<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) UNION STANDARD
EQUITY FUND
SEMIANNUAL REPORT o SEPTEMBER 30, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 25
Independent Auditors' Report .............................................. 31
Trustees and Officers ..................................................... 33
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,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have
been early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS 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 16, 2000
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the 12 months ended September 30, 2000, Class A shares of the fund provided
a total return of -7.77%, Class B shares -8.37%, Class C shares -8.38%, and
Class I shares -7.45%. These returns assume the reinvestment of any
distributions but exclude the effects of any sales charges and compare to a
13.28% return over the same period for the fund's benchmark, the Standard &
Poor's 500 Composite Index (the S&P 500). The S&P 500 is a popular, unmanaged
index of common stock total return performance. During the same period, the
average large cap value fund tracked by Lipper Inc., an independent firm that
reports mutual fund performance, returned 10.57%.
Q. THE FUND'S PERFORMANCE STRUGGLED DURING THE PERIOD. WHAT WERE THE MAIN
FACTORS CONTRIBUTING TO THE WEAK RESULTS?
A. In order to meet its stated objectives, the fund's basic investment universe
is limited to a list of companies that maintain good relations with their
labor unions. Very few companies in predominantly non union sectors of the
economy, such as technology and financial services, qualify for inclusion in
the fund. When the fund was initially launched back in 1994, these two
sectors accounted for just over 20% of the S&P 500. Today, they total 45%.
Our performance analysis shows that about half of the fund's
underperformance over the past few years has been attributable to its
limitations in purchasing key sectors and holdings relative to the
benchmark.
Q. WHAT HAVE YOU DONE TO ADDRESS THE PROBLEM?
A. In March we decided to adjust the portfolio by investing a larger portion of
its assets in selected technology and financial services companies. The
fund's prospectus allows us to invest up to 35% of assets in non union
companies. We go a step further by subjecting these potential holdings to
additional screening to verify that they have generally good labor relations
and do not make products subject to union boycott. The resulting
diversification provided a significant reduction in the fund's volatility
relative to the S&P 500. Despite the market's subsequent turmoil, the fund
outperformed the benchmark over the past six months, largely on the strength
of its stock selection.
Q. HAS THE FUND'S STOCK SELECTION PROCESS CHANGED AS WELL?
A. In our opinion, MFS' strength is fundamental research, and our team of
research analysts continues to play a very important role in making stock
recommendations. To augment that process, we have developed a series of
quantitative models that provide additional financial screening on a broad
universe of stocks. The best-performing stocks have tended to be buy rated
on both a fundamental and quantitative basis, and the fund incorporates
those ideas whenever they meet our labor-sensitive criteria. In short, the
stock selection process has become more disciplined, but MFS Original
Research(R) remains solidly at its core.
Q. ALTHOUGH THE FUND WAS UNDERWEIGHTED IN TECHNOLOGY STOCKS VERSUS THE S&P 500
DURING THE PERIOD, IT IS CURRENTLY THE LARGEST SECTOR WEIGHTING IN THE
PORTFOLIO. GIVEN THE RECENT WEAKNESS IN THE TECHNOLOGY SECTOR, WHAT'S YOUR
OUTLOOK?
A. Much of the technology sector appears to be suffering from a slowdown in
global demand that many companies are only now recognizing as something more
than seasonal. The number of revenue and profit warnings in the sector has
been sobering. From that standpoint, our near-term outlook is not very
positive and we would argue against such a large absolute weighting. As a
result, the fund remains somewhat underweighted compared to the S&P 500. On
the other hand, we think the technology sector is one of the highest growth
areas of the market with some of the most innovative and profitable
companies in the world. Consequently, the fund maintained a large exposure
to this sector because the risks involved with severely underweighting such
an important sector of the economy were high.
Q. WHICH HOLDINGS WERE THE PRIMARY DETRACTORS?
A. The biggest detractors from performance versus the S&P 500 were actually
names that we did not hold - at least not until after the portfolio
restructuring. The top three included Cisco, Intel, and Oracle, all of which
have had positive returns for the last 12 months despite their recent
weakness. Some names that hurt performance included CMS Energy, Dial Corp,
and AT&T. The first two have been sold, but we still hold some AT&T,
although it was underweighted compared to the S&P 500.
