<PAGE>
[logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
MFS(R) UNION STANDARD(R)
EQUITY FUND
SEMIANNUAL REPORT o MARCH 31, 1999
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 27)
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 13
Notes to Financial Statements ............................................. 20
MFS' Year 2000 Readiness Disclosure ....................................... 25
Trustees and Officers ..................................................... 29
MFS CELEBRATES ITS DIAMOND ANNIVERSARY!
MARCH 21, 1999, MARKED THE 75TH ANNIVERSARY OF MFS' INVENTION OF
THE MUTUAL FUND. THE MUTUAL FUND INDUSTRY HAS BROUGHT THE POWER
OF INVESTING TO EVERY AMERICAN, OFFERING THEM THE OPPORTUNITY FOR
COLLEGE DEGREES, HOME OWNERSHIP, AND COMFORTABLE RETIREMENT.
IMAGINE TODAY'S WORLD WITHOUT MUTUAL -------------------------
FUNDS. WE COULDN'T. AND WHILE THE MFS 75 YEARS
YEARS AHEAD WILL BRING A NUMBER OF [graphic omitted]
CHALLENGES, OUR 75 YEARS OF EXPERIENCE -------------------------
WILL HELP GUIDE A NEW GENERATION OF EXPERIENCE THE FUTURE(SM)
INVESTORS INTO THE FUTURE. -------------------------
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
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
MFS Investment Management(R)
April 16, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Mitchell D. Dynan]
Mitchell D. Dynan
For the six months ended March 31, 1999, Class A shares of the Fund provided a
total return of 9.63%, Class B shares 9.19%, Class C shares 9.26%, and Class I
shares 9.84%. These returns include the reinvestment of distributions, but
exclude the effects of any sales charges, and compare 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. During the same period, the average
growth and income fund as tracked by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance, returned 20.06%.
Q. COULD YOU TALK ABOUT THE FUND'S UNDERPERFORMANCE RELATIVE TO THE S&P 500 AND
THE LIPPER AVERAGE?
A There are three main reasons for the underperformance. First, many of the
companies driving the performance of the S&P 500 and many growth and income
funds do not meet the labor-sensitive criteria of this Fund, which is to
invest in companies with strong union representation. Second, a few of our
individual positions have disappointed recently. Third, relative to the S&P
500, the Fund has smaller positions in industries such as technology and
financial services that have shown good returns.
Q. WHICH COMPANIES UNDERPERFORMED?
A. One was Rite Aid. The company reported a significant earnings
disappointment, and the stock fell 50%. Due to fears that Rite Aid's
problems might be endemic to the industry, the price of CVS, another drug
store chain, also fell, although not as much. But we believe the long-term
prospects for CVS are good. In addition, several of the electric utility
stocks are down because of the warm weather and the current market.
Investors are buying a narrow band of large-company growth stocks whose
prices are rising despite their high price-to-earnings (P/E) ratios.
Q. WHY AREN'T YOU BUYING MORE OF THE LARGE-COMPANY GROWTH STOCKS?
A. Because it goes against my strategy, which features a disciplined, value-
oriented approach. I look for companies whose stock prices more closely
reflect their true worth based on current or projected earnings and whose
risk-reward potential is attractive in the long term. For example,
Interstate Bakeries has performed poorly relative to the biggest
growth-company stocks in the S&P 500. Even so, I'm sticking with it because
I think its business is good and its P/E ratio is extremely attractive.
Q. COULD YOU TALK ABOUT SOME STOCKS THAT HAVE PERFORMED WELL?
A. American Home Products, Johnson & Johnson, and Merck have contributed to
performance. Most drug company earnings are growing at double-digit rates.
Much of this growth is the result of new, more profitable drugs and the
aging of the population, which means more prescription medications.
Companies such as General Motors and Dial also are benefiting from a strong
consumer sector, while CBS is being helped by strong cash flow growth in its
radio assets. Sprint also has performed well, partly due to speculation that
it may be acquired by another telecommunications company. In the oil sector,
Exxon, Mobil, and Chevron stocks have benefited from rising oil prices.
