<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) UNION STANDARD(R)
EQUITY FUND
ANNUAL REPORT o SEPTEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 21
Independent Auditors' Report .............................................. 26
MFS' Year 2000 Readiness Disclosure ....................................... 28
Trustees and Officers ..................................................... 29
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to last
year's. One year ago, global economies were floundering, and the crisis in Asia
threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low. Many
corporations are focused on improving their profitability, and investors have
been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although the
process is in its infancy, some Japanese corporations not only are talking about
restructuring and cost cutting, they also are beginning to take action, looking
within to become more competitive and improve returns on equity. While still
lagging the United States, Europe is beginning to restructure and consolidate.
These signs of international growth have contributed to concerns that the U.S.
economy now may be too strong. In June, and again in August, the Fed raised
rates by one-quarter of a percentage point to help ward off the specter of
inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current market
many investors are taking on additional risk - whether through day trading or
investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top 25
stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, are still the most overvalued. Such
extreme overvaluation makes the stock market sensitive to interest-rate news and
any negative earnings surprises. The Year 2000 (Y2K) computer problem is another
factor causing investor concern. While we believe corporate America is well
prepared to address any Y2K situations that may arise at year-end, no one can
predict investor behavior. In our opinion, it is investor behavior that has the
greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research(R) and our fundamental investment
tenet of long-term investing. Whether markets are up or down, MFS analysts focus
on analyzing industries and visiting companies to determine the long-term
winners and the prices that will make them attractive opportunities. Because all
companies will not benefit equally from the improving international environment,
bottom-up research remains critical to identifying those that we believe are
successfully restructuring, consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at attractive
prices. For this reason, we are continuing to expand our domestic and
international capabilities to ensure that MFS has primary, in-house research on
companies worldwide. We believe that we have built the right investment team,
backed by MFS Original Research, to take advantage of those opportunities for
our shareholders.
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
MFS Investment Management(R)
October 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Mitchell D. Dynan]
Mitchell D. Dynan
For the 12 months ended September 30, 1999, Class A shares of the Fund provided
a total return of 5.56%, Class B shares 4.86%, Class C shares 4.92%, and Class I
shares 5.97%. These returns include the reinvestment of any distributions, but
exclude the effects of any sales charges, and compare to a 27.81% return for the
S&P 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock total return performance, and to a 20.60% return for the average growth
and income fund tracked by Lipper Analytical Services, Inc., an independent firm
that reports mutual fund performance.
Q. WHY HAS THE FUND'S PERFORMANCE LAGGED THE BROAD STOCK MARKET AND THE LIPPER
AVERAGE?
A. The Fund's underperformance can be attributed to the portfolio's defensive
and conservative orientation, which conflicted with the market's movements.
Significant positions in sectors that came under pressure, along with a
number of disappointing individual holdings, further dampened the Fund's
performance. With the exception of a brief period during this past spring
when the stock market broadened out, the primary beneficiary of the stock
market's surges over the period was a narrow band of large-capitalization
stocks. As was the case throughout much of the past 12 months, the
outperformance of this narrow group of stocks masked weakness in the overall
market. Indeed, in the final three months of the period, only a handful of
industries within the S&P 500 posted positive results, although individual
stock performance varied significantly within groups. Despite very high
valuations, the technology sector was by far the year's standout performer,
with the computer and electronics subsectors generating positive returns.
Q. WHAT INDUSTRIES DID YOU EMPHASIZE DURING THE PERIOD?
A. We continued to follow a steady course, emphasizing industries and stocks
that historically have been defensive in nature -- ones that have tended to
offer predictable earnings growth, such as consumer staples, health care,
supermarkets, drug stores, and electric utilities. On a risk versus reward
basis and on a stock-by-stock basis, valuations in these industries seemed
quite attractive, because we believed that the strength of both the U.S.
economy and the stock market -- particularly given nine years of significant
upward momentum -- would likely moderate. We also anticipated that the
Federal Reserve Board (the Fed) would raise interest rates at some point and
that an economic slowdown would likely result. Moreover, we believed the
global political and economic environment was unstable.
