<PAGE>
SEMIANNUAL REPORT
MARCH 31, 2000
[graphic omitted]
VERTEX(SM) ALL CAP FUND
VERTEX(SM) CONTRARIAN FUND
<PAGE>
VERTEX(SM) ALL CAP FUND
VERTEX(SM) CONTRARIAN FUND
TRUSTEES CUSTODIAN
Jeffrey L. Shames* -- Chairman, State Street Bank and Trust Company
Chief Executive Officer, and
Director, Vertex Investment INVESTOR SERVICE
Management, Inc. MFS Service Center, Inc.
P.O. Box 2281
Nelson J. Darling, Jr. -- Professional Boston, MA 02107-9906
Trustee For additional information, contact
your investment professional.
William R. Gutow -- Vice Chairman,
Capitol Entertainment Management WORLD WIDE WEB
Company; Real Estate Consultant www.mfs.com
INVESTMENT ADVISER
Vertex Investment Management, Inc.,
a wholly owned subsidiary of
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGERS
John W. Ballen*
Toni Y. Shimura*
Brian E. Stack*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Vertex Investment Management, Inc.
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
Historically, there have been two ways that shareholders in stocks and stock
mutual funds could potentially make money: capital gains from share price
appreciation and dividend payments. Over the past decade, however, it appears to
us that dividends have become less and less relevant as a means of profiting
from stock investments. Investors who in the past may have counted on dividend
payments from stocks or stock funds as a source of income are sometimes finding
their payments are no longer meeting their needs. In the balance of this letter,
we'd like to address why that has happened, why this may in some ways be good
for investors, and what investors may want to do to adjust to the new reality of
shrinking dividends.
A FUNDAMENTAL CHANGE
When a company pays a dividend, it is essentially sharing its profits with
stockholders. Until the 1950s, paying a dividend was standard practice for a
majority of American companies; dividend payments were virtually required to
compensate investors for taking on the risks associated with investing in
stocks.
What has happened in the ensuing decades, however, is a fundamental change in
the way investors view the stock market. The tremendous popularity of Individual
Retirement Accounts and 401(k) retirement plans has introduced a flood of new
investors to stocks and stock mutual funds, and a generally rising market
through most of the past decade has made the experience a very positive one for
many of those shareholders.
As a result, investors appear to be focusing much more on share price and on
company earnings -- which we believe are the strongest long-term driver of share
prices -- than on dividend payments. Summing up the trend, The New York Times
commented on January 4, 2000, that "a growing portion of corporate America
appears to be concluding that dividends are no longer needed to attract
investors and are therefore an unnecessary cost of doing business. Fewer
companies are raising dividends, and more and more major companies do not bother
to pay them at all."
BENEFITS FOR INVESTORS
In assessing whether or not this trend is good for investors, it may help to
look at what shareholders have traditionally regarded as the benefits of
dividends. One benefit was that a dividend payment served as an indication that
a company was in good health, because it was generating profits that it could
share with its investors. However, there are other ways for a corporation to use
its profits that over the long term may benefit shareholders more than a
dividend.
As part of the MFS Original Research(R) process that we use in evaluating
potential investments, one thing we look for is companies that are investing
their profits back in their businesses. Profits can be used to fund additional
research, product development, marketing, and other areas that may improve the
earnings of a company and potentially result in higher stock prices. Share
buybacks are another way we like to see a company reinvest its profits. By
buying back its own shares and thus reducing the number of shares outstanding, a
company may increase the value of existing shares. Over the long term, we
believe such actions may benefit shareholders more than a dividend payment. An
additional reason we feel dividends are an inefficient way for a company to use
its profits is that dividend payouts are subject to double taxation: once as
corporate profits and a second time as ordinary income to shareholders.
POTENTIAL DOWNSIDE PROTECTION "Downside protection" is a second potential
benefit that investors have historically attributed to dividends. The reasoning
went that, during a bad market period, a stockholder could at least count on
dividend payments to somewhat counteract the effect of declining share prices.
We believe, however, that the best long-term protection against market
volatility is simply investing in good businesses -- which is why our research
is focused on identifying companies with the potential to grow earnings over the
long haul, taking down markets in their stride.
And although dividend payments may appear to provide some short-term protection
against volatility, over the past decade stock prices in general have risen much
faster than dividends, making most dividend payments too small to provide
significant protection. In 1999, for example, the average dividend yield of
stocks in the Standard & Poor's 500 Composite Index was only 1.21%(1) -- whereas
yields had averaged in the 3% - 4% range or greater during the decades of the
1960s, '70s, and '80s.(2)
ALTERNATE INCOME STREAMS
A third benefit of stock dividend payments has traditionally been that they may
provide a steady stream of income, allowing an investor to receive money from
stock or stock mutual fund investments without selling shares. This benefit has
often been used to provide retirement income. Over the past decade, however,
many investors have found their dividend checks shrinking while the value of
their holdings may have appreciated considerably.