Q. WHAT WORKED WELL FOR THE FUND?
A. Among the names we continued to hold, General Electric had by far the
greatest positive impact because we consistently overweighted the stock
relative to our benchmark. Other names included Corning, AES Corp, and
Anheuser Busch. The compelling business fundamentals, strong management
teams, and positive earnings results at these companies drove the favorable
stock performance.
Q. WHAT'S YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. Given the number of economic and financial uncertainties in the near-term
environment, the prospects of continued volatility are high. On the other
hand, we do think that there are a few positive developments on the horizon.
In our view, equity valuations have declined from extreme levels, oil prices
are unlikely to increase much further from current levels, and the Federal
Reserve Board is more likely to lower interest rates rather than raise them,
provided that energy prices are contained. These factors alone may not
provide the impetus for a market recovery in the near term, but we believe
they will pave the way for future gains. Regardless of the overall direction
of the market, however, our goal continues to be to locate companies that we
believe have the best chances of delivering above-average results.
/s/ Lisa B. Nurme /s/ James M. Perkins
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
-------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILE
-------------------------------------------------------------------------------
LISA B. NURME IS SENIOR VICE PRESIDENT AND DIRECTOR OF CONSERVATIVE
EQUITY PORTFOLIO MANAGEMENT OF MFS INVESTMENT MANAGEMENT(R). SHE
OVERSEES AND PROVIDES STRATEGIC DIRECTION TO THE GROUP OF PORTFOLIO
MANAGERS OF OUR VALUE OR CONSERVATIVE EQUITY PRODUCTS. LISA ALSO MANAGES
THE EQUITY INCOME PORTFOLIOS OF OUR MUTUAL FUND AND VARIABLE ANNUITY
PRODUCTS, AND IS A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM OF OUR TOTAL
RETURN PRODUCTS. SHE JOINED MFS FROM GOLDMAN SACHS IN 1987 AS A RESEARCH
ANALYST AND WAS NAMED PORTFOLIO MANAGER IN 1995, SENIOR VICE PRESIDENT
IN 1998, AND DIRECTOR OF CONSERVATIVE EQUITY PORTFOLIO MANAGEMENT IN
1999. LISA IS A GRADUATE OF THE UNIVERSITY OF NORTH CAROLINA, WHERE SHE
WAS ELECTED TO PHI BETA KAPPA.
JAMES M. PERKINS IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND A
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND. JIM JOINED
MFS IN 1983 AS A PROGRAMMER/ANALYST. HE BECAME ASSISTANT VICE PRESIDENT
AND DIRECTOR OF EQUITY TECHNOLOGY AND QUANTITATIVE RESEARCH IN 1986,
VICE PRESIDENT IN 1990, SENIOR QUANTITATIVE ANALYST IN 1999, AND A
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND IN 2000. HE IS
A GRADUATE OF DARTMOUTH COLLEGE.
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 GLOBAL, 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 MFS
product is available from your investment professional, 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: $68.7 MILLION NET ASSETS AS OF SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
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 the
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.) 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, 2000. Index information is from
January 1, 1994.)
MFS Union S&P 500
Standard Equity Composite
Fund - Class I Index
-----------------------------------------------------
1/94 $10,000 $10,000
9/94 9,640 10,134
9/96 14,483 15,821
9/98 21,829 24,231
9/00 21,409 35,082
<TABLE>
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
<CAPTION>
Class A
1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge - 7.77% +10.32% +76.50% +111.33%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge - 7.77% + 3.33% +12.03% + 11.80%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -13.07% + 1.31% +10.71% + 10.82%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class B
1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge - 8.37% + 8.24% +73.50% +107.74%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge - 8.37% + 2.68% +11.65% + 11.51%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -11.53% + 1.93% +11.39% + 11.51%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class C
1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge - 8.38% + 8.33% +73.64% +107.91%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge - 8.38% + 2.70% +11.67% + 11.53%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge - 9.17% + 2.70% +11.67% + 11.53%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
Class I
1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge - 7.45% +11.55% +78.80% +114.09%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge - 7.45% + 3.71% +12.32% + 12.01%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