Q. IN GENERAL, HOW HAVE THE FUND'S POSITIONS IN THESE INDUSTRIES PERFORMED?
A. The stock market's unpredictability affected the performance of sectors
differently each quarter. For example, from April through June, most of the
Fund's holdings in the consumer staples sector, such as Ralston Purina,
matched or beat the market. A majority of the Fund's utilities and
communications holdings outperformed the market as well. Throughout the
remainder of the past 12 months, however, the portfolio's dominant industry
weightings came under pressure. Fear of future earnings shortfalls played a
key role in the general underperformance of our industry groupings.
Q. WHY HASN'T THE FUND INVESTED HEAVILY IN TECHNOLOGY AND FINANCIAL SERVICES?
A. The Fund generally invests in industries that have strong union
representation, which is not the case for technology and financial services
companies. However, we do have limited positions in these two industries
because we hope to increase opportunities for diversification.
Q. CAN YOU NAME A FEW MORE HOLDINGS THAT SIGNIFICANTLY CONTRIBUTED TO OR
DETRACTED FROM THE FUND'S PERFORMANCE?
A. In the industrial goods sector, Martin Marietta Materials and United
Technologies worked well for the Fund during the first half of the period. We
pared back our positions when we believed the stocks were excessively valued
and had limited potential. Reducing the Fund's stake in Martin Marietta
proved timely because the stock posted losses near the end of the period.
Bristol-Myers Squibb and Johnson & Johnson, two of the Fund's health care
stocks, contributed to performance, while Schering-Plough and American Home
Products detracted from results. Clorox, Xerox, CVS, and Texas Utilities
suffered notable declines.
Q. DID YOU ADD NEW HOLDINGS TO THE FUND AS THE YEAR PROGRESSED?
A. In the oil sector, we purchased shares of Conoco, a company that was spun out
from DuPont. We believe it has an attractive production profile and is a good
acquisition candidate in a rapidly consolidating industry. In consumer
staples, Keebler Foods and Quaker Oats were added -- both of which have been
growing their earnings at double-digit rates. Over the period, we also added
to existing holdings such as Time Warner, Pinnacle West, and Bell Atlantic.
Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. Although it has been a challenging market for funds like ours, we believe the
portfolio remains defensively positioned. We still believe that U.S. economic
growth will moderate and that the Fed stands ready to raise interest rates if
the economy does not slow on its own. We expect that the equity market will
remain volatile and that excessive valuations will continue to be a concern.
Although we are not satisfied with the Fund's recent performance, we remain
confident in the Fund's ability to produce competitive long-term results. We
are going to maintain our value-oriented approach and continue to buy stocks
that we believe exhibit growth potential at attractive prices.
/s/ Mitchell D. Dynan
Mitchell D. Dynan
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current 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.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
- --------------------------------------------------------------------------------
MITCHELL D. DYNAN IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND. HE IS ALSO A
PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST, AMERICA'S OLDEST MUTUAL
FUND, AND THE MASSACHUSETTS INVESTORS TRUST SERIES OFFERED THROUGH MFS(R)/SUN
LIFE ANNUITY PRODUCTS.
HE JOINED MFS IN 1986 AS A RESEARCH ANALYST AND WAS NAMED ASSISTANT VICE
PRESIDENT IN 1987, VICE PRESIDENT IN 1988, PORTFOLIO MANAGER IN 1995, AND SENIOR
VICE PRESIDENT IN 1999. 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 SECURITY ANALYSTS
SOCIETY, INC., AND IS A CHARTERED FINANCIAL ANALYST.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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 consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
- --------------------------------------------------------------------------------
FUND FACTS
- --------------------------------------------------------------------------------
OBJECTIVE: SEEKS LONG-TERM GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 14, 1994
CLASS INCEPTION: CLASS A AUGUST 7, 1997
CLASS B AUGUST 11, 1997
CLASS C AUGUST 11, 1997
CLASS I JANUARY 14, 1994
SIZE: $104.3 MILLION NET ASSETS AS OF SEPTEMBER 30, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results reflect the percentage change in net asset value, including reinvestment
of dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be less than the line
shown, based on differences in sales charges and Rule 12b-1 fees paid by
shareholders investing in different classes. (See Notes to Performance Summary
for more information.) It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
January 14, 1994, through September 30, 1999. Index information is from
January 1, 1994.)
