner-Lambert Co. (300) $(19,856)
- ------------------------------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received, $56,045) $(58,381)
- ------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 8.1% 75,452
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $930,447
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral requirements. At March 31,
1999, the value of securities pledged amounted to $108,344.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - March 31, 1999
VERTEX CONTRARIAN FUND
Stocks - 152.3%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 147.0%
Business Machines - 1.0%
Kulicke & Soffa Industries, Inc.*# 1,000 $ 25,250
- ------------------------------------------------------------------------------------------------------
Business Services - 30.5%
DST Systems, Inc.*# 600 $ 36,038
Learning Tree International, Inc.*# 3,200 32,000
Quintiles Transnational Corp.* 16,911 638,390
Technology Solutions Co.* 5,100 36,337
----------
$ 742,765
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 9.5%
America Online, Inc.*# 1,000 $ 146,000
AVT Corp.* 1,000 23,875
Microsoft Corp.*# 700 62,737
----------
$ 232,612
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 4.4%
Hyperion Solutions Corp.*# 3,800 $ 55,100
PLATINUM Technology International, Inc.* 2,000 51,000
----------
$ 106,100
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 5.7%
Critical Path, Inc.* 100 $ 7,700
Etec Systems, Inc.* 1,500 44,156
SCB Computer Technology, Inc.* 2,000 9,125
Security Dynamics Technologies, Inc.* 900 16,763
SunGard Data Systems, Inc.*# 1,000 40,000
Wind River Systems, Inc.*# 1,150 20,484
----------
$ 138,228
- ------------------------------------------------------------------------------------------------------
Conglomerates - 1.1%
Sodexho Marriott Services, Inc.*# 1,200 $ 26,475
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 5.7%
Galileo International, Inc.# 800 $ 38,700
SportsLine USA, Inc.*# 2,200 100,375
----------
$ 139,075
- ------------------------------------------------------------------------------------------------------
Containers - 1.6%
Gaylord Container Corp.* 5,200 $ 39,000
- ------------------------------------------------------------------------------------------------------
Electronics - 9.2%
Credence Systems Corp.*# 900 $ 19,294
GaSonics International Corp.* 9,900 108,900
KLA-Tencor Corp.*# 400 19,425
MKS Instruments, Inc.* 100 1,338
SIPEX Corp.*# 1,600 20,900
Teradyne, Inc.*# 1,000 54,562
----------
$ 224,419
- ------------------------------------------------------------------------------------------------------
Energy - 0.9%
BJ Services Co.*# 900 $ 21,094
- ------------------------------------------------------------------------------------------------------
Entertainment - 10.6%
Disney (Walt) Co.# 1,100 $ 34,238
Gemstar International Group Ltd.*# 1,350 101,587
Jacor Communications, Inc.*# 1,600 121,600
----------
$ 257,425
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 8.7%
Jefferies Group, Inc. 4,000 $ 189,750
U.S. Trust Corp.# 300 22,256
----------
$ 212,006
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.3%
Del Monte Foods Co.*# 600 $ 7,913
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 1.1%
Haemonetics Corp.*# 1,700 $ 26,669
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 20.7%
Cytyc Corp.*# 8,900 $ 123,487
IDEXX Laboratories, Inc.*# 4,100 98,144
PAREXEL International Corp.*# 1,050 21,722
Quorum Health Group, Inc.* 600 6,000
Superior Consultant Holdings Corp.*# 1,600 54,600
Total Renal Care Holdings, Inc.*# 18,100 199,100
----------
$ 503,053
- ------------------------------------------------------------------------------------------------------
Oil Services - 2.5%
Cooper Cameron Corp.*# 700 $ 23,713
Noble Drilling Corp.*# 2,200 38,087
----------
$ 61,800
- ------------------------------------------------------------------------------------------------------
Oils - 1.2%
Newfield Exploration Co.*# 1,300 $ 29,412
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 14.4%
Scholastic Corp.*# 800 $ 39,100
Ziff Davis, Inc.* 14,300 307,450
Ziff-Davis, Inc. - ZDNet* 100 3,600
----------
$ 350,150
- ------------------------------------------------------------------------------------------------------
Railroads - 2.3%
Kansas City Southern Industries, Inc.# 1,000 $ 57,000