Comparative Indices(+)
1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average large-cap value fund+ +10.57% +10.29% +16.65% + 16.20%
-----------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index# +13.28% +16.44% +21.69% + 20.44%
-----------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, January 14, 1994, through
September 30, 2000. Index information is from January 1, 1994.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. 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 in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
<PAGE>
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 25.3%
INDUSTRIAL GOODS & SERVICES 14.6%
HEALTH CARE 10.1%
LEISURE 8.0%
UTILITIES & COMMUNICATIONS 7.8%
TOP 10 STOCK HOLDINGS
GENERAL ELECTRIC CO. 7.3% ANHEUSER-BUSCH COS., INC. 2.6%
Diversified manufacturing and financial International beverage company
services conglomerate
INTEL CORP. 2.6%
EXXON MOBIL CORP. 3.8% Semiconductor manufacturer
International oil and gas company
BRISTOL-MYERS SQUIBB CO. 2.3%
CISCO SYSTEMS, INC. 3.3% Pharmaceutical products company
Computer network developer
JOHNSON & JOHNSON CO. 2.1%
ORACLE CORP. 2.7% Health care and pharmaceutical
Database software developer and products company
manufacturer
BOEING CO. 2.0%
MICROSOFT CORP. 2.7% Aircraft manufacturer
Computer software and systems company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- September 30, 2000
Stocks - 99.4%
--------------------------------------------------------------------------------------------------------
<CAPTION>
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 95.6%
Aerospace - 5.5%
Boeing Co. 22,000 $ 1,386,000
General Dynamics Corp. 14,380 903,244
Goodrich (B.F.) Co. 4,200 164,587
Lockheed-Martin Corp. 9,100 299,936
United Technologies Corp. 15,000 1,038,750
-----------
$ 3,792,517
--------------------------------------------------------------------------------------------------------
Airlines - 0.3%
AMR Corp.* 7,200 $ 235,350
--------------------------------------------------------------------------------------------------------
Automotive - 1.5%
Delphi Automotive Systems Corp. 32,300 $ 488,538
Harley-Davidson, Inc. 11,600 555,350
-----------
$ 1,043,888
--------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.4%
Bank America Corp. 23,000 $ 1,204,625
Firstar Corp. 18,400 411,700
-----------
$ 1,616,325
--------------------------------------------------------------------------------------------------------
Biotechnology - 1.7%
Pharmacia Corp. 19,200 $ 1,155,600
--------------------------------------------------------------------------------------------------------
Business Machines - 3.2%
Compaq Computer Corp. 11,100 $ 306,138
Dell Computer Corp.* 8,700 268,069
Hewlett-Packard Co. 2,700 261,900
Motorola, Inc. 10,000 282,500
Sun Microsystems, Inc.* 7,900 922,325
Xerox Corp. 12,600 189,787
-----------
$ 2,230,719
--------------------------------------------------------------------------------------------------------
Business Services - 2.6%
DST Systems, Inc.* 7,300 $ 857,750
First Data Corp. 19,900 777,344
Unisys Corp.* 13,400 150,750
-----------
$ 1,785,844
--------------------------------------------------------------------------------------------------------
Cellular Telephones - 0.7%
QUALCOMM, Inc.* 7,000 $ 498,750
--------------------------------------------------------------------------------------------------------
Chemicals - 1.5%
E.I. du Pont de Nemours & Co., Inc. 15,200 $ 629,850
Rohm & Haas Co. 12,800 372,000
-----------
$ 1,001,850
--------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 6.5%
America Online, Inc.* 13,000 $ 698,750
Microsoft Corp.* 30,700 1,851,594
Oracle Corp.* 24,000 1,890,000
-----------
$ 4,440,344
--------------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.6%
EMC Corp.* 10,000 $ 991,250
Siebel Systems, Inc.* 4,000 445,250
VERITAS Software Corp.* 2,600 369,200
-----------
$ 1,805,700
--------------------------------------------------------------------------------------------------------
Conglomerates - 1.9%
Tyco International Ltd. 25,240 $ 1,309,325
--------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.7%
Clorox Co. 15,140 $ 598,976
Colgate-Palmolive Co. 16,760 791,072
Philip Morris Cos., Inc. 15,000 441,563
-----------
$ 1,831,611
--------------------------------------------------------------------------------------------------------
Containers - 0.3%
Owens Illinois, Inc.* 22,200 $ 205,350
--------------------------------------------------------------------------------------------------------
Electrical Equipment - 7.2%
General Electric Co. 85,820 $ 4,950,741