MFS Union Standard Standard & Poor's
Equity Fund 500
- Class I Composite Index
- --------------------------------------------------------------------------------
1/94 $10,000 $10,340
9/95 11,970 13,150
9/96 14,480 15,820
9/97 19,190 22,220
9/98 21,830 24,230
9/99 23,133 30,968
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Class A
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 5.56% +59.95% +140.30% +131.65%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge + 5.56% +16.52% + 18.91% + 15.63%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge - 0.51% +14.25% + 17.51% + 14.44%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class B
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 4.86% +55.57% +133.73% +125.32%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge + 4.86% +16.11% + 18.65% + 15.41%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 1.00% +15.36% + 18.45% + 15.32%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class C
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 4.92% +55.72% +133.96% +125.54%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge + 4.92% +16.15% + 18.68% + 15.43%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 3.96% +16.15% + 18.68% + 15.43%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class I
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 5.97% +59.73% +139.97% +131.33%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge + 5.97% +16.89% + 19.13% + 15.82%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Comparative Indices
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average growth and income fund+ +20.60% +17.04% + 18.78% + 16.17%
- ----------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index# +27.81% +25.09% + 25.03% + 21.72%
- ----------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, January 14, 1994, through
September 30, 1999. Index information is from January 1, 1994.
+ Source: Lipper Analytical Services, Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
The Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. The Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class C Share Performance Including Sales Charge takes into account the
deduction of the 1% CDSC applicable to shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class A, B, and C share performance include the performance of the Fund's Class
I shares for periods prior to their inception (blended performance). Class A
blended performance has been adjusted to take into account the initial sales
charge applicable to Class A shares. Class B and C blended performance has been
adjusted to take into account the CDSC applicable to Class B and C shares. These
blended performance figures have not been adjusted to take into account the
differences in class-specific operating expenses. Because operating expenses for
Class A, B, and C shares are higher than those of Class I shares, the blended
Class A, B, and C share performance is higher than it would have been had Class
A, B, and C shares been offered for the entire period.
All performance 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 reinvestment of dividends and capital gains.
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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1999
FIVE LARGEST STOCK SECTORS
UTILITIES & COMMUNICATIONS 18.7%
CONSUMER STAPLES 16.1%
FINANCIAL SERVICES 13.8%
HEALTH CARE 13.6%
INDUSTRIAL GOODS & SERVICES 9.4%
TOP 10 STOCK HOLDINGS
GENERAL ELECTRIC CO. 5.4% KROGER CO. 3.0%
Diversified manufacturing and Supermarket company
financial services conglomerate
BELL ATLANTIC CORP. 2.8%
BRISTOL-MYERS SQUIBB CO. 4.5% Integrated telecommunications company
Pharmaceutical products company
ANHEUSER-BUSCH COS., INC. 2.7%
EXXON CORP. 3.4% Diversified beverage company
International oil and gas company
TYCO INTERNATIONAL LTD. 2.5%
JOHNSON & JOHNSON CO. 3.4% Security systems, packaging, and electronic
Health care and pharmaceutical equipment conglomerate
products company
AMERICAN HOME PRODUCTS CORP. 2.3%
SCHERING-PLOUGH CORP. 3.4% Pharmaceutical and home products company
Pharmaceutical products company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- September 30, 1999
Stocks - 89.5%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 89.5%
Aerospace - 2.5%
General Dynamics Corp. 26,080 $ 1,628,370
United Technologies Corp. 15,800 937,138
------------
$ 2,565,508
- -------------------------------------------------------------------------------
Banks and Credit Companies - 1.0%
US Bancorp 35,100 $ 1,059,581
- -------------------------------------------------------------------------------
Business Services - 1.3%
DST Systems, Inc.* 24,700 $ 1,404,813
- -------------------------------------------------------------------------------