Q. WHAT DO YOU MEAN BY FUNDAMENTALS?
A. Fundamentals encompasses a number of factors. Are sales growing? Are profit
margins holding or increasing? Is cash flow growing? Is demand steady or
growing, and is pricing okay? Anything that helps a company steadily
increase its earnings also helps its fundamentals. In the case of the oil
industry, prices have increased as oil-producing countries have cut exports,
while the vibrant economy continues to generate strong demand.
Q. TECHNOLOGY AND FINANCIAL SERVICES STOCKS HAVE BEEN LEADING THE WAY IN THE
MARKET LATELY, YET THE FUND IS NOT HEAVILY INVESTED IN THESE SECTORS. CAN
YOU TELL US WHY?
A. The Fund generally invests in industries that have strong union
representation, which is not the case for technology and financial services
companies. Last year, however, we began taking limited positions in these
two industries because we wanted to increase opportunities for
diversification.
Q. HOW HAVE TECHNOLOGY AND FINANCIAL SERVICES STOCKS PERFORMED FOR THE FUND?
A. It has been a mixed bag over the past six months. Owning plenty of Microsoft
has been a real plus because its stock has performed very well. On the other
hand, Computer Associates and BMC Software, as well as much of the software
industry, have underperformed, partly because investors fear that customers
will reduce their technology spending in preparation for any Year 2000 (Y2K)
computer problems. Financial services companies also have been a mixed bag.
Some of the insurance companies such as Lincoln National, CIGNA, Hartford
Financial, and Associates First Capital have done well. These are well-run
companies, some of which have upgraded their management teams over the past
couple of years.
Q. SO ARE YOU STILL POSITIVE ON THESE TWO SECTORS?
A. For now, I'm cautious about technology. I'm very concerned about the
disruptive effect Y2K will have on demand for computer equipment in the
second half of 1999. But, I think there is good value in financial services.
Also, I've emphasized financial services to preserve the conservative nature
of the portfolio. I think that in a market with inflated technology P/Es,
insurance companies offer attractive risk-reward potential because their
revenue streams tend to remain steady regardless of economic cycles.
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. I think the environment is going to be volatile. Money among different
industry groups, as well as between value and growth stocks, may flow very
quickly. That is why I am somewhat cautious going forward.
/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.
It is not possible to invest directly in an index.
As discussed in the Fund's prospectus, the Fund invests in companies which
meet certain labor sensitivity requirements. This list is developed with the
assistance of the Labor Advisory Board, which is comprised of senior labor
officials and labor experts. While the Advisory Board has historically been
independent from the Fund and MFS, MFS has agreed to administer the Board and
to bear certain expenses on behalf of the Board.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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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 CONSERVATIVE GROWTH 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 SOCIETY OF SECURITY
ANALYSTS FEDERATION AND IS A CHARTERED FINANCIAL ANALYST.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT MANAGEMENT
AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED BY AN INVESTMENT
STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS(R) ORIGINAL RESEARCH(SM), 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 adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: 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: $107.9 MILLION NET ASSETS AS OF MARCH 31, 1999
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in net
asset value, including reinvestment of dividends. (See Notes to Performance
Summary for more information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +9.63% +5.20% +73.19% +151.85% +138.06%
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Average Annual Total Return -- +5.20% +20.09% + 20.29% + 18.11%
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SEC Results -- -0.85% +17.74% + 18.87% + 16.78%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +9.19% +4.47% +71.81% +149.77% +136.17%
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Average Annual Total Return -- +4.47% +19.77% + 20.09% + 17.93%
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SEC Results -- +0.62% +19.07% + 19.90% + 17.83%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +9.26% +4.59% +71.98% +150.08% +136.38%
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Average Annual Total Return -- +4.59% +19.81% + 20.12% + 17.95%
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SEC Results -- +3.62% +19.81% + 20.12% + 17.95%
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* For the period from the commencement of the Fund's investment operations, January 14, 1994,
through March 31, 1999.
<PAGE>
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +9.84% +5.60% +74.49% +153.74% +139.85%
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Average Annual Total Return -- +5.60% +20.39% + 20.47% + 18.28%
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* For the period from the commencement of the Fund's investment operations, January 14, 1994, through
March 31, 1999.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months. Class I shares "I" have no sales charge or Rule 12b-1 fees and are only
available to certain institutional investors.