Intuitively, receiving a stream of dividend income without reducing the
principal in one's account may seem preferable to selling shares to generate
income. But investors should also bear in mind the tax consequences of dividend
income. Dividends are federally taxed as ordinary income, whereas profits from
selling stock or mutual fund shares held more than one year are taxed at the
capital gains rate of 20% -- which for many investors is lower than their
ordinary income tax bracket. Many shareholders may find themselves paying lower
taxes on profits from share appreciation than on dividend income. Given the
current reality of low and declining stock dividends, we would suggest that
investors seeking an income stream from their equity portfolio talk with their
investment professionals about alternate payout methods. Two possible strategies
are systematic withdrawals and bond investing.
With a systematic withdrawal, an investor's account is set up to sell shares in
order to pay out a fixed amount on a regular schedule. The advantage of this
approach is that the payout amount is always the same, regardless of market
fluctuations or variations in dividends paid by the holdings in the account. In
a period when the market is rising, share price appreciation may in fact
compensate for some selling of holdings. Of course, the disadvantage of a
systematic withdrawal is that, depending on the payout amount, the principal
balance in the account will most likely shrink as shares are sold. At some point
an investor can potentially run out of money.
For investors who feel more comfortable not drawing down their account
principal, bond funds may present an attractive alternative for providing an
income stream. High-yield bond funds, in particular, may offer the potential for
higher dividend yields than many stock funds are offering today. A disadvantage
is that, historically, bond funds have not tended to offer as much potential for
long-term share price appreciation as have stock funds. Investors should also
understand that, although investments in lower-rated securities such as
high-yield bonds may provide greater returns, they are also associated with
greater than average risk.(3) We suggest that investors work with their
investment professionals to determine whether a bond fund or systematic
withdrawal plan may meet their needs within their expected time frame.
As with most major changes in the financial markets, the overall decline in
stock dividend payments presents a combination of challenges and potential
benefits for investors. We feel that most investors will be best served by
working with their investment professionals to continually monitor such changes
in the financial markets, as well as changes in their own situations, and
adjusting their portfolios accordingly. As always, we appreciate your confidence
and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
Vertex Investment Management, Inc.
April 18, 2000
- ------------
(1)Source: Standard & Poor's. The Standard & Poor's 500 Composite Index (the
S&P 500) is a popular, unmanaged index of common stock total return
performance. It is not possible to invest directly in an index.
(2)Source: FactSet Research. The dividend yield of a stock is calculated by
dividing the dividend per share by the current market price per share.
(3)These risks may increase share price volatility. Please see a prospectus
for details.
A prospectus containing more complete information on any Vertex product,
including 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
Vertex All Cap Fund
Dear Shareholders,
For the six months ended March 31, 2000, the Fund provided a total return of
107.75%. This return includes the reinvestment of any distributions but excludes
the effects of any sales charges and compares to a 17.51% return over the same
period for the Fund's benchmark, the Standard & Poor's 500 Composite Index (the
S&P 500), a popular, unmanaged index of common stock total return performance.
The Fund performed very well over the past six months, which we attribute to our
focus on key areas such as telecommunications, technology, and health care, as
well as to our emphasis on small-cap names.
Among the Fund's strongest performing holdings was the very large position we
held in Network Solutions early in the year, which quadrupled in value. Network
Solutions supplies network domain-name registration and network consulting
services. Our strategy of owning many small-cap technology and healthcare stocks
also contributed to Fund performance.
However, it is well known that market leadership reversed sharply in mid-March.
In this environment, investments in more conservative, lower P/E stocks may be
more attractive until the highest-growth sectors of the market catch up to their
valuations. In addition, the Fund has the ability to engage in short sales and
to use leverage to help its performance. (These investment strategies all entail
significant risks.) The Fund is permitted to invest in all types of equity
securities, which provides us with flexibility in this challenging market
environment.
Respectfully,
/s/ John W. Ballen /s/ Toni Y. Shimura
John W. Ballen Toni Y. Shimura
Portfolio Manager Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
Vertex Contrarian Fund
Dear Shareholders,
For the six months ended March 31, 2000, the Fund provided a total return of
179.88%. This return includes the reinvestment of any distributions but excludes
the effects of any sales charges and compares to a 17.51% return over the same
period for the Fund's benchmark, the S&P 500.
The Fund has benefited from an extensive overweighting in technology, energy,
and business services stocks relative to the S&P 500. Lam Research Corp., which
posted strong performance during the previous period, continued to contribute to
the Fund's return due to improved demand for semiconductor capital equipment.
Corning Inc., which we perceive as a leader in the optical networking area, was
another technology holding that appreciated sharply. Caremark, our top holding,
also performed well; our research indicates the company may emerge as a
profitable and fast-growing pharmaceutical benefits manager after divesting
itself of its unattractive legacy businesses in physician practice management.
During the period, the Fund consistently employed concentrated investment
positions, leverage, and short sales, all of which contributed positively to its
return. We anticipate that the portfolio will continue to employ all of these
tools to the extent that our research efforts continue to identify attractive
opportunities for achieving capital appreciation. These investment techniques
all entail significant risks.