Chemicals - 0.8%
E.I. du Pont de Nemours & Co., Inc. 13,400 $ 815,725
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.9%
Microsoft Corp.* 21,900 $ 1,983,319
- -------------------------------------------------------------------------------
Computer Software - Systems - 2.5%
BMC Software, Inc.* 14,500 $ 1,037,656
Computer Associates International, Inc. 26,400 1,617,000
------------
$ 2,654,656
- -------------------------------------------------------------------------------
Conglomerates - 3.2%
AlliedSignal, Inc. 17,600 $ 1,054,900
Tyco International Ltd. 22,520 2,325,190
------------
$ 3,380,090
- -------------------------------------------------------------------------------
Construction Services - 1.2%
Martin Marietta Materials, Inc. 30,779 $ 1,229,236
- -------------------------------------------------------------------------------
Consumer Goods and Services - 4.7%
Clorox Co. 42,540 $ 1,627,155
Colgate-Palmolive Co. 23,860 1,091,595
Dial Corp. 43,900 1,119,450
Philip Morris Cos., Inc. 32,250 1,102,547
------------
$ 4,940,747
- -------------------------------------------------------------------------------
Electrical Equipment - 4.8%
General Electric Co. 42,140 $ 4,996,224
- -------------------------------------------------------------------------------
Entertainment - 1.2%
Disney (Walt) Co. 12,700 $ 328,613
Time Warner, Inc. 16,000 972,000
------------
$ 1,300,613
- -------------------------------------------------------------------------------
Financial Institutions - 3.4%
Associates First Capital Corp., "A" 33,000 $ 1,188,000
Citigroup, Inc. 24,800 1,091,200
Federal Home Loan Mortgage Corp. 24,100 1,253,200
------------
$ 3,532,400
- -------------------------------------------------------------------------------
Food and Beverage Products - 9.7%
Anheuser-Busch Cos., Inc. 36,100 $ 2,529,256
Bestfoods Co. 38,900 1,886,650
Coca-Cola Co. 8,450 406,128
Hershey Foods Corp. 10,180 495,639
Keebler Foods Co.* 48,600 1,451,925
PepsiCo., Inc. 25,820 781,055
Quaker Oats Co. 17,400 1,076,625
Ralston-Ralston Purina Co. 51,640 1,436,238
------------
$ 10,063,516
- -------------------------------------------------------------------------------
Insurance - 8.0%
Allstate Corp. 19,900 $ 496,256
CIGNA Corp. 26,000 2,021,500
Hartford Financial Services Group, Inc. 44,100 1,802,587
Lincoln National Corp. 29,000 1,089,313
Marsh & McLennan Cos., Inc. 15,900 1,089,150
MBIA, Inc. 19,200 895,200
Torchmark Corp. 34,800 900,450
------------
$ 8,294,456
- -------------------------------------------------------------------------------
Medical and Health Products - 12.2%
American Home Products Corp. 51,020 $ 2,117,330
Bristol-Myers Squibb Co. 62,680 4,230,900
Johnson & Johnson Co. 34,360 3,156,825
Schering-Plough Corp. 73,200 3,193,350
------------
$ 12,698,405
- -------------------------------------------------------------------------------
Oils - 7.4%
Chevron Corp. 15,860 $ 1,407,575
Conoco, Inc. 43,400 1,188,075
Exxon Corp. 42,280 3,210,637
Mobil Corp. 19,460 1,960,595
------------
$ 7,766,882
- -------------------------------------------------------------------------------
Special Products and Services - 1.0%
Xerox Corp. 23,900 $ 1,002,306
- -------------------------------------------------------------------------------
Stores - 1.5%
CVS Corp. 37,700 $ 1,538,631
- -------------------------------------------------------------------------------
Supermarkets - 4.4%
Kroger Co.* 126,880 $ 2,799,290
Safeway, Inc.* 48,120 1,831,567
------------
$ 4,630,857
- -------------------------------------------------------------------------------
Telecommunications - 6.8%
Alltel Corp. 23,100 $ 1,625,663
Bell Atlantic Corp. 39,400 2,652,112
SBC Communications, Inc. 24,708 1,261,652
Sprint Corp. 27,640 1,499,470
------------
$ 7,038,897
- -------------------------------------------------------------------------------
Utilities - Electric - 9.1%
CMS Energy Corp. 51,150 $ 1,735,903
GPU, Inc. 25,900 844,988
NiSource, Inc. 55,600 1,230,150
NSTAR Co. 26,700 1,034,625
Pinnacle West Capital Corp. 51,030 1,856,216
Texas Utilities Co. 32,400 1,208,925
Unicom Corp. 43,200 1,595,700
------------
$ 9,506,507
- -------------------------------------------------------------------------------
Utilities - Gas - 0.1%
Columbia Energy Group 2,270 $ 125,701
- -------------------------------------------------------------------------------
Utilities - Telephone - 0.8%
BellSouth Corp. 18,500 $ 832,500
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $81,151,345) $ 93,361,570
- -------------------------------------------------------------------------------
Short-Term Obligations - 9.9%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 10/01/99, at Amortized Cost $ 10,300 $ 10,300,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $91,451,345) $103,661,570