--------------------------------------------------------------------------------------------------------
Electronics - 4.8%
Agilent Technologies, Inc.* 4,626 $ 226,385
Analog Devices, Inc.* 4,600 379,788
Conexant Systems, Inc.* 9,100 381,062
Intel Corp. 42,200 1,753,937
Micron Technology, Inc.* 10,400 478,400
Teradyne, Inc.* 2,600 91,000
-----------
$ 3,310,572
--------------------------------------------------------------------------------------------------------
Entertainment - 5.9%
Disney (Walt) Co. 30,400 $ 1,162,800
Harrah's Entertainment, Inc.* 17,000 467,500
Time Warner, Inc. 17,500 1,369,375
Viacom, Inc., "B"* 18,277 1,069,204
-----------
$ 4,068,879
--------------------------------------------------------------------------------------------------------
Financial Institutions - 3.5%
Citigroup, Inc. 15,100 $ 816,344
Merrill Lynch & Co., Inc. 8,400 554,400
Morgan Stanley Dean Witter & Co. 8,600 786,362
Schwab (Charles) Corp. 6,000 213,000
-----------
$ 2,370,106
--------------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.4%
Anheuser-Busch Cos., Inc. 41,600 $ 1,760,200
Keebler Foods Co. 7,800 327,600
Quaker Oats Co. 3,000 237,375
-----------
$ 2,325,175
--------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.6%
Fort James Corp. 5,600 $ 171,150
Weyerhaeuser Co. 6,200 250,325
-----------
$ 421,475
--------------------------------------------------------------------------------------------------------
Industrial - 1.1%
Loews Corp. 8,700 $ 725,363
--------------------------------------------------------------------------------------------------------
Machinery - 1.4%
Deere & Co., Inc. 19,900 $ 661,675
Ingersoll Rand Co. 9,700 328,588
-----------
$ 990,263
--------------------------------------------------------------------------------------------------------
Medical and Health Products - 8.4%
American Home Products Corp. 21,820 $ 1,234,194
Barr Laboratories, Inc.* 8,900 590,181
Bristol-Myers Squibb Co. 27,380 1,564,082
Johnson & Johnson Co. 15,200 1,427,850
Mallinckrodt Inc. 16,300 743,688
Sybron Intl. Corp. 8,300 199,200
-----------
$ 5,759,195
--------------------------------------------------------------------------------------------------------
Metals and Minerals - 0.8%
Alcoa, Inc. 20,400 $ 516,375
--------------------------------------------------------------------------------------------------------
Oil Services - 0.8%
Baker Hughes, Inc. 15,000 $ 556,875
--------------------------------------------------------------------------------------------------------
Oils - 4.4%
Conoco, Inc. 15,800 $ 425,613
ExxonMobil Corp. 29,161 2,598,974
-----------
$ 3,024,587
--------------------------------------------------------------------------------------------------------
Pollution Control - 0.3%
Allied Waste Industries, Inc.* 23,200 $ 213,150
--------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.9%
New York Times Co. 4,500 $ 176,906
Tribune Co. 10,900 475,513
-----------
$ 652,419
--------------------------------------------------------------------------------------------------------
Retail - 2.7%
Costco Wholesale Corp.* 16,200 $ 565,987
CVS Corp. 18,000 833,625
TJX Cos., Inc. 12,500 281,250
Walgreen Co. 5,200 197,275
-----------
$ 1,878,137
--------------------------------------------------------------------------------------------------------
Supermarkets - 2.5%
Kroger Co.* 40,580 $ 915,586
Safeway, Inc.* 17,120 799,290
-----------
$ 1,714,876
--------------------------------------------------------------------------------------------------------
Telecommunications - 5.7%
Cisco Systems, Inc.* 40,900 $ 2,259,725
Corning, Inc. 4,400 1,306,800
Lucent Technologies, Inc. 12,200 372,862
-----------
$ 3,939,387
--------------------------------------------------------------------------------------------------------
Utilities - Electric - 4.0%
AES Corp.* 15,100 $ 1,034,350
Pinnacle West Capital Corp. 11,530 586,589
TXU Corp. 27,900 1,105,537
-----------
$ 2,726,476
--------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.6%
Enron Corp. 12,600 $ 1,104,075
--------------------------------------------------------------------------------------------------------
Utilities - Telephone - 2.2%
AT&T Corp. 17,500 $ 514,062
Qwest Communications Intl., Inc.* 6,584 316,444
WorldCom, Inc.* 21,600 656,100
-----------
$ 1,486,606
--------------------------------------------------------------------------------------------------------
Total U.S. Stocks $65,687,905
--------------------------------------------------------------------------------------------------------
Foreign Stocks - 3.8%
Canada - 2.6%
Nortel Networks Corp. (Telecommunications) 17,700 $ 1,054,256
Seagrams Ltd. (Conglomerates) 12,800 735,200