Respectfully,
/s/ Brian E. Stack
Brian E. Stack
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.
It is not possible to invest directly in an index.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently, each Fund offers only Class A shares, which are available for
purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
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.)
VERTEX ALL CAP FUND
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH MARCH 31, 2000
<TABLE>
<CAPTION>
CLASS A 6 Months 1 Year Life*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +107.75% +197.71% +372.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +197.71% +125.06%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +180.59% +118.21%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VERTEX CONTRARIAN FUND
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH MARCH 31, 2000
<TABLE>
<CAPTION>
CLASS A 6 Months 1 Year Life*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +179.88% +278.89% +585.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +278.89% +173.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +257.11% +164.82%
- -----------------------------------------------------------------------------------------------------------------------------------
*For the period from the commencement of each Fund's investment operations, May 1, 1998, through March 31, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable 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 include 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. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Each Fund may invest in lower-rated securities which may provide greater
returns, but are also associated with greater-than-average risk. These risks may
increase share price volatility. See the prospectus for details.
Each Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
See the prospectus for details.
Each Fund may enter into short sales. A short sale transaction involves selling
a security that a fund does not own with the intent of purchasing it later at a
lower price. See the prospectus for details.
Each Fund may purchase securities with proceeds from bank borrowings or reverse
repurchase agreements, and may engage in other forms of leveraged investments.
These types of investments are speculative, involve greater risks, and can
substantially increase share price volatility. See the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - March 31, 2000
VERTEX ALL CAP FUND
Stocks - 79.7%
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------
U.S. Stocks - 70.9%
Aerospace - 1.3%
Honeywell International, Inc. 2,300 $ 121,181
United Technologies Corp. 1,300 82,144
-----------
$ 203,325
- ------------------------------------------------------------------------------
Automotive - 0.3%
Harley-Davidson, Inc. 550 $ 43,656
- ------------------------------------------------------------------------------
Banks and Credit Companies - 1.0%
Chase Manhattan Corp. 1,750 $ 152,578
- ------------------------------------------------------------------------------
Biotechnology - 0.2%
Guidant Corp.* 325 $ 19,114
Waters Corp.* 140 13,335
-----------
$ 32,449
- ------------------------------------------------------------------------------
Business Machines - 1.8%
Sun Microsystems, Inc.* 1,650 $ 154,610
Texas Instruments, Inc. 780 124,800
-----------
$ 279,410
- ------------------------------------------------------------------------------
Cellular Telephones - 1.6%
AirGate PCS, Inc.* 25 $ 2,637
Sprint Corp. (PCS Group)* 1,400 91,437
TeleCorp PCS, Inc.* 10 518
Voicestream Wireless Corp.* 1,165 150,067
-----------
$ 244,659
- ------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.7%
Apple Computer, Inc.* 300 $ 40,744
Microsoft Corp.* 3,600 382,500
-----------
$ 423,244
- ------------------------------------------------------------------------------
Computer Software - Services - 0.1%
Internet Commerce Corp.* 250 $ 11,813
Lightspan Partnership, Inc.* 20 355
-----------
$ 12,168
- ------------------------------------------------------------------------------
Computer Software - Systems - 1.3%
eOn Communications Corp.* 20 $ 294
Oracle Corp.*# 1,900 148,318
VERITAS Software Corp.* 460 60,260
-----------
$ 208,872
- ------------------------------------------------------------------------------
Conglomerates - 0.3%
Tyco International Ltd. 1,125 $ 56,109
- ------------------------------------------------------------------------------
Consumer Goods and Services - 2.0%
Atwood Oceanics, Inc.* 2,400 $ 159,150
Monsanto Co. 3,150 162,225
-----------
$ 321,375
- ------------------------------------------------------------------------------
Electrical Equipment - 0.6%
General Electric Co. 650 $ 100,872
- ------------------------------------------------------------------------------
Electronics - 7.1%
Analog Devices, Inc.* 1,305 $ 105,134
Applied Materials, Inc.* 2,150 202,637
Conductus, Inc.* 200 6,488
Intel Corp. 1,790 236,168
Lam Research Corp.* 1,790 80,662
LSI Logic Corp.* 1,485 107,848
Micron Technology, Inc.* 1,615 203,490