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 1.0%
Newport News Shipbuilding, Inc.# 800 $ 25,350
- ------------------------------------------------------------------------------------------------------
Stores - 4.4%
BJ's Wholesale Club, Inc.*# 800 $ 21,150
Micro Warehouse, Inc.*# 800 12,900
Rite Aid Corp.# 2,400 60,000
Valley Media, Inc.* 600 13,650
----------
$ 107,700
- ------------------------------------------------------------------------------------------------------
Technology - 1.8%
Galileo Technology Ltd.*# 1,500 $ 43,875
- ------------------------------------------------------------------------------------------------------
Telecommunications - 7.3%
Cisco Systems, Inc.*# 500 $ 54,781
Intermedia Communications, Inc.*# 2,725 72,553
Network Solutions, Inc.*# 200 21,150
Qwest Communications International, Inc.*# 400 28,838
----------
$ 177,322
- ------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.1%
Frontier Corp.# 500 $ 25,938
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $3,580,631
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 5.3%
United Kingdom - 5.3%
CBT Group PLC, ADR (Computer Software)*# 11,400 $ 130,387
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $3,456,514) $3,711,018
- ------------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 1.1%
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.1%
Concentra Managed Care, Inc., 4.50% (Identified Cost, $23,086) 30,000 $ 27,713
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,479,600) $3,738,731
- ------------------------------------------------------------------------------------------------------
Securities Sold Short - (37.8)%
- ------------------------------------------------------------------------------------------------------
U.S. Stocks - (35.9)%
Business Services - (5.3)%
Preview Travel, Inc.* (6,800) $ (129,200)
- ------------------------------------------------------------------------------------------------------
Computer Hardware - Systems (1.2)%
Dell Computer Corp.* (700) $ (28,613)
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - (4.8)%
Internet America, Inc.* (1,100) $ (32,588)
Yahoo!, Inc.* (500) (84,187)
----------
$ (116,775)
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - (3.3)%
E*TRADE Group, Inc.* (900) $ (52,481)
Xoom.com, Inc. (400) (26,825)
----------
$ (79,306)
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - (1.2)%
Procter & Gamble Co. (300) $ (29,381)
- ------------------------------------------------------------------------------------------------------
Entertainment - (2.5)%
Clear Channel Communications, Inc.* (900) $ (60,356)
- ------------------------------------------------------------------------------------------------------
Financial Institutions - (7.4)%
AmeriTrade Holding Corp. "A"* (1,290) $ (79,658)
Investment Technology Group, Inc.* (2,000) (101,500)
----------
$ (181,158)
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - (1.0)%
Coca-Cola Co. (400) $ (24,550)
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology Services - (1.5)%
PacifiCare Health Systems, Inc., "B"* (540) $ (36,855)
- ------------------------------------------------------------------------------------------------------
Stores - (7.7)%
Amazon.com, Inc.* (300) $ (51,656)
CDnow, Inc. (1,700) (27,413)
Cyberian Outpost, Inc.* (1,500) (29,625)
eBay, Inc.* (360) (49,432)
ONSALE, Inc.* (900) (30,206)
----------
$ (188,332)
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks Sold Short $ (874,526)
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - (1.9)%
Bermuda - (0.9)%
Global Crossing Ltd. (Telecommunications)* (500) $ (23,125)
- ------------------------------------------------------------------------------------------------------
Germany - (1.0)%
SAP AG, ADR (Computer Software -- Systems)## (900) $ (23,850)
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks Sold Short $ (46,975)
- ------------------------------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received, $862,931) $ (921,501)
- ------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (15.6)% (380,888)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,436,342
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral requirements. At the period
end, the value of securities pledged amounted to $2,029,179.
## SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------
VERTEX VERTEX VERTEX
ALL CAP U.S. ALL CAP CONTRARIAN
MARCH 31, 1999 FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost,
$2,155,699, $851,188, and $3,479,600,
respectively) $2,457,009 $ 913,376 $3,738,731
Cash 254,821 7,814 16,087
Deposits with brokers for securities sold short 193,916 56,045 1,419,482
Receivable for investments sold 111,491 163,258 450,806
Interest and dividends receivable 3,854 1,158 152
---------- ---------- ----------
Total assets $3,021,091 $1,141,651 $5,625,258
---------- ---------- ----------
Liabilities:
Payable to custodian $ 138,849 $ -- $ 916,803
Securities sold short, at value (proceeds
received, $102,071, $56,045, and $862,931,
respectively) 146,313 58,381 921,501
Payable for investments purchased 462,144 152,504 1,313,944
Payable for Fund shares reacquired -- -- 36,000
Payable for dividends on securities sold short 962 -- 536
Accrued expenses and other liabilities 115 319 132
---------- ---------- ----------
Total liabilities $ 748,383 $ 211,204 $3,188,916
---------- ---------- ----------
Net Assets $2,272,708 $ 930,447 $2,436,342
========== ========== ==========
Net assets consist of:
Paid-in capital $1,597,958 $ 710,950 $1,760,768
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 257,068 59,852 200,561
Accumulated undistributed net realized gain on
investments and foreign currency transactions 431,288 164,580 486,876
Accumulated net investment loss (13,606) (4,935) (11,863)
---------- ---------- ----------
Net assets $2,272,708 $ 930,447 $2,436,342
========== ========== ==========
Shares of beneficial interest outstanding 151,258 71,790 135,662
======= ====== =======
Net asset value, offering price, and redemption
price per share (net assets / shares of
beneficial interest outstanding) $15.03 $12.96 $17.96
====== ====== ======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
<CAPTION>
- ----------------------------------------------------------------------------------------------------
VERTEX VERTEX VERTEX
ALL CAP U.S. ALL CAP CONTRARIAN
SIX MONTHS ENDED MARCH 31, 1999 FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss):
Income -
Dividends $ 6,674 $ 1,625 $ 1,578
Interest 1,770 720 360
Foreign taxes withheld (1,800) -- --
-------- -------- --------
Total investment income $ 6,644 $ 2,345 $ 1,938
-------- -------- --------
Expenses -
Management fee $ 14,560 $ 5,472 $ 9,838
Trustees' compensation 2,500 2,500 2,500
Shareholder servicing agent fee 1,092 409 740
Distribution and service fee (Class A) 3,400 1,277 2,325
Administrative fee 162 58 75
Custodian fee 4,417 1,976 2,906
Interest expense 4,155 1,451 6,739
Printing 5,213 -- 946
Postage 218 72 102
Auditing fees 7,007 6,616 6,991
Legal fees 1,367 1,671 1,699
Dividend expense on securities sold short 837 -- 680
Miscellaneous 1,524 143 1,319
-------- -------- --------
Total expenses $ 46,452 $ 21,645 $ 36,860
Fees paid indirectly (149) (169) (213)
Reduction of expenses by investment adviser and
distributor (26,053) (14,196) (22,846)
-------- -------- --------
Net expenses $ 20,250 $ 7,280 $ 13,801
-------- -------- --------
Net investment loss $(13,606) $ (4,935) $(11,863)
-------- -------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $719,876 $184,940 $477,944
Securities sold short (140,412) (9,915) 10,745
Foreign currency transactions (1,395) 266 --
-------- -------- --------
Net realized gain on investments and foreign
currency transactions $578,069 $175,291 $488,689
-------- -------- --------
Change in unrealized appreciation (depreciation) -
Investments $319,499 $100,104 $297,841
Securities sold short (93,555) (6,556) (58,571)
Translation of assets and liabilities in foreign
currencies (4,430) 395 --
-------- -------- --------
Net unrealized gain on investments and foreign
currency translation $221,514 $ 93,943 $239,270
-------- -------- --------
Net realized and unrealized gain on
investments and foreign currency $799,583 $269,234 $727,959
-------- -------- --------
Increase in net assets from operations $785,977 $264,299 $716,096
======== ======== ========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX ALL CAP FUND (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (13,606) $ (5,612)
Net realized gain (loss) on investments and foreign
currency transactions 578,069 (39,384)
Net unrealized gain on investments and foreign currency
translation 221,514 35,554
---------- ----------
Increase (decrease) in net assets from operations $ 785,977 $ (9,442)
---------- ----------
Distributions declared to shareholders from net realized gain
on investments and foreign currency transactions $ (106,531) $ --
---------- ----------
Net increase in net assets from Fund share transactions $ 562,075 $1,040,629
---------- ----------
Total increase in net assets $1,241,521 $1,031,187
Net assets:
At beginning of period 1,031,187 --
---------- ----------
At end of period (including accumulated net investment loss
of $13,606 and $0, respectively) $2,272,708 $1,031,187
========== ==========
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX U.S. ALL CAP FUND (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (4,935) $ (1,940)
Net realized gain (loss) on investments and foreign currency
transactions 175,291 (10,724)
Net unrealized gain (loss) on investments and foreign currency
translation 93,943 (34,091)
-------- --------
Increase (decrease) in net assets from operations $264,299 $(46,755)
-------- --------
Net increase in net assets from Fund share transactions $360,295 $352,608