A, B, and C results include the performance and the operating expenses of I for
periods prior to the inception of A, B, and C. A, B, and C performance generally
would have been lower than I performance. The I performance included within the
A SEC performance has been adjusted to reflect the maximum initial sales charge
generally applicable to A. The I performance included within the B and C SEC
performance has been adjusted to reflect the CDSC generally applicable to B and
C.
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 the 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 MARCH 31, 1999
FIVE LARGEST STOCK SECTORS
UTILITIES & COMMUNICATIONS 16.7%
HEALTH CARE 14.0%
CONSUMER STAPLES 13.3%
FINANCIAL SERVICES 12.5%
INDUSTRIAL GOODS & SERVICES 10.6%
TOP 10 STOCK HOLDINGS
<TABLE>
<S> <C> <C> <C>
GENERAL ELECTRIC CO. 4.5% EXXON CORP. 3.4%
Diversified manufacturing and financial International oil and gas company
services conglomerate
SCHERING-PLOUGH CORP. 3.0%
BRISTOL-MYERS SQUIBB CO. 3.9% Pharmaceutical products company
Pharmaceutical products company
AMERICAN HOME PRODUCTS CORP. 2.6%
MICROSOFT CORP. 3.5% Pharmaceutical and home products company
Computer software and systems company
SBC COMMUNICATIONS, INC. 2.5%
TYCO INTERNATIONAL LTD. 3.5% Integrated telecommunications company
Security systems, packaging, and electronic
equipment conglomerate GENERAL DYNAMICS CORP. 2.4%
Defense and aerospace company
JOHNSON & JOHNSON CO. 3.4%
Health care and pharmaceutical products
company
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- March 31, 1999
Stocks - 90.4%
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ISSUER SHARES VALUE
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Aerospace - 4.6%
Allied Signal, Inc. 24,000 $ 1,180,500
General Dynamics Corp. 35,880 2,305,290
United Technologies Corp. 10,700 1,449,181
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$ 4,934,971
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Automotive - 2.1%
Ford Motor Co. 18,400 $ 1,044,200
General Motors Corp. 14,600 1,268,375
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$ 2,312,575
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Banks and Credit Companies - 0.8%
National City Corp. 4,100 $ 272,137
US Bancorp 17,900 609,719
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$ 881,856
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Business Machines - 1.1%
Xerox Corp. 22,400 $ 1,195,600
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Business Services - 1.3%
DST Systems, Inc.* 24,100 $ 1,447,506
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Chemicals - 1.1%
Air Products & Chemicals, Inc. 12,940 $ 443,195
Du Pont (E.I.) de Nemours & Co., Inc. 13,400 778,038
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$ 1,221,233
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Computer Software - Personal Computers - 3.2%
Microsoft Corp.* 38,000 $ 3,405,750
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Computer Software - Systems - 2.0%
BMC Software, Inc.* 23,400 $ 867,262
Computer Associates International, Inc. 36,800 1,308,700
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$ 2,175,962
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Construction Services - 2.1%
Martin Marietta Materials, Inc. 39,279 $ 2,241,358
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Consumer Goods and Services - 7.0%
Clorox Co. 9,670 $ 1,133,203
Colgate-Palmolive Co. 9,230 849,160
Dial Corp. 37,100 1,275,312
Philip Morris Cos., Inc. 25,950 913,116
Tyco International Ltd. 47,320 3,395,210
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$ 7,566,001
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Electrical Equipment - 4.1%
General Electric Co. 39,540 $ 4,374,112
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Entertainment - 1.2%
CBS Corp.* 14,000 $ 573,125
Disney (Walt) Co. 12,700 395,288
Time Warner, Inc. 4,000 284,250
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$ 1,252,663
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Financial Institutions - 2.5%
Associates First Capital Corp., "A" 31,000 $ 1,395,000