Novellus Systems, Inc.* 15 842
Teradyne, Inc.* 390 32,078
Veeco Instruments, Inc. 100 7,400
Xilinx, Inc.* 1,525 126,289
-----------
$ 1,109,036
- ------------------------------------------------------------------------------
Energy - 0.3%
Rowan Cos., Inc.* 1,700 $ 50,044
- ------------------------------------------------------------------------------
Entertainment - 0.5%
Mediacom Communications Corp.* 140 $ 1,951
Univision Communications, Inc., "A"* 700 79,100
-----------
$ 81,051
- ------------------------------------------------------------------------------
Financial Institutions - 4.0%
Citigroup, Inc. 2,300 $ 136,419
Goldman Sachs Group, Inc. 570 59,921
Lehman Brothers Holdings, Inc. 820 79,540
Merrill Lynch & Co., Inc. 1,350 141,750
Morgan Stanley Dean Witter & Co. 625 50,977
Schwab (Charles) Corp. 1,300 73,856
State Street Corp. 900 87,187
-----------
$ 629,650
- ------------------------------------------------------------------------------
Food and Beverage Products - 0.9%
Whole Foods Market, Inc.*# 3,400 $ 140,887
- ------------------------------------------------------------------------------
Insurance - 1.2%
American International Group, Inc. 1,450 $ 158,775
Hartford Financial Services Group, Inc. 600 31,650
-----------
$ 190,425
- ------------------------------------------------------------------------------
Internet - 0.1%
PC - Tel, Inc.* 25 $ 1,881
Viador, Inc.* 300 14,663
webMethods, Inc.* 10 2,414
-----------
$ 18,958
- ------------------------------------------------------------------------------
Machinery - 0.5%
Danaher Corp. 1,500 $ 76,500
- ------------------------------------------------------------------------------
Medical and Health Products - 0.5%
Bristol-Myers Squibb Co. 600 $ 34,650
Pharmacia & Upjohn, Inc. 700 41,475
-----------
$ 76,125
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.0%
BioSource International, Inc.*# 15,000 $ 182,813
BioSphere Medical, Inc.* 100 2,450
Medimmune, Inc. 250 43,531
Medtronic, Inc. 675 34,720
PE Corp. 2,105 203,133
-----------
$ 466,647
- ------------------------------------------------------------------------------
Oil Services - 7.8%
Baker Hughes, Inc. 500 $ 15,125
BJ Services Co.* 1,350 99,731
Cooper Cameron Corp.* 1,650 110,344
ENSCO International, Inc. 5,250 189,656
Global Marine, Inc.* 1,100 27,912
Halliburton Co. 1,000 41,000
Nabors Industries, Inc.* 1,900 73,744
Noble Drilling Corp.* 3,375 139,852
Schlumberger Ltd. 1,900 145,350
Smith International, Inc.* 2,425 187,937
Weatherford International, Inc.*# 3,350 197,441
-----------
$ 1,228,092
- ------------------------------------------------------------------------------
Oils - 3.2%
Anadarko Petroleum Corp. 4,100 $ 158,619
EOG Resources, Inc. 8,500 180,094
Transocean Sedco Forex, Inc.* 3,175 162,917
-----------
$ 501,630
- ------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
Sepracor, Inc.* 400 $ 29,125
- ------------------------------------------------------------------------------
Retail - 0.5%
Ross Stores, Inc. 3,100 $ 74,594
- ------------------------------------------------------------------------------
Special Products and Services - 0.1%
Millipore Corp. 300 $ 16,931
- ------------------------------------------------------------------------------
Stores - 10.0%
Bed Bath & Beyond, Inc.* 3,200 $ 126,000
Best Buy Co., Inc.* 1,505 129,430
Circuit City Stores, Inc. 3,375 205,453
Costco Wholesale Corp.* 2,275 119,580
Gap, Inc. 3,100 154,419
Home Depot, Inc. 2,950 190,275
Kohl's Corp.* 1,775 181,937
Linens 'n Things, Inc.* 4,700 160,975
Talbots, Inc. 800 47,100
Target Corp. 1,250 93,438
Wal-Mart Stores, Inc.# 2,800 155,400
-----------
$ 1,564,007
- ------------------------------------------------------------------------------
Supermarkets - 1.3%
Safeway, Inc.* 4,500 $ 203,625
- ------------------------------------------------------------------------------
Telecommunications - 16.0%
Allegiance Telecom, Inc.* 1 $ 40
AT&T Corp.* 3,200 189,600
Choice One Communications, Inc.* 30 1,065
CIENA Corp.* 1,245 157,026
Cisco Systems, Inc.* 3,900 301,519
Corning, Inc. 375 72,750
EchoStar Communications Corp.* 975 77,025
JDS Uniphase Corp.* 3,795 457,535
Metromedia Fiber Network, Inc., "A"* 1,295 125,291
NEXTEL Communications, Inc.*# 1,665 246,836
Nortel Networks Corp.# 3,000 378,000
Pegasus Communications Corp.* 75 10,556
QUALCOMM, Inc.*# 2,920 435,992
Spectrasite Holdings, Inc.* 600 16,988
Telaxis Communications Corp.* 10 601
Time Warner Telecom, Inc.* 550 43,725
Tritel, Inc.* 10 383
-----------
$ 2,514,932
- ------------------------------------------------------------------------------
Utilities - Gas - 0.5%
Enron Corp. 1,100 $ 82,362
- ------------------------------------------------------------------------------
Total U.S. Stocks $11,133,338
- ------------------------------------------------------------------------------
Foreign Stocks - 8.8%
Canada - 0.5%
Call-Net Enterprises, Inc. (Telecommunications)* 12,700 $ 71,040
- ------------------------------------------------------------------------------
Finland - 2.3%
Nokia Corp., ADR (Telecommunications) 1,640 $ 356,290