-----------
$ 1,789,456
--------------------------------------------------------------------------------------------------------
Netherlands - 1.2%
Royal Dutch Petroleum Co., ADR (Oils) 13,800 $ 827,138
--------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 2,616,594
--------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $61,780,261) $68,304,499
--------------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.5%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., due 10/02/00 $ 104 $ 103,982
General Electric Capital Corp., due 10/02/00 126 125,977
Gillette Co., due 10/02/00 121 120,977
--------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 350,936
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $62,131,197) $68,655,435
Other Assets, Less Liabilities - 0.1% 50,137
--------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $68,705,572
--------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $62,131,197) $68,655,435
Investments of cash collateral for securities loaned, at
identified cost and value 5,580,598
Cash 5,055
Receivable for fund shares sold 5,205
Dividends and interest receivable 59,424
Other assets 2,107
-----------
Total assets $74,307,824
-----------
Liabilities:
Collateral for securities loaned, at value $ 5,580,598
Payable for fund shares reacquired 18,023
Payable to affiliates -
Management fee 2,486
Distribution and service fee 380
Accrued expenses and other liabilities 765
-----------
Total liabilities $ 5,602,252
-----------
Net assets $68,705,572
===========
Net assets consist of:
Paid-in capital $62,167,185
Unrealized appreciation on investments 6,524,238
Accumulated net realized loss on investments (562,754)
Accumulated undistributed net investment income 576,903
-----------
Total $68,705,572
===========
Shares of beneficial interest outstanding 5,284,464
=========
Class A shares:
Net asset value per share
(net assets of $10,066,049 / 779,760 shares of
beneficial interest outstanding) $12.91
======
Offering price per share (100 / 94.25 of net asset value
per share) $13.70
======
Class B shares:
Net asset value and offering price per share
(net assets of $2,355,533 / 183,768 shares of beneficial
interest outstanding) $12.82
======
Class C shares:
Net asset value and offering price per share
(net assets of $956,597 / 74,958 shares of beneficial
interest outstanding) $12.76
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $55,327,393 / 4,245,978 shares of
beneficial interest outstanding) $13.03
======
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, 2000
-------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 1,070,121
Interest 266,574
-----------
Total investment income $ 1,336,695
-----------
Expenses -
Management fee $ 514,079
Trustees' compensation 4,300
Shareholder servicing agent fee 79,139
Distribution and service fee (Class A) 43,319
Distribution and service fee (Class B) 27,769
Distribution and service fee (Class C) 13,393
Administrative fee 10,865
Custodian fee 47,559
Printing 31,486
Postage 8,757
Auditing fees 31,314
Legal fees 3,841
Registration fees 45,843
Miscellaneous 21,343
-----------
Total expenses $ 883,007
Reduction of expenses by investment adviser (113,597)
Fees paid indirectly (12,671)
-----------
Net expenses $ 756,739
-----------
Net investment income $ 579,956
-----------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on investment
transactions $ (458,796)
Change in unrealized appreciation on investments (5,685,987)
-----------
Net realized and unrealized loss on investments $(6,144,783)
-----------
Decrease in net assets from operations $(5,564,827)
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statement of Changes in Net Assets
------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30, 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 579,956 $ 861,667
Net realized gain (loss) on investments (458,796) 12,658,549
Net unrealized loss on investments (5,685,987) (8,556,998)
------------ ------------
Increase (decrease) in net assets from operations $ (5,564,827) $ 4,963,218
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (72,234) $ (87,862)
From net investment income (Class B) -- (9,675)
From net investment income (Class C) (6,489) (5,088)
From net investment income (Class I) (593,238) (686,646)
From net realized gain on investments and foreign
currency transactions (Class A) (1,855,062) (996,694)
From net realized gain on investments and foreign
currency transactions (Class B) (462,720) (238,729)
From net realized gain on investments and foreign
currency transactions (Class C) (330,338) (101,449)
From net realized gain on investments and foreign
currency transactions (Class I) (9,037,486) (6,183,480)