Federal Home Loan Mortgage Corp. 22,600 1,291,025
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$ 2,686,025
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Food and Beverage Products - 8.1%
Anheuser-Busch Cos., Inc. 22,100 $ 1,683,744
Bestfoods Co. 28,100 1,320,700
Coca-Cola Co. 8,450 518,619
Heinz (H.J.) Co. 17,240 816,745
Hershey Foods Corp. 25,880 1,449,280
Interstate Bakeries Corp. 30,800 664,125
PepsiCo., Inc. 24,220 949,121
Quaker Oats Co. 1,400 87,588
Ralston-Ralston Purina Co. 48,440 1,292,742
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$ 8,782,664
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Insurance - 8.0%
Allstate Corp. 44,200 $ 1,638,163
CIGNA Corp. 20,500 1,718,156
Hartford Financial Services Group, Inc. 32,400 1,840,725
Lincoln National Corp. 13,600 1,344,700
MBIA, Inc. 18,000 1,044,000
Torchmark Corp. 32,600 1,030,975
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$ 8,616,719
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Medical and Health Products - 12.7%
American Home Products Corp. 39,220 $ 2,559,105
Bristol-Myers Squibb Co. 58,780 3,780,289
Johnson & Johnson Co. 35,260 3,303,421
Merck & Co., Inc. 13,940 1,117,814
Schering-Plough Corp. 52,500 2,903,906
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$ 13,664,535
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Oils - 6.3%
Chevron Corp. 12,660 $ 1,119,619
Exxon Corp. 46,480 3,279,745
Mobil Corp. 22,260 1,958,880
Texaco, Inc. 8,540 484,645
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$ 6,842,889
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Railroads - 0.9%
Burlington Northern Santa Fe Railway Co. 29,870 $ 981,976
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Stores - 2.5%
CVS Corp. 35,400 $ 1,681,500
Rite Aid Corp. 41,680 1,042,000
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$ 2,723,500
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Supermarkets - 3.6%
Kroger Co.* 30,040 $ 1,798,645
Safeway, Inc.* 40,020 2,053,526
------------
$ 3,852,171
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Telecommunications - 6.6%
Alltel Corp. 25,300 $ 1,578,087
Bell Atlantic Corp. 29,800 1,540,288
SBC Communications, Inc. 51,008 2,403,752
Sprint Corp. 15,770 1,547,431
------------
$ 7,069,558
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Utilities - Electric - 6.2%
CMS Energy Corp. 28,750 $ 1,151,797
GPU, Inc. 24,300 906,694
NIPSCO Industries, Inc. 52,200 1,409,400
Pinnacle West Capital Corp. 30,030 1,092,341
Texas Utilities Co. 24,500 1,021,344
Unicom Corp. 30,200 1,104,187
------------
$ 6,685,763
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Utilities - Gas - 1.1%
Columbia Energy Group 21,970 $ 1,147,933
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Utilities - Telephone - 1.3%
BellSouth Corp. 35,500 $ 1,422,219
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Total Stocks (Identified Cost, $73,280,314) $ 97,485,539
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Short-Term Obligations - 8.2%
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PRINCIPAL AMOUNT
(000 OMITTED)
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Federal Home Loan Mortgage Bank, due 4/01/99,
at Amortized Cost $ 8,800 $ 8,800,000
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Other Short-Term Obligations - 7.2%
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SHARES
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Navigator Securities Lending Prime
Portfolio, at Cost 7,822,960 $ 7,822,960
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Total Investments (Identified Cost, $89,903,274) $114,108,499
Other Assets, Less Liabilities - (5.8)% (6,234,607)
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Net Assets - 100.0% $107,873,892
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*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
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MARCH 31, 1999
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $89,903,274) $114,108,499
Cash 90,977
Receivable for Fund shares sold 6,311
Receivable for investments sold 2,152,118