- ------------------------------------------------------------------------------
France - 2.7%
Bouygues S.A. (Telecommunications) 520 $ 412,132
Business Objects S.A., ADR (Computer Software -
Systems)* 50 4,975
STMicroelectronics Co. (Electronics)* 50 9,189
-----------
$ 426,296
- ------------------------------------------------------------------------------
Germany - 0.1%
Infineon Technologies AG (Electronics)* 210 $ 11,468
- ------------------------------------------------------------------------------
India
SSI Ltd., GDR (Computer Software - Services)* 60 $ 810
- ------------------------------------------------------------------------------
Japan - 1.4%
Honda Motor Co., Ltd., ADR (Automotive) 1,300 $ 105,625
Toyota Motor Corp., ADR (Automotive) 1,100 114,000
-----------
$ 219,625
- ------------------------------------------------------------------------------
Netherlands
KPNQwest N.V. (Internet)* 30 $ 1,596
- ------------------------------------------------------------------------------
Sweden - 1.4%
Ericsson LM, ADR (Telecommunications) 2,400 $ 225,150
- ------------------------------------------------------------------------------
Switzerland
Carrier 1 International S.A., ADR
(Telecommunications)* 40 $ 3,829
- ------------------------------------------------------------------------------
United Kingdom - 0.4%
lastminute.com plc (Internet)* 230 $ 861
NDS Group PLC, ADR (Internet)* 10 705
Thus PLC (Internet)* 130 993
Vodafone AirTouch PLC (Telecommunications)* 10,167 56,636
-----------
$ 59,195
- ------------------------------------------------------------------------------
Total Foreign Stocks $ 1,375,299
- ------------------------------------------------------------------------------
Total Stocks (Identified Cost, $11,808,931) $12,508,637
- ------------------------------------------------------------------------------
Short-Term Obligation - 11.0%
- ------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 4/03/00, at
Amortized Cost $ 1,730 $ 1,729,419
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $13,538,349) $14,238,056
Other Assets, Less Liabilities - 9.3% 1,464,549
- ------------------------------------------------------------------------------
Net Assets - 100.0% $15,702,605
- ------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral
requirements. At the period end, the value of securities pledged amounted to
$1,582,526.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - March 31, 2000
VERTEX CONTRARIAN FUND
Stocks - 131.9%
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------
U.S. Stocks - 130.8%
Business Machines - 1.3%
Seagate Technology, Inc.*# 5,700 $ 343,425
- ------------------------------------------------------------------------------
Business Services - 7.7%
eLoyalty Corp.*# 33,200 $ 792,650
infoUSA, Inc.*# 23,200 211,700
Modis Professional Services, Inc.*# 40,700 503,662
Navigant Consulting Co.* 16,800 184,800
Radiant Systems, Inc.*# 4,900 308,088
-----------
$ 2,000,900
- ------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.0%
HNC Software, Inc.*# 7,000 $ 504,437
Intuit, Inc.*# 5,100 277,313
-----------
$ 781,750
- ------------------------------------------------------------------------------
Computer Software - Services - 2.2%
RSA Security, Inc.*# 10,800 $ 559,575
- ------------------------------------------------------------------------------
Computer Software - Systems - 3.2%
MMC Networks, Inc.*# 13,600 $ 448,800
New Era of Networks, Inc.* 6,300 247,275
Unisys Corp.* 5,000 127,500
-----------
$ 823,575
- ------------------------------------------------------------------------------
Conglomerates - 1.0%
Tyco International Ltd. 5,000 $ 249,375
- ------------------------------------------------------------------------------
Containers - 5.0%
Intertape Polymer Group, Inc.*# 40,100 $ 456,137
Ivex Packaging Corp.*# 111,600 843,975
-----------
$ 1,300,112
- ------------------------------------------------------------------------------
Electrical Equipment - 2.1%
Emerson Electric Co. 10,000 $ 528,750
- ------------------------------------------------------------------------------
Electronics - 5.9%
Flextronics International Ltd.*# 6,800 $ 478,975
Integrated Device Technology, Inc.*# 8,500 336,813
Lam Research Corp.*# 7,200 324,450
Solectron Corp.*# 9,400 376,587
Viasystems Group Inc.# 520 8,060
-----------
$ 1,524,885
- ------------------------------------------------------------------------------
Financial Institutions - 0.7%
SLM Holding Corp. 5,000 $ 166,563
- ------------------------------------------------------------------------------
Forest and Paper Products - 2.0%
Weyerhaeuser Co.# 9,100 $ 518,700
- ------------------------------------------------------------------------------
Healthcare - 24.4%
Caremark Rx, Inc.*# 1,508,000 $ 6,314,750
- ------------------------------------------------------------------------------
Insurance - 7.8%
Aetna, Inc.# 25,000 $ 1,392,187
Hartford Financial Services Group, Inc. 3,900 205,725
Inspire Insurance Solutions, Inc.* 131,000 425,750
-----------
$ 2,023,662
- ------------------------------------------------------------------------------