-------- --------
Total increase in net assets $624,594 $305,853
Net assets:
At beginning of period 305,853 --
-------- --------
At end of period (including accumulated net investment loss of
$4,935 and $0, respectively) $930,447 $305,853
======== ========
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX CONTRARIAN FUND (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (11,863) $ 1,409
Net realized gain on investments and foreign currency
transactions 488,689 13,783
Net unrealized gain (loss) on investments and foreign
currency translation 239,270 (38,709)
---------- --------
Increase (decrease) in net assets from operations $ 716,096 $(23,517)
---------- --------
Distributions declared to shareholders -
From net investment income $ (1,392) $ --
From net realized gain on investments and foreign currency
transactions (15,613) --
---------- --------
Total distributions declared to shareholders $ (17,005) $ --
---------- --------
Net increase in net assets from Fund share transactions $1,347,765 $413,003
---------- --------
Total increase in net assets $2,046,856 $389,486
Net assets:
At beginning of period 389,486 --
---------- --------
At end of period (including accumulated net investment loss
of $11,863 and accumulated net investment income of
$1,392, respectively) $2,436,342 $389,486
========== ========
*For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Cash Flows (Unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------------
VERTEX
CONTRARIAN
SIX MONTHS ENDED MARCH 31, 1999 FUND
- -------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities -
Net increase in net assets from operations $ 716,096
Adjustments to reconcile net increase in net assets from operations to
net cash provided by (used in) operating activities:
Purchase of investment securities (23,727,905)
Proceeds from disposition of investment securities 22,026,616
Increase in deposits with brokers for securities sold short (1,419,482)
Increase in dividends and interest receivable 867
Increase in receivable for securities sold (450,806)
Decrease in other receivables 2,100
Increase in payable for securities purchased 1,309,156
Increase in payable for Fund shares reacquired 36,000
Increase in accrued expenses and other liabilities 647
Unrealized appreciation from investments and securities sold short (239,270)
Net realized gain from investments and securities sold short (488,689)
------------
Net cash used in operating activities $ (2,234,670)
------------
Cash flows from financing activities -
Increase in loan payable $ 916,803
Proceeds from Fund shares sold 1,483,118
Payment on Fund shares redeemed (152,357)
------------
Net cash provided by financing activities 2,247,564
------------
Net increase in cash $ 12,894
Cash:
Beginning balance 3,193
Ending balance $ 16,087
============
Non cash financing activities not included herein consist of reinvestment of distributions
of $17,005.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX ALL CAP FUND (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.10 $10.00
------ ------
Income from investment operations# -
Net investment loss(S) $(0.09) $(0.07)
Net realized and unrealized gain on investments
and foreign currency 5.71 0.17
------ ------
Total from investment operations $ 5.62 $ 0.10
------ ------
Less distributions declared to shareholders from net realized
gain on investments and foreign currency transactions $(0.69) $ --
------ ------
Net asset value - end of period $15.03 $10.10
====== ======
Total return 58.18%++ 1.00%++
Ratios (to average net assets)/Supplemental data(S):
Expenses##(+) 2.11%+ 2.39%+
Net investment loss (1.41)%+ (1.43)%+
Portfolio turnover 991% 446%
Net assets at end of period (000 omitted) $2,273 $1,031
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The
Fund's expenses are calculated without reduction for this expense offset arrangement.
(+) Excluding dividend expense on securities sold short, the ratio of expenses to average net assets
was 2.02% and 2.00% for the six months ended March 31, 1999, and the period ended September 30,
1998, respectively.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain expenses of the
Fund, exclusive of management, distribution and service fees, and dividend expense on securities
sold short, at not more than 2.00% of average daily net assets. In addition, the investment
adviser and the distributor voluntarily waived their fees for the periods indicated. To the
extent actual expenses were over this limitation and the waivers had not been in place, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.27) $(0.36)
Ratios (to average net assets):
Expenses## 4.83% 8.62%+
Net investment loss (4.13)% (7.66)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX U.S. ALL CAP FUND (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.61 $10.00
------ ------
Income from investment operations# -
Net investment loss(S) $(0.08) $(0.06)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 4.43 (1.33)
------ ------
Total from investment operations $ 4.35 $(1.39)
------ ------
Net asset value - end of period $12.96 $ 8.61
====== ======
Total return 50.99%++ (13.90)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.04%+ 2.50%+
Net investment loss (1.35)%+ (1.51)%+
Portfolio turnover 397% 928%
Net assets at end of period (000 omitted) $930 $306
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The
Fund's expenses are calculated without reduction for this expense offset arrangement.