Other Assets, Less Liabilities - 0.6% 607,860
- -------------------------------------------------------------------------------
Net Assets - 100.0% $104,269,430
- -------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $91,451,345) $103,661,570
Cash 59,665
Receivable for Fund shares sold 14,426
Receivable for investments sold 1,487,754
Dividends receivable 146,350
Other assets 507
------------
Total assets $105,370,272
------------
Liabilities:
Payable for Fund shares reacquired $ 5,052
Payable for investments purchased 1,093,111
Payable to affiliates -
Management fee 1,847
Distribution and service fee 264
Accrued expenses and other liabilities 568
------------
Total liabilities $ 1,100,842
------------
Net assets $104,269,430
============
Net assets consist of:
Paid-in capital $ 79,701,889
Unrealized appreciation on investments 12,210,225
Accumulated undistributed net realized gain on
investments 11,685,606
Accumulated undistributed net investment income 671,710
------------
Total $104,269,430
============
Shares of beneficial interest outstanding 6,344,152
=========
Class A shares:
Net asset value per share
(net assets of $13,361,249 / 818,440 shares of
beneficial interest outstanding) $16.33
======
Offering price per share (100 / 94.25 of net asset value
per share) $17.33
======
Class B shares:
Net asset value and offering price per share
(net assets of $3,447,595 / 212,389 shares of
beneficial interest outstanding) $16.23
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,580,872 / 97,503 shares of beneficial
interest outstanding) $16.21
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $85,879,714 / 5,215,820 shares of
beneficial interest outstanding) $16.47
======
On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of
Class A, Class B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 1,532,102
Interest 332,301
------------
Total investment income $ 1,864,403
------------
Expenses -
Management fee $ 691,079
Trustees' compensation 5,300
Shareholder servicing agent fee 111,576
Distribution and service fee (Class A) 49,469
Distribution and service fee (Class B) 34,584
Distribution and service fee (Class C) 15,197
Administrative fee 13,474
Custodian fee 41,832
Printing 28,051
Postage 6,535
Auditing fees 47,661
Legal fees 3,502
Amortization of organization expenses 1,619
Miscellaneous 63,329
------------
Total expenses $ 1,113,208
Reduction of expenses by investment adviser (100,193)
Fees paid indirectly (10,279)
------------
Net expenses $ 1,002,736
------------
Net investment income $ 861,667
------------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $ 12,658,549
Change in unrealized appreciation on investments (8,556,998)
------------
Net realized and unrealized gain on investments $ 4,101,551
------------
Increase in net assets from operations $ 4,963,218
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 861,667 $ 772,646
Net realized gain on investments 12,658,549 7,335,113
Net unrealized gain (loss) on investments (8,556,998) 1,856,998
------------ -----------
Increase in net assets from operations $ 4,963,218 $ 9,964,757
------------ -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (87,862) $ (29,580)
From net investment income (Class B) (9,675) (11,127)
From net investment income (Class C) (5,088) (4,445)
From net investment income (Class I) (686,646) (760,399)
From net realized gain on investments (Class A) (996,694) (225,065)
From net realized gain on investments (Class B) (238,729) (97,691)
From net realized gain on investments (Class C) (101,449) (35,466)
From net realized gain on investments (Class I) (6,183,480) (5,806,765)
------------ -----------
Total distributions declared to shareholders $ (8,309,623) $(6,970,538)
------------ -----------
Net increase in net assets from Fund share transactions $ 16,821,625 $18,716,448
------------ -----------
Total increase in net assets $ 13,475,220 $21,710,667
Net assets:
At beginning of period 90,794,210 69,083,543
------------ -----------
At end of period (including accumulated undistributed net
investment income of $671,710 and $574,748, respectively) $104,269,430 $90,794,210
============ ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
---------------------------- SEPTEMBER 30,
1999 1998 1997*
- --------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value - beginning of period $16.85 $16.40 $16.13
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.10 $ 0.10 $ 0.03
Net realized and unrealized gain on
investments 0.88 1.92 0.24
------ ------ ------
Total from investment operations $ 0.98 $ 2.02 $ 0.27
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.12) $(0.18) $ --
From net realized gain on investments (1.38) (1.39) --
------ ------ ------
Total distributions declared to shareholders $(1.50) $(1.57) $ --