Internet
Eprise Corp.* 70 $ 1,103
- ------------------------------------------------------------------------------
Leisure - 0.5%
Royal Caribbean Cruises Ltd. 5,000 $ 140,000
- ------------------------------------------------------------------------------
Machinery - 0.4%
Ingersoll Rand Co. 2,500 $ 110,625
- ------------------------------------------------------------------------------
Medical and Health Products - 4.0%
BioSource International, Inc.*# 26,100 $ 318,094
Bristol-Myers Squibb Co. 5,000 288,750
Pharmacia & Upjohn, Inc.# 7,300 432,525
-----------
$ 1,039,369
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.4%
Allos Therapeutics Inc.* 160 $ 2,290
Cytyc Corp.*# 8,800 424,600
Total Renal Care Holdings, Inc.* 60,000 187,500
-----------
$ 614,390
- ------------------------------------------------------------------------------
Oil Services - 14.5%
Diamond Offshore Drilling, Inc.# 10,100 $ 403,369
Dril-Quip, Inc.*# 10,200 480,675
Global Industries, Inc.*# 56,700 829,237
Key Energy Services, Inc.*# 23,800 276,675
National Oilwell, Inc.*# 19,100 589,712
Noble Drilling Corp.*# 14,900 617,419
Trico Marine Services, Inc.*# 62,600 551,663
-----------
$ 3,748,750
- ------------------------------------------------------------------------------
Oils - 15.8%
Apache Corp.# 7,000 $ 348,250
EOG Resources, Inc.# 43,800 928,012
Houston Exploration Co.*# 9,700 174,600
Louis Dreyfus Natural Gas Corp.*# 22,800 775,200
Newfield Exploration Co.*# 13,950 491,738
Oceaneering International, Inc.*# 12,400 232,500
Santa Fe Snyder Corp.*# 31,500 303,188
Transocean Sedco Forex, Inc.*# 16,200 831,262
-----------
$ 4,084,750
- ------------------------------------------------------------------------------
Special Products and Services - 1.8%
Harmonic Lightwaves, Inc.*# 5,700 $ 474,525
- ------------------------------------------------------------------------------
Stores - 1.1%
Wal-Mart Stores, Inc. 5,000 $ 277,500
- ------------------------------------------------------------------------------
Supermarkets - 0.7%
Kroger Co.* 10,000 $ 175,625
- ------------------------------------------------------------------------------
Telecommunications - 23.3%
Allegiance Telecom, Inc.*# 3,100 $ 249,937
Bell Atlantic Corp. 5,000 305,625
Cabletron Systems, Inc.*# 63,900 1,873,069
Corning, Inc.# 2,700 523,800
Intermedia Communications, Inc.*# 17,500 845,469
MGC Communications, Inc.*# 8,300 593,450
Net2000 Communication Inc.*# 130 3,088
Network Solutions, Inc.*# 8,400 1,291,106
Time Warner Telecom, Inc.*# 4,100 325,950
-----------
$ 6,011,494
- ------------------------------------------------------------------------------
Total U.S. Stocks $33,814,153
- ------------------------------------------------------------------------------
Foreign Stocks - 1.1%
Finland - 1.1%
Elcoteq Network Corp. (Telecommunications) 9,800 $ 276,726
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $33,069,653) $34,090,879
- ------------------------------------------------------------------------------
Securities Sold Short - (24.8)%
- ------------------------------------------------------------------------------
Airlines - (0.2)%
Airborne Freight Corp. (2,500) $ (60,000)
- ------------------------------------------------------------------------------
Audio & Video - (0.5)%
Harman International Industries, Inc. (2,000) $ (120,000)
- ------------------------------------------------------------------------------
Business Services - (2.4)%
Affiliated Managers Group, Inc.* (3,000) $ (142,500)
Robert Half International, Inc.* (5,000) (237,188)
Scient Corp.* (2,500) (226,719)
-----------
$ (606,407)
- ------------------------------------------------------------------------------
Computer Hardware - Systems - (1.2)%
Cybex Computer Products Corp. (6,000) $ (225,750)
Rambus, Inc.* (300) (88,350)
-----------
$ (314,100)
- ------------------------------------------------------------------------------
Computer Hardware - Services - (0.5)%
Kana Communications, Inc.* (2,000) $ (136,000)
- ------------------------------------------------------------------------------
Computer Hardware - Systems - (2.1)%
Digex, Inc.* (5,000) $ (554,687)
- ------------------------------------------------------------------------------
Drugs and Healthcare - (0.9)%
Universal Health Services, Inc.* (5,000) $ (245,000)
- ------------------------------------------------------------------------------
Education - (1.2)%
Devry, Inc. (10,000) $ (305,000)
- ------------------------------------------------------------------------------
Energy - (1.2)%
Dynegy, Inc. (5,000) $ (313,750)
- ------------------------------------------------------------------------------
Entertainment - (1.1)%
Entercom Communications Corp.* (2,500) $ (127,500)
Fox Entertainment Group, Inc.* (5,000) (149,688)
-----------
$ (277,188)
- ------------------------------------------------------------------------------
Financial Institutions - (1.1)%
CIT Group, Inc., "A" (2,200) $ (42,900)
National Discount Brokers Group (5,000) (246,875)
-----------
$ (289,775)
- ------------------------------------------------------------------------------