Interest and dividends receivable 120,846
Other assets 1,133
------------
Total assets $116,479,884
------------
Liabilities:
Receivable for Fund shares reacquired $ 36,214
Payable for investments purchased 743,840
Collateral for securities loaned, at value 7,822,960
Payable to affiliates -
Management fee 1,936
Distribution and service fee 306
Accrued expenses and other liabilities 736
------------
Total liabilities $ 8,605,992
------------
Net assets $107,873,892
============
Net assets consist of:
Paid-in capital $ 79,418,044
Unrealized appreciation on investments 24,205,225
Accumulated undistributed net realized gain on
investments 4,051,131
Accumulated undistributed net investment income 199,492
------------
Total $107,873,892
============
Shares of beneficial interest outstanding 6,328,776
=========
Net assets:
Class A shares:
Net asset value per share
(net assets of $16,977,050 / 1,001,028 shares of
beneficial interest outstanding) $16.96
======
Offering price per share (100 / 94.25 of net asset
value per share) $17.99
======
Class B shares:
Net asset value and offering price per share
(net assets of $3,537,837 / 209,150 shares of
beneficial interest outstanding) $16.92
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,617,786 / 95,757 shares of beneficial
interest outstanding) $16.89
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $85,741,219 / 5,022,841 shares of
beneficial interest outstanding) $17.07
======
On sales of $50,000 or more, the offering price of Class A 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 (Unaudited)
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SIX MONTHS ENDED MARCH 31, 1999
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 728,138
Interest 165,198
----------
Total investment income $ 893,336
----------
Expenses -
Management fee $ 330,308
Trustees' compensation 2,500
Shareholder servicing agent fee 55,737
Distribution and service fee (Class A) 24,745
Distribution and service fee (Class B) 15,847
Distribution and service fee (Class C) 6,788
Administrative fee 5,139
Custodian fee 21,038
Printing 21,690
Postage 3,855
Auditing fees 32,882
Legal fees 2,087
Amortization of organization expenses 1,619
Miscellaneous 19,785
----------
Total expenses $ 544,020
Reduction of expenses by investment adviser (61,075)
Fees paid indirectly (3,624)
----------
Net expenses $ 479,321
----------
Net investment income $ 414,015
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment transactions $5,023,751
Change in unrealized appreciation on investments 3,438,002
----------
Net realized and unrealized gain on investments $8,461,753
----------
Increase in net assets from operations $8,875,768
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 414,015 $ 772,646
Net realized gain on investments 5,023,751 7,335,113
Net unrealized gain on investments 3,438,002 1,856,998
------------- -------------
Increase in net assets from operations $ 8,875,768 $ 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) (101,450) (35,466)
From net realized gain on investments (Class I) (6,183,480) (5,806,765)
------------- -------------
Total distributions declared to shareholders $ (8,309,624) $ (6,970,538)
------------- -------------
Net increase in net assets from Fund share transactions $ 16,513,538 $18,716,448
------------- -------------
Total increase in net assets $ 17,079,682 $ 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 $199,492 and $574,748, respectively) $107,873,892 $90,794,210
============ ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997*
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.85 $16.40 $16.13
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.05 $ 0.10 $ 0.03
Net realized and unrealized gain on investments 1.56 1.92 0.24
------ ------ ------
Total from investment operations $ 1.61 $ 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 $16.96 $16.85 $16.40
====== ====== ======
Total return(+) 9.63%++ 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 31% 43% 49%
Net assets at end of period (000 omitted) $16,977 $10,915 $536
* 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.