------ ------ ------
Net asset value - end of period $16.33 $16.85 $16.40
====== ====== ======
Total return(+) 5.56% 13.31% 1.67%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.21% 1.21% 1.21%+
Net investment income 0.56% 0.57% 0.86%+
Portfolio turnover 58% 43% 49%
Net assets at end of period (000 omitted) $13,361 $10,915 $536
(S) Subject to reimbursement by the Fund, MFS has voluntarily agreed, under a temporary expense reimbursement
agreement, to pay all of the Fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the Fund pays MFS a fee not greater than 0.20% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment income per share and
the ratios would have been:
Net investment income $ 0.08 $ 0.08 $ 0.03
Ratios (to average net assets):
Expenses## 1.30% 1.32% 1.34%+
Net investment income 0.47% 0.45% 0.72%+
* For the period from the inception of Class A, August 7, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
--------------------------- SEPTEMBER 30,
1999 1998 1997*
- --------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value - beginning of period $16.81 $16.43 $16.24
------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.02) $(0.01) $(0.01)
Net realized and unrealized gain on
investments 0.88 1.94 0.20
------ ------ ------
Total from investment operations $ 0.86 $ 1.93 $ 0.19
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.06) $(0.16) $ --
From net realized gain on investments (1.38) (1.39) --
------ ------ ------
Total distributions declared to shareholders $(1.44) $(1.55) $ --
------ ------ ------
Net asset value - end of period $16.23 $16.81 $16.43
====== ====== ======
Total return 4.86% 12.65% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86% 1.86% 1.86%+
Net investment loss (0.10)% (0.05)% (0.37)%+
Portfolio turnover 58% 43% 49%
Net assets at end of period (000 omitted) $3,448 $2,405 $17
(S) Subject to reimbursement by the Fund, MFS has voluntarily agreed, under a termporary expense reimbursement
agreement, to pay all of the Fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the Fund pays MFS a fee not greater than 0.20% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment loss per share and the
ratios would have been:
Net investment loss $(0.04) $(0.03) $(0.01)
Ratios (to average net assets):
Expenses## 1.95% 1.97% 1.99%+
Net investment loss (0.19)% (0.17)% (0.52)%+
* 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.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
--------------------------- SEPTEMBER 30,
1999 1998 1997*
- --------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value - beginning of period $16.80 $16.43 $16.24
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $(0.02) $ 0.01
Net realized and unrealized gain on
investments 0.88 1.95 0.18
------ ------ ------
Total from investment operations $ 0.86 $ 1.93 $ 0.19
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.07) $(0.17) $ --
From net realized gain on investments (1.38) (1.39) --
------ ------ ------
Total distributions declared to shareholders $(1.45) $(1.56) $ --
------ ------ ------
Net asset value - end of period $16.21 $16.80 $16.43
====== ====== ======
Total return 4.92% 12.70% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86% 1.86% 1.86%+
Net investment income (loss) (0.10)% (0.10)% 0.63%+
Portfolio turnover 58% 43% 49%
Net assets at end of period (000 omitted) $1,581 $1,067 $4
(S) Subject to reimbursement by the Fund, MFS has voluntarily agreed, under a temporary expense reimbursement
agreement, to pay all of the Fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the Fund pays MFS a fee not greater than 0.20% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment income (loss) per
share and the ratios would have been:
Net investment income (loss) $(0.04) $(0.04) $ 0.01
Ratios (to average net assets):
Expenses## 1.95% 1.97% 1.99%+
Net investment income (loss) (0.19)% (0.22)% 0.49%+
* 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.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $16.96 $16.43 $13.85 $11.85 $ 9.64
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.16 $ 0.16 $ 0.17 $ 0.18 $ 0.17
Net realized and unrealized gain on
investments 0.88 1.94 4.01 2.25 2.14
------ ------ ------ ------ ------
Total from investment operations $ 1.04 $ 2.10 $ 4.18 $ 2.43 $ 2.31
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.18) $(0.19) $(0.15) $(0.10)
From net realized gain on investments (1.38) (1.39) (1.41) (0.28) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.53) $(1.57) $(1.60) $(0.43) $(0.10)
------ ------ ------ ------ ------
Net asset value - end of period $16.47 $16.96 $16.43 $13.85 $11.85
====== ====== ====== ====== ======
Total return 5.97% 13.74% 32.51% 20.96% 24.21%