In excess of net realized gain on investments and foreign
currency transactions (Class A) (16,948) --
In excess of net realized gain on investments and foreign
currency transactions (Class B) (4,227) --
In excess of net realized gain on investments and foreign
currency transactions (Class C) (3,018) --
In excess of net realized gain on investments and foreign
currency transactions (Class I) (82,567) --
------------ ------------
Total distributions declared to shareholders $(12,464,327) $ (8,309,623)
------------ ------------
Net decrease in net assets from Fund share transactions $(17,534,704) $ 16,821,625
------------ ------------
Total increase (decrease) in net assets $(35,563,858) $ 13,475,220
Net assets:
At beginning of period 104,269,430 90,794,210
------------ ------------
At end of period (including accumulated undistributed net
investment income of $576,903 and $671,710, respectively) $ 68,705,572 $104,269,430
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
------------------------ SEPTEMBER 30,
2000 1999 1998 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.33 $16.85 $16.40 $16.13
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.07 $ 0.10 $ 0.10 $ 0.03
Net realized and unrealized gain (loss) on
investments (1.12) 0.88 1.92 0.24
------ ------ ------ ------
Total from investment operations $(1.05) $ 0.98 $ 2.02 $ 0.27
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.09) $(0.12) $(0.18) $ --
From net realized gain on investments (2.26) (1.38) (1.39) --
In excess of net realized gain on investments
and foreign currency transactions (0.02) -- -- --
------ ------ ------ ------
Total distributions declared to shareholders $(2.37) $(1.50) $(1.57) $ --
------ ------ ------ ------
Net asset value - end of period $12.91 $16.33 $16.85 $16.40
====== ====== ====== ======
Total return(+) (7.77)% 5.56% 13.31% 1.67%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.22% 1.21% 1.21% 1.21%+
Net investment income 0.48% 0.56% 0.57% 0.86%+
Portfolio turnover 86% 58% 43% 49%
Net assets at end of period (000 omitted) $10,066 $13,361 $10,915 $536
(S) Subject to reimbursement by the fund, the investment adviser 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 the investment adviser 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 $ 0.05 $ 0.08 $ 0.08 $ 0.03
Ratios (to average net assets):
Expenses## 1.36% 1.30% 1.32% 1.34%+
Net investment income 0.34% 0.47% 0.45% 0.72%+
* For the period from the inception of Class A shares, 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
------------------------ SEPTEMBER 30,
2000 1999 1998 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.23 $16.81 $16.43 $16.24
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.02) $(0.02) $(0.01) $(0.01)
Net realized and unrealized gain (loss) on
investments (1.11) 0.88 1.94 0.20
------ ------ ------ ------
Total from investment operations $(1.13) $ 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 (2.26) (1.38) (1.39) --
In excess of net realized gain on investments
and foreign currency transactions (0.02) -- -- --
------ ------ ------ ------
Total distributions declared to shareholders (2.28) (1.44) (1.55) --
------ ------ ------ ------
Net asset value - end of period $12.82 $16.23 $16.81 $16.43
====== ====== ====== ======
Total return (8.37)% 4.86% 12.65% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.87% 1.86% 1.86% 1.86%+
Net investment (income) loss (0.14)% (0.10)% (0.05)% (0.37)%+
Portfolio turnover 86% 58% 43% 49%
Net assets at end of period (000 omitted) $2,356 $3,448 $2,405 $17
(S) Subject to reimbursement by the fund, the investment adviser 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 the investment adviser 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) $(0.04) $(0.03) $(0.01)
Ratios (to average net assets):
Expenses## 2.01% 1.95% 1.97% 1.99%+
Net investment income (loss) (0.28)% (0.19)% (0.17)% (0.52)%+
* For the period from the inception of Class B shares, 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
------------------------ SEPTEMBER 30,
2000 1999 1998 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.21 $16.80 $16.43 $16.24
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $(0.02) $(0.02) $ 0.01
Net realized and unrealized gain (loss) on
investments (1.11) 0.88 1.95 0.18
------ ------ ------ ------
Total from investment operations $(1.13) $ 0.86 $ 1.93 $ 0.19
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.04) $(0.07) $(0.17) $ --
From net realized gain on investments (2.26) (1.38) (1.39) --
In excess of net realized gain on investments
and foreign currency transactions (0.02) -- -- --
------ ------ ------ ------