## 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.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more 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 $ 0.04 $ 0.08 $ 0.03
Ratios (to average net assets):
Expenses## 1.33%+ 1.32% 1.34%+
Net investment income 0.44%+ 0.45% 0.72%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997*
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.81 $16.43 $16.24
------ ------ ------
Income from investment operations# -
Net investment loss(S) $ (0.01) $ (0.01) $ (0.01)
Net realized and unrealized gain on investments 1.56 1.94 0.20
------ ------ ------
Total from investment operations $ 1.55 $ 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 $16.92 $16.81 $16.43
====== ====== ======
Total return 9.19%++ 12.65% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86%+ 1.86% 1.86%+
Net investment loss (0.09)%+ (0.05)% (0.37)%+
Portfolio turnover 31% 43% 49%
Net assets at end of period (000 omitted) $3,538 $2,405 $17
* For the period from the inception of Class B, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more 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 $ (0.02) $ (0.03) $ (0.01)
Ratios (to average net assets):
Expenses## 1.98%+ 1.97% 1.99%
Net investment loss (0.21)%+ (0.17)% (0.52)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997*
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.80 $16.43 $16.24
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $ (0.01) $ (0.02) $ 0.01
Net realized and unrealized gain on investments 1.55 1.95 0.18
------ ------ ------
Total from investment operations $ 1.54 $ 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 $16.89 $16.80 $16.43
====== ====== ======
Total return 9.26%++ 12.70% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86%+ 1.86% 1.86%+
Net investment income (loss) (0.08)%+ (0.10)% 0.63%+
Portfolio turnover 31% 43% 49%
Net assets at end of period (000 omitted) $1,618 $1,067 $4
* For the period from the inception of Class C, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more 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) $ (0.02) $ (0.04) $ 0.01
Ratios (to average net assets):
Expenses## 1.98%+ 1.97% 1.99%+
Net investment income (loss) (0.20)%+ (0.22)% 0.49%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ENDED SEPTEMBER 30, PERIOD ENDED
MARCH 31, ------------------------------------------------------ SEPTEMBER 30,
1999 1998 1997 1996 1995 1994*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.96 $16.43 $13.85 $11.85 $ 9.64 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.08 $ 0.16 $ 0.17 $ 0.18 $ 0.17 $ 0.12
Net realized and unrealized
gain (loss) on investments 1.56 1.94 4.01 2.25 2.14 (0.48)
------ ------ ------ ------ ------ ------
Total from investment operations $ 1.64 $ 2.10 $ 4.18 $ 2.43 $ 2.31 $ (0.36)
------ ------ ------ ------ ------ ------
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 $17.07 $16.96 $16.43 $13.85 $11.85 $ 9.64
====== ====== ====== ====== ====== ======
Total return 9.84%++ 13.74% 32.51% 20.96% 24.21% (3.60)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.86%+ 0.85% 0.97% 1.00% 1.00% 1.00%+
Net investment income 0.91%+ 0.95% 1.12% 1.36% 1.58% 1.55%+
Portfolio turnover 31% 43% 49% 81% 125% 48%
Net assets at end of period
(000 omitted) $85,741 $76.408 $68,527 $49,318 $35,842 $22,184
* For the period from the commencement of the Fund's investment operations, January 14, 1994, through September 30, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## 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. For fiscal years ending after September 1, 1995,
the Fund's expenses are calculated without reduction for this expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more 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 this limitation, the net investment income per share and the ratios would
have been:
Net investment income $ 0.07 $ 0.14 $ 0.15 $ 0.18 $ 0.16 $ 0.07
Ratios (to average net assets):
Expenses## 0.98%+ 0.97% 1.11% 1.03% 1.12% 1.64%+
Net investment income 0.79%+ 0.83% 0.96% 1.33% 1.49% 0.91%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a diversified series of MFS 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.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by the
Fund. The loans are collateralized at all times by cash and U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provides the Fund with indemnification against Borrower
default. The Fund bears the risk of loss with respect to the investment of cash
collateral.
At March 31, 1999, the value of securities loaned was $7,458,404. These loans
were collateralized by cash of $7,822,960. Cash collateral is invested in
short-term securities, which are included in the Portfolio of Investments. A
portion of the income generated upon investment of the collateral is remitted to
the Borrowers, and the remainder is allocated between the Fund and State Street
in its capacity as lending agent. Income from securities lending is included in
interest income in the Statement of Operations. The dividend and interest income
earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
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 - 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 income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. The Fund files a tax return annually
using tax accounting methods required under provisions of the Code, which may
differ from generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on these financial statements may differ
from that reported on the Fund's tax return and, consequently, the character of
distributions to shareholders reported in the financial highlights may differ
from that reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
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 March 31, 1999, the aggregate
unreimbursed expenses owed to MFS by the Fund amounted to $326,857.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, and MFS Service Center, Inc. (MFSC).