Food and Beverage Products - (0.3)%
Whitman Corp. (5,000) $ (69,688)
- ------------------------------------------------------------------------------
Insurance - (0.8)%
Progressive Corp. (2,800) $ (212,975)
- ------------------------------------------------------------------------------
Internet - (5.8)%
Amazon.com, Inc.* (1,700) $ (113,900)
Priceline.com, Inc.* (3,700) (296,000)
Retek, Inc.# (9,790) (403,226)
USinternetworking, Inc.* (17,700) (685,875)
-----------
$(1,499,001)
- ------------------------------------------------------------------------------
Machinery - (0.3)%
York International Corp. (3,000) $ (70,125)
- ------------------------------------------------------------------------------
Medical and Health Products - (0.6)%
Mallinckrodt, Inc. (5,000) $ (143,750)
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - (1.3)%
Integrated Health Services, Inc.* (5,000) $ (1,300)
Ventana Medical Systems, Inc.* (7,800) (336,862)
-----------
$ (338,162)
- ------------------------------------------------------------------------------
Pharmaceuticals - (0.8)%
Kos Pharmaceuticals, Inc.* (14,700) $ (209,475)
- ------------------------------------------------------------------------------
Telecommunications - (2.5)%
Elcom International, Inc.* (12,000) $ (179,187)
Extended Systems, Inc.* (3,000) (330,000)
Globalstar Telecommunications Ltd.* (9,300) (129,037)
-----------
$ (638,224)
- ------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received,
$7,271,399) $(6,403,307)
Other Assets, Less Liabilities - (7.1)% (1,837,905)
- ------------------------------------------------------------------------------
Net Assets - 100.0% $25,849,667
- ------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral
requirements. At the period end, the value of securities pledged
amounted to $24,981,833.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------------------------
VERTEX VERTEX
ALL CAP CONTRARIAN
MARCH 31, 2000 FUND FUND
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $13,538,349 and
$33,069,653, respectively) $ 14,238,056 $ 34,090,879
Cash 3,863 --
Foreign currency, at value (identified cost, $185 and $9,
respectively) 188 9
Deposits with brokers for securities sold short -- 8,648,147
Receivable for investments sold 7,718,640 11,398,219
Receivable for Fund shares sold 14,125 1,260
Dividends and interest receivable 1,652 4,497
Other assets 146 --
------------ ------------
Total assets $ 21,976,670 $ 54,143,011
------------ ------------
Liabilities:
Payable to custodian $ -- $ 11,452,837
Payable for dividends on securities sold short -- 4,748
Securities sold short, at value (proceeds received, $0
and $7,271,399, respectively) -- 6,403,307
Payable for investments purchased 6,195,892 10,362,015
Payable for Fund shares reacquired 36,758 12,500
Payable to affiliate -
Management fee 40,551 56,468
Reimbursement fee 864 1,469
------------ ------------
Total liabilities $ 6,274,065 $ 28,293,344
------------ ------------
Net Assets $ 15,702,605 $ 25,849,667
============ ============
Net assets consist of:
Paid-in capital $ 8,806,436 $ 14,859,499
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 699,769 1,888,777
Accumulated undistributed net realized gain on
investments and foreign currency transactions 6,327,996 9,287,300
Accumulated net investment loss (131,596) (185,909)
------------ ------------
Net assets $ 15,702,605 $ 25,849,667
============ ============
Shares of beneficial interest outstanding 406,350 470,520
======= =======
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $38.64 $54.94
====== ======
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
- ----------------------------------------------------------------------------------------------
VERTEX VERTEX
ALL CAP CONTRARIAN
SIX MONTHS ENDED MARCH 31, 2000 FUND FUND
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss):
Income -
Interest $ 7,465 $ 2,726
Dividends 4,954 10,702
Foreign taxes withheld (284) (484)
------------ ------------
Total investment income $ 12,135 $ 12,944
------------ ------------
Expenses -
Management fee $ 142,764 $ 179,822
Trustees' compensation 2,395 2,395
Shareholder servicing agent fee 5,159 6,883
Distribution and service fee (Class A) 18,107 23,929
Administrative fee 611 848
Custodian fee 5,132 9,450
Interest expense 69,379 155,840
Printing 4,657 5,249
Postage 1,564 1,749
Auditing fees 9,167 10,800
Legal fees 264 2,736
Registration fees -- 1,612
Dividend expense on securities sold short -- 4,748
Miscellaneous 3,705 1,960
------------ ------------
Total expenses $ 262,904 $ 408,021
Fees paid indirectly (953) --
Reduction of expenses by investment adviser and
distributor (118,220) (209,168)
------------ ------------
Net expenses $ 143,731 $ 198,853
------------ ------------
Net investment loss $ (131,596) $ (185,909)
------------ ------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 6,197,909 $ 10,400,563
Securities sold short 168,745 (313,152)
Foreign currency transactions 399 (3,469)
------------ ------------
Net realized gain on investments and foreign currency