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 0.86% 0.86% 0.98% 1.01% 1.03%
Net investment income 0.90% 0.95% 1.12% 1.36% 1.58%
Portfolio turnover 58% 43% 49% 81% 125%
Net assets at end of period (000 omitted) $85,880 $76,408 $68,527 $49,318 $35,842
(S) Effective February 1, 1997, subject to reimbursement by the Fund, MFS has voluntarily agreed to pay all of the Fund's
operating expenses, exclusive of management fees. In consideration, the Fund pays MFS a fee not greater than 0.20% of
average daily net assets. Prior to February 1, 1997, the investment adviser agreed to maintain the expenses of the Fund at
not more than 1.00% of average daily net assets. To the extent actual expenses were over these limitations, the net
investment income per share and the ratios would have been:
Net investment income $ 0.14 $ 0.14 $ 0.15 $ 0.18 $ 0.16
Ratios (to average net assets):
Expenses## 0.95% 0.97% 1.116% 1.03% 1.12%
Net investment income 0.81% 0.83% 0.98% 1.33% 1.49%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a 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 a
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 in good faith by
the Trustees.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and have been 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
discounts are 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 - 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.
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 distribution in excess of tax basis earnings and
profits be 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.
During the year ended September 30, 1999, $324 and $24,242 were reclassified
from accumulated undistributed net realized gain on investments and paid-in
capital, respectively, to accumulated undistributed net investment income due
to differences between book and tax accounting.
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 daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. 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 the Fund's average daily net assets. The Fund has a temporary expense
reimbursement agreement whereby MFS has voluntarily agreed to pay all of the
Fund's operating expenses, exclusive of management, distribution, and service
fees. The Fund in turn will pay MFS an expense reimbursement fee not greater
than 0.20% of average daily net assets. To the extent that the expense
reimbursement fee exceeds the Fund's actual expenses, the excess will be
applied to amounts paid by MFS in prior years. At September 30, 1999, the
aggregate unreimbursed expenses paid by MFS amounted to $75,145.
Administrator - The Fund has an administrative service 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 who 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
$12,754 for the year ended September 30, 1999, 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. 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 $477 for
the year ended September 30, 1999. Fees incurred under the distribution plan
during the year ended September 30, 1999, 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 $18 and $2 for Class B
and Class C shares, respectively, for the year ended September 30, 1999. Fees
incurred under the distribution plan during the year ended September 30, 1999,
were 1.00% of average daily net assets attributable to Class B and Class C
shares on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of shareholders redemption within 12 months following
purchase. A contingent deferred sale charge is imposed on shareholders
redemption of Class B shares in the event of shareholders redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended September 30,
1999, were $5,192, $5,498, and $336 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 annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $58,109,800 and $56,975,835, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $ 91,555,302
------------
Gross unrealized appreciation $ 16,969,269
Gross unrealized depreciation (4,863,001)
------------
Net unrealized appreciation $ 12,106,268
============
(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. Transactions in
Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 597,540 $10,381,908 698,352 $11,794,147
Shares issued to shareholders in
reinvestment of distributions 26,061 440,486 1,936 29,578
Shares reacquired (452,782) (7,955,967) (85,357) (1,465,120)
-------- ----------- ------- -----------
Net increase 170,819 $ 2,866,427 614,931 $10,358,605
======== =========== ======= ===========
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 123,213 $ 2,145,359 165,663 $ 2,804,466
Shares issued to shareholders in
reinvestment of distributions 11,183 188,553 1,082 16,549
Shares reacquired (65,035) (1,159,729) (24,732) (420,648)