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$5,424 for the six months ended March 31, 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 and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $14 for the six months ended March 31,
1999. Fees incurred under the distribution plan during the six months ended
March 31, 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 $0 and $1 for Class B and Class C shares, respectively, for the six
months ended March 31, 1999. Fees incurred under the distribution plan during
the six months ended March 31, 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 a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended March 31,
1999, were $0, $0, and $273 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$30,835,585 and $29,937,853, 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 $89,903,274
-----------
Gross unrealized appreciation $26,243,084
Gross unrealized depreciation (2,037,859)
-----------
Net unrealized appreciation $24,205,225
===========
(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>
<CAPTION>
Class A Shares
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 363,793 $ 6,278,072 698,352 $ 11,794,147
Shares issued to shareholders in
reinvestment of distributions 26,062 440,486 1,936 29,578
Shares reacquired (36,448) (636,045) (85,357) (1,465,120)
------- ------------ -------- -------------
Net increase 353,407 $ 6,082,513 614,931 $ 10,358,605
======= ============ ======== =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 67,255 $ 1,161,200 165,663 $ 2,804,466
Shares issued to shareholders in
reinvestment of distributions 11,183 188,553 1,082 16,549
Shares reacquired (12,316) (211,348) (24,732) (420,648)
------- ------------ -------- -------------
Net increase 66,122 $ 1,138,405 142,013 $ 2,400,367
======= ============ ======== =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 30,014 $ 523,948 62,469 $ 1,057,574
Shares issued to shareholders in
reinvestment of distributions 5,252 88,035 2,610 39,906
Shares reacquired (3,008) (50,201) (1,814) (30,327)
------- ------------ -------- -------------
Net increase 32,258 $ 561,782 63,265 $ 1,067,153
======= ============ ======== =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 169,621 $ 2,865,539 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 (56,663) (994,148) (170,955) (2,919,996)
------- ------------ -------- -------------
Net increase 517,166 $ 8,730,838 334,048 $ 4,890,323
======= ============ ======== =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $720 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended March 31, 1999, was $330. The Fund had no borrowings during the
period.
<PAGE>
MFS(R) UNION STANDARD(R) EQUITY FUND
TRUSTEES INVESTOR INFORMATION
Jeffrey L. Shames* For MFS stock and bond market
Chairman, Chief Executive Officer, and outlooks, call toll free:
Director, MFS Investment Management 1-800-637-4458 anytime from a
touch-tone telephone.
Nelson J. Darling, Jr.
Professional Trustee For information on MFS mutual
funds, call your financial adviser
William R. Gutow or, for an information kit, call
Private Investor; toll free: 1-800-637-2929 any
Vice Chairman, Capitol Entertainment business day from 9 a.m. to 5 p.m.
Management Company; Real Estate Eastern time (or leave a message
Consultant anytime).
INVESTMENT ADVISER INVESTOR SERVICE
Massachusetts Financial Services Company MFS Service Center, Inc.
500 Boylston Street P.O. Box 2281
Boston, MA 02116-3741 Boston, MA 02107-9906
DISTRIBUTOR For general information, call toll
MFS Fund Distributors, Inc. free: 1-800-225-2606 any business
500 Boylston Street day from 8 a.m. to 8 p.m. Eastern
Boston, MA 02116-3741 time.
CHAIRMAN AND PRESIDENT For service to speech- or
Jeffrey L. Shames* hearing-impaired, call toll free:
1-800-637-6576 any business day
PORTFOLIO MANAGER from 9 a.m. to 5 p.m. Eastern time.
Mitchell D. Dynan* (To use this service, your phone
must be equipped with a
TREASURER Telecommunications Device for the
W. Thomas London* Deaf.)
ASSISTANT TREASURERS For share prices, account balances,
Mark E. Bradley* and exchanges, call toll free:
Ellen Moynihan* 1-800-MFS-TALK (1-800-637-8255)
James O. Yost* anytime from a touch-tone
telephone.
SECRETARY
Stephen E. Cavan* WORLD WIDE WEB
www.mfs.com
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
*Affiliated with the Investment Adviser
<PAGE>
------------
MFS(R) Union Standard(R) Bulk Rate
Equity Fund U.S. Postage
Paid
[logo] M F S (R) MFS
INVESTMENT MANAGEMENT ------------
WE INVENTED THE MUTUAL FUND(R)
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
USE-3 5/99 4M 84/284/384/884