(+) Excluding dividend expense on securities sold short, the ratio of expenses to average net assets
was 2.04% and 2.00% for the six months ended March 31, 1999, and the period ended September 30,
1998, respectively.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain expenses of the
Fund, exclusive of management and distribution and service fees at not more than 2.00% of
average daily net assets. In addition, the investment adviser and the distributor voluntarily
waived their fees for the periods indicated. To the extent actual expenses were over this
limitation and the waivers had not been in place, the net investment loss per share and the
ratios would have been:
Net investment loss $(0.40) $(0.88)
Ratios (to average net assets):
Expenses## 5.93%+ 21.86%+
Net investment loss (5.20)%+ (20.87)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998*
VERTEX CONTRARIAN FUND (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.58 $10.00
------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.13) $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 8.73 (0.46)
------ ------
Total from investment operations $ 8.60 $(0.42)
------ ------
Less distributions declared to shareholders -
From net investment income $(0.02) $ --
From net realized gain on investment and foreign
currency transactions (0.20) --
------ ------
Total distributions declared to shareholders $(0.22) $ --
------ ------
Net asset value - end of period $17.96 $ 9.58
====== ======
Total return 91.25%++ (4.20)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses##(+) 2.14%+ 2.03%+
Net investment income (loss) (1.81)%+ 0.91%+
Portfolio turnover 942% 243%
Net assets at end of period (000 omitted) $2,436 $389
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through
September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The
Fund's expenses are calculated without reduction for this expense offset arrangement.
(+) Excluding dividend expense on securities sold short, the ratio of expenses to average net assets
was 2.03% and 2.03% for the six months ended March 31, 1999, and the period ended September 30,
1998, respectively.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain expenses of the
Fund, exclusive of management, distribution and service fees, and dividend expense on securities
sold short, at not more than 2.00% of average daily net assets. In addition, the investment
adviser and the distributor voluntarily waived their fees for the periods indicated. To the
extent actual expenses were over this limitation and the waivers had not been in place, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.37) $(0.64)
Ratios (to average net assets):
Expenses## 5.63%+ 15.69%+
Net investment loss (5.30)%+ (12.78)%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
Vertex All Cap Fund, Vertex U.S. All Cap Fund and Vertex Contrarian Fund,
(each Fund) are non-diversified series of MFS Series Trust XI (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. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
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.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Short Sales - Each Fund may enter into short sales. A short sale transaction
involves selling a security which the Fund does not own with the intent of
purchasing it later at a lower price. A Fund will realize a gain if the security
price decreases and a loss if the security price increases between the date of
the short sale and the date on which the Fund must replace the borrowed
security. Losses can exceed the proceeds from short sales and can be greater
than losses from the actual purchase of a security. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of the
premium, dividends, or interest the Fund may be required to pay in connection
with a short sale. Whenever a Fund engages in short sales, its custodian
segregates cash or marketable securities in an amount that, when combined with
the amount of proceeds from the short sale deposited with the broker, at least
equals the current market value of the security sold short.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
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 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 - Each 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 Statements of Operations.
Tax Matters and Distributions - Each 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. Each 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. Each 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 distributions from paid-in
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.
(3) Transactions with Affiliates
Investment Adviser - Each Fund has an investment advisory agreement with Vertex
Investment Management, Inc. (Vertex), a wholly owned subsidiary of 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 1.50% of average daily net
assets. The investment adviser has voluntarily agreed to waive its fee, which is
reflected as a reduction of expenses in the Statements of Operations.
Each Fund has a temporary expense reimbursement agreement whereby Vertex has
voluntarily agreed to pay all of each Fund's operating expenses, exclusive of
management, distribution and service fees, and dividend expense on securities
sold short. Each Fund in turn will pay Vertex an expense reimbursement fee not
greater than 2.00% of average daily net assets. To the extent that the expense
reimbursement fee exceeds each Fund's actual expenses, the excess will be
applied to amounts paid by Vertex in prior years.
At March 31, 1999, the aggregate unreimbursed expenses owed to Vertex were as
follows:
VERTEX VERTEX VERTEX
ALL CAP FUND U.S. ALL CAP FUND CONTRARIAN FUND
-----------------------------------------------------
$25,281 $29,910 $29,116
Each Fund pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Fund from Vertex. Certain officers and
Trustees of the Fund are officers or directors of Vertex, MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator - Each Fund has an administrative services agreement with MFS to
provide each Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each 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%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales on Class A shares of each Fund for the six
months ended March 31, 1999.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that each 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 each 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 each 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 each Fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase.