-------- ----------- ------- -----------
Net increase 69,361 $ 1,174,183 142,013 $ 2,400,367
======== =========== ======= ===========
</TABLE>
<TABLE>
Class C Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 37,193 $ 649,762 62,469 $ 1,057,574
Shares issued to shareholders in
reinvestment of distributions 5,515 92,586 2,610 39,906
Shares reacquired (8,704) (150,360) (1,814) (30,327)
-------- ----------- ------- -----------
Net increase 34,004 $ 591,988 63,265 $ 1,067,153
======== =========== ======= ===========
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 363,605 $ 6,341,173 76,932 $ 1,256,551
Shares issued to shareholders in
reinvestment of distributions 404,208 6,859,447 428,071 6,553,768
Shares reacquired (57,668) (1,011,593) (170,955) (2,919,996)
-------- ----------- ------- -----------
Net increase 710,145 $12,189,027 334,048 $ 4,890,323
======== =========== ======= ===========
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 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 year ended September 30, 1999, was $726.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust XI and Shareholders of MFS Union Standard
Equity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Union Standard Equity Fund (a series of MFS
Series Trust XI) as of September 30, 1999, the related statement of operations
for the year then ended, the statement of changes in net assets for the years
ended September 30, 1999 and 1998, and the financial highlights for each of the
years in the five-year period ended September 30, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at September 30, 1999 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Union Standard
Equity Fund at September 30, 1999, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 4, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1999.
THE FUND HAS DESIGNATED $7,024,356 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED SEPTEMBER 30, 1999.
FOR THE YEAR ENDED SEPTEMBER 30, 1999, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS ARE 100%.
- --------------------------------------------------------------------------------
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking
steps to ascertain the Y2K readiness of MFS' internal systems and is working
with our external systems vendors to determine whether they expect their
systems to be ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness. Each year, MFS' research analysts and portfolio managers conduct
more than 1,000 on-site meetings with companies whose securities are, or may be,
held in fund and client portfolios, and host an additional 1,500 meetings at
MFS' headquarters. When assessing the Y2K readiness of these companies, MFS'
research analysts and portfolio managers may rely upon discussions at these
meetings as well as SEC disclosure documents and third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston
Street, Boston, MA 02116-3741.
<PAGE>
MFS(R) UNION STANDARD(R) EQUITY FUND
<TABLE>
<S> <C>
TRUSTEES CUSTODIAN
Jeffrey L. Shames* State Street Bank and Trust Company
Chairman, Chief Executive Officer, and
Director, MFS Investment Management AUDITORS
Deloitte & Touche LLP
Nelson J. Darling, Jr.
Professional Trustee INVESTOR INFORMATION
and bond market outlooks, call toll free:
William R. Gutow 1-800-637-4458 anytime from a touch-tone
For MFS stock Private Investor, telephone.
Vice Chairman, Capitol Entertainment
Management Company; Real Estate Consultant For information on MFS mutual funds, call
your financial consultant or, for an information
INVESTMENT ADVISER kit, call toll free: 1-800-637-2929 any
Massachusetts Financial Services Company business day from 9 a.m. to 5 p.m. Eastern
500 Boylston Street time (or leave a message anytime).
Boston, MA 02116-3741
INVESTOR SERVICE
DISTRIBUTOR MFS Service Center, Inc.
MFS Fund Distributors, Inc. P.O. Box 2281
500 Boylston Street Boston, MA 02107-9906
Boston, MA 02116-3741
For general information, call toll free:
CHAIRMAN AND PRESIDENT 1-800-225-2606 any business day from
Jeffrey L. Shames* 8 a.m. to 8 p.m. Eastern time.
PORTFOLIO MANAGER For service to speech- or hearing-impaired,
Mitchell D. Dynan* call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
TREASURER (To use this service, your phone must be
W. Thomas London* equipped with a Telecommunications Device
for the Deaf.)
ASSISTANT TREASURERS
Mark E. Bradley* For share prices, account balances, and
Ellen Moynihan* exchanges, call toll free:
James O. Yost* 1-800-MFS-TALK (1-800-637-8255)
anytime from a touch-tone telephone.
SECRETARY
Stephen E. Cavan* WORLD WIDE WEB
www.mfs.com
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) UNION STANDARD(R) ------------
EQUITY FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
USE-2 11/99 6.6M 84/284/384/884