Total distributions declared to shareholders $(2.32) $(1.45) $(1.56) $ --
------ ------ ------ ------
Net asset value - end of period $12.76 $16.21 $16.80 $16.43
====== ====== ====== ======
Total return (8.38)% 4.92% 12.70% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.87% 1.86% 1.86% 1.86%+
Net investment income (loss) (0.14)% (0.10)% (0.10)% 0.63%+
Portfolio turnover 86% 58% 43% 49%
Net assets at end of period (000 omitted) $957 $1,581 $1,067 $4
(S) Subject to reimbursement by the fund, the investment adviser 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 the investment adviser 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) $(0.04) $ 0.01
Ratios (to average net assets):
Expenses## 2.01% 1.95% 1.97% 1.99%+
Net investment income (loss) (0.28)% (0.19)% (0.22)% 0.49%+
* For the period from the inception of Class C shares, 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS I
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $16.47 $16.96 $16.43 $13.85 $11.85
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.12 $ 0.16 $ 0.16 $ 0.17 $ 0.18
Net realized and unrealized gain (loss)
on investments (1.13) 0.88 1.94 4.01 2.25
------ ------ ------ ------ ------
Total from investment operations $(1.01) $ 1.04 $ 2.10 $ 4.18 $ 2.43
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.15) $(0.18) $(0.19) $(0.15)
From net realized gain on investments (2.26) (1.38) (1.39) (1.41) (0.28)
In excess of net realized gain on
investments and foreign currency
transactions (0.02) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.43) $(1.53) $(1.57) $(1.60) $(0.43)
------ ------ ------ ------ ------
Net asset value - end of period $13.03 $16.47 $16.96 $16.43 $13.85
====== ====== ====== ====== ======
Total return (7.45)% 5.97% 13.74% 32.51% 20.96%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.87% 0.86% 0.86% 0.98% 1.01%
Net investment income 0.84% 0.90% 0.95% 1.12% 1.36%
Portfolio turnover 86% 58% 43% 49% 81%
Net assets at end of period (000 omitted) $55,327 $85,880 $76,408 $68,527 $49,318
(S) Effective February 1, 1997, subject to reimbursement by the fund, the investment adviser voluntarily agreed to pay,
under a temporary expense reimbursement agreement, all of the fund's operating expenses, exclusive of management fees.
In consideration, the fund pays the investment adviser 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 $ 0.10 $ 0.14 $ 0.14 $ 0.15 $ 0.18
Ratios (to average net assets):
Expenses## 1.01% 0.95% 0.97% 1.11% 1.03%
Net investment income 0.70% 0.81% 0.83% 0.98% 1.33%
# 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 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. The fund can
invest in foreign securities. Investments in foreign securities are vulnerable
to the effects of changes in the relative values of the local currency and the
U.S. dollar and to the effects of changes in each country's legal, political,
and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued in good faith, at fair value, by the
Trustees.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/or 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.
Cash collateral is invested in short-term securities. 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 the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agent. Income from securities
lending is included in interest income on 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.
At September 30, 2000, the value of securities loaned was $5,438,561. These
loans were collateralized by cash of $5,580,598. which was invested in the
following short-term obligation:
AMORTIZED COST
SHARES AND VALUE
-------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 5,580,598 $5,580,598
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 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 total 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 net 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 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. During
the year ended September 30, 2000, $2,802 was reclassified from accumulated
undistributed net investment income to accumulated net realized loss on
investments and foreign currency transactions due to differences between book
and tax accounting for foreign currency transactions. This change had no effect
on the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that 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, 2000, aggregate
unreimbursed expenses amounted to $188,742.
The fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the fund, all of whom receive remuneration
for their services to the fund from MFS. Certain officers and Trustees of the
fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC).