There were no contingent deferred sales charges imposed on Class A shares of
each Fund during the six months ended March 31, 1999.
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 each Fund's average daily net assets at an effective annual
rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than short sale transactions,
purchased option transactions and short-term obligations, were as follows:
<TABLE>
<CAPTION>
VERTEX VERTEX VERTEX
ALL CAP FUND U.S. ALL CAP FUND CONTRARIAN FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
- ---------
Investments (non-U.S. government securities) $19,957,209 $3,167,603 $19,070,273
----------- ---------- -----------
Sales
- -----
Investments (non-U.S. government securities) $19,828,774 $2,864,183 $16,410,822
----------- ---------- -----------
</TABLE>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each Fund, as computed on a federal income tax basis, are
as follows:
<TABLE>
<CAPTION>
VERTEX VERTEX VERTEX
ALL CAP FUND U.S. ALL CAP FUND CONTRARIAN FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost $ 2,155,699 $ 851,188 $ 3,479,600
----------- ---------- -----------
Gross unrealized appreciation $ 372,671 $ 106,173 $ 381,598
Gross unrealized depreciation (71,361) (43,985) (122,467)
----------- ---------- -----------
Net unrealized appreciation $ 301,310 $ 62,188 $ 259,131
=========== ========== ===========
</TABLE>
(5) Shares of Beneficial Interest
Each Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999
----------------------------------------------------------------------------------------
VERTEX ALL CAP FUND VERTEX U.S. ALL CAP FUND VERTEX CONTRARIAN FUND
---------------------------- -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 98,084 $1,245,521 36,400 $361,356 102,797 $1,483,117
Shares reinvested 9,053 106,915 -- -- 1,324 17,005
Shares reacquired (57,948) (790,361) (117) (1,061) (9,116) (152,357)
------- ---------- ------ -------- ------- ----------
Net increase 49,189 $ 562,075 36,283 $360,295 95,005 $1,347,765
======= ========== ====== ======== ======= ==========
</TABLE>
<TABLE>
Class A Shares
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998*
----------------------------------------------------------------------------------------
VERTEX ALL CAP FUND VERTEX U.S. ALL CAP FUND VERTEX CONTRARIAN FUND
---------------------------- -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 102,107 $1,041,011 35,507 $352,608 70,657 $ 725,305
Shares reacquired (38) (382) -- -- (30,000) (312,302)
------- ---------- ------ -------- ------- ----------
Net increase 102,069 $1,040,629 35,507 $352,608 40,657 $ 413,003
======= ========== ====== ======== ======= ==========
*For the period from the commencement of each Fund's investment operations, May 1, 1998, through September 30, 1998.
</TABLE>
(6) Line of Credit
The Funds participate in a $4 million committed secured line of credit, provided
by State Street Bank and Trust Company under a line of credit agreement. Each
Fund may borrow up to 50% of its net assets to invest in portfolio securities or
for liquidity or defensive purposes. Each loan is secured by assets of the Fund.
Interest is charged to each Fund, based on its borrowings, at a rate equal to
the Overnight Federal Funds Rate plus 0.45%. In addition, a commitment fee of
0.07% per annum is charged based on the daily unused portion of the committed
line of credit and allocated among the participating funds at the end of each
quarter. During the six months ended March 31, 1999, the maximum amounts
outstanding and the amounts outstanding at March 31, 1999, were as follows:
<TABLE>
<CAPTION>
VERTEX VERTEX VERTEX
ALL CAP FUND U.S. ALL CAP FUND CONTRARIAN FUND
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum loan outstanding $500,000 $159,923 $916,803
Loan outstanding at March 31, 1999 $138,849 -- $916,803
</TABLE>
Interest expense and weighted average interest rate incurred on the borrowings
for the six months ended March 31, 1999, and the interest rate on March 31,
1999, were as follows:
<TABLE>
<CAPTION>
VERTEX VERTEX VERTEX
ALL CAP FUND U.S. ALL CAP FUND CONTRARIAN FUND
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Expense $ 4,155 $ 864 $ 6,739
Weighted Average Interest Rate 5.38% 5.40% 5.30%
Interest Rate at March 31, 1999 5.625% -- 5.625%
</TABLE>
--------------------------------
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>
VERTEX ALL CAP FUND(SM)
VERTEX U.S. ALL CAP FUND(SM)
VERTEX CONTRARIAN FUND(SM)
VERTEX INVESTMENT MANAGEMENT, INC.
500 BOYLSTON STREET
BOSTON, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VER-3 5/99 2M