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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$3,663 for the year ended September 30, 2000, 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 $1600 for the year ended September 30,
2000. Fees incurred under the distribution plan during the year ended September
30, 2000, 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 $9 and $4 for Class B and Class C shares, respectively, for the year
ended September 30, 2000. Fees incurred under the distribution plan during the
year ended September 30, 2000 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 year ended September 30,
2000, were $0, $5,217, and $696. 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%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$64,235,032 and $83,147,203 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 $62,135,426
-----------
Gross unrealized appreciation $13,071,936
Gross unrealized depreciation (6,551,927)
-----------
Net unrealized appreciation $ 6,520,009
===========
(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
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 627,674 $ 8,472,156 597,540 $10,381,908
Shares issued to shareholders in
reinvestment of distributions 109,842 1,560,851 26,061 440,486
Shares reacquired (776,196) (10,373,995) (452,782) (7,955,967)
---------- ------------ -------- -----------
Net increase (decrease) (38,680) $ (340,988) 170,819 $ 2,866,427
========== ============ ======== ===========
<CAPTION>
Class B shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 61,558 $ 852,515 123,213 $ 2,145,359
Shares issued to shareholders in
reinvestment of distributions 31,735 449,994 11,183 188,553
Shares reacquired (121,914) (1,674,803) (65,035) (1,159,729)
---------- ------------ -------- -----------
Net increase (decrease) (28,621) $ (372,294) 69,361 $ 1,174,183
========== ============ ======== ===========
<CAPTION>
Class C shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 101,136 $ 1,565,393 37,193 $ 649,762
Shares issued to shareholders in
reinvestment of distributions 21,343 301,374 5,515 92,586
Shares reacquired (145,024) (1,992,145) (8,704) (150,360)
---------- ------------ -------- -----------
Net increase (decrease) (22,545) $ (125,378) 34,004 $ 591,988
========== ============ ======== ===========
<CAPTION>
Class I shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 43,235 $ 598,368 363,605 $ 6,341,173
Shares issued to shareholders in
reinvestment of distributions 679,226 9,712,930 404,208 6,859,447
Shares reacquired (1,692,303) (27,007,342) (57,668) (1,011,593)
---------- ------------ -------- -----------
Net increase (decrease) (969,842) $(16,696,044) 710,145 $12,189,027
========== ============ ======== ===========
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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, 2000, was $685. The fund had no significant borrowings during the year.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of Series Trust XI and the 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, 2000, the related statement of operations
for the year then ended, the statement of changes in net assets for the years
ended September 30, 2000 and 1999, and the financial highlights for each of the
years in the four-year period ended September 30, 2000. These financial
statements and financial highlights are the responsibility of the Trust'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 accounting principles generally
accepted in the United States of America. 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, 2000 by correspondence with the custodian.
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, 2000, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 2, 2000
<PAGE>
-------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
-------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2000.
THE FUND HAS DESIGNATED $11,792,366, AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED SEPTEMBER 30, 2000.
FOR THE YEAR ENDED SEPTEMBER 30, 2000, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS ARE 100%.
-------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) UNION STANDARD(R) EQUITY FUND
<S> <C>
TRUSTEES INVESTOR INFORMATION
Jeffrey L. Shames* For MFS stock and bond market outlooks, call toll
Chairman, Chief Executive Officer, and free: 1-800-637-4458 anytime from a touch-tone
Director, MFS Investment Management telephone.
Nelson J. Darling, Jr. For information on MFS mutual funds, call your
Professional Trustee investment professional or, for an information
kit, call toll free: 1-800-637-2929 any business
William R. Gutow day from 9 a.m. to 5 p.m. Eastern time (or leave a
Private Investor; message anytime).
Vice President, Capital Entertainment
Management Company; Real Estate Consultant INVESTOR SERVICE
MFS Service Center, Inc.
INVESTMENT ADVISER P.O. Box 2281
Massachusetts Financial Services Company Boston, MA 02107-9906
500 Boylston Street
Boston, MA 02116-3741 For general information, call toll free:
1-800-225-2606 any business day from 8 a.m. to 8
DISTRIBUTOR p.m. Eastern time.
MFS Fund Distributors, Inc.
500 Boylston Street For service to speech- or hearing-impaired, call
Boston, MA 02116-3741 toll free: 1-800-637-6576 any business day from 9
a.m. to 5 p.m. Eastern time. (To use this service,
PORTFOLIO MANAGERS your phone must be equipped with a
Lisa B. Nurme* Telecommunications Device for the Deaf.)
James M. Perkins*
For share prices, account balances, and exchanges,
CHAIRMAN AND PRESIDENT call toll free: 1-800-MFS-TALK (1-800-637-8255)
Jeffrey L. Shames* anytime from a touch-tone telephone.
TREASURER WORLD WIDE WEB
James O. Yost* www.mfs.com
ASSISTANT TREASURERS
Mark E. Bradley*
Robert R. Flaherty*
Laura F. Healy*
Ellen Moynihan*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
* MFS Investment Management
</TABLE>
<PAGE>
------------
MFS(R) UNION STANDARD(R) EQUITY FUND PRSRT STD
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)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
USE-2 11/00 7.1M 84/284/384/884