transactions $ 6,367,053 $ 10,083,942
------------ ------------
Change in unrealized appreciation (depreciation) -
Investments $ (216,972) $ 433,739
Securities sold short (1,504) 849,632
Translation of assets and liabilities in foreign
currencies 61 (541)
------------ ------------
Net unrealized gain (loss) on investments and foreign
currency translation $ (218,415) $ 1,282,830
------------ ------------
Net realized and unrealized gain on investments and
foreign currency $ 6,148,638 $ 11,366,772
------------ ------------
Increase in net assets from operations $ 6,017,042 $ 11,180,863
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
VERTEX ALL CAP FUND (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (131,596) $ (36,600)
Net realized gain on investments and foreign currency
transactions 6,367,053 1,188,345
Net unrealized gain (loss) on investments and foreign
currency translation (218,415) 882,630
------------ ------------
Increase in net assets from operations $ 6,017,042 $ 2,034,375
------------ ------------
Distributions declared to shareholders from net realized
gain on investments and foreign currency transactions $ (1,044,021) $ (106,531)
------------ ------------
Net increase in net assets from Fund share transactions $ 5,781,806 $ 1,988,747
------------ ------------
Total increase in net assets $ 10,754,827 $ 3,916,591
Net assets:
At beginning of period 4,947,778 1,031,187
------------ ------------
At end of period (including accumulated net investment
loss of $131,596 and $0, respectively) $ 15,702,605 $ 4,947,778
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets - continued
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
VERTEX CONTRARIAN FUND (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (185,909) $ (47,045)
Net realized gain on investments and foreign currency
transactions 10,083,942 975,918
Net unrealized gain on investments and foreign currency
translation 1,282,830 644,656
------------ ------------
Increase in net assets from operations $ 11,180,863 $ 1,573,529
------------ ------------
Distributions declared to shareholders -
From net investment income $ -- $ (1,392)
From net realized gain on investments and foreign
currency transactions (1,723,702) (15,613)
------------ ------------
Total distributions declared to shareholders $ (1,723,702) $ (17,005)
------------ ------------
Net increase in net assets from Fund share transactions $ 12,129,167 $ 2,317,329
------------ ------------
Total increase in net assets $ 21,586,328 $ 3,873,853
Net assets:
At beginning of period 4,263,339 389,486
------------ ------------
At end of period (including accumulated net investment
loss of $185,909 and $0, respectively) $ 25,849,667 $ 4,263,339
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Cash Flows (Unaudited)
- -----------------------------------------------------------------------------------------------------------
VERTEX VERTEX
ALL CAP CONTRARIAN
SIX MONTHS ENDED MARCH 31, 2000 FUND FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in cash:
Cash flows from operating activities -
Net increase in net assets from operations $ 6,017,042 $ 11,180,863
Adjustments to reconcile net increase in net assets from operation
to net cash provided by (used in) operating activities:
Purchase of investment securities (157,658,046) (229,710,380)
Accretion of discount (6,675) --
Proceeds from disposition of investment securities 155,535,486 218,850,820
Increase (decrease) in deposits with brokers for securities sold short 279,142 (7,887,970)
Increase in dividends and interest receivable (1,205) (3,626)
Increase in receivable for securities sold (7,486,980) (10,300,709)
Increase in receivable for Fund shares sold (14,125) (1,260)
Decrease in other receivables 9,063 12,149
Increase in payable for securities purchased 5,526,497 9,164,023
Increase (decrease) in payable for Fund shares reacquired 36,758 (7,866)
Decrease in payable for dividends on securities sold short (962) (3,944)
Increase in accrued expenses and other liabilities 41,154 57,700
Unrealized appreciation (depreciation) from
investments and securities sold short 218,476 (1,283,371)
Net realized gain from investments and securities sold short (6,366,654) (10,087,411)
------------- -------------
Net cash used in operating activities $ (3,871,029) $ (20,020,982)
------------- -------------
Cash flows from financing activities -
Increase (decrease) in loan payable $ (863,024) $ 9,610,354
Proceeds from Fund shares sold 7,264,956 11,419,539
Payment on Fund shares redeemed (2,526,002) (1,012,892)
Cash payment of distributions from net realized gain on
investments and foreign currency transactions (1,169) (1,182)
------------- -------------
Net cash provided by financing activities $ 3,874,761 $ 20,015,819
Net decrease in cash $ 3,732 $ (5,163)
------------- -------------
Cash and foreign currency:
Beginning balance $ 319 $ 5,172
Ending balance $ 4,051 $ 9
============= =============
Non-cash financing activities not included herein consist of the reinvestment of distributions of $1,042,852 and
$1,722,520, respectively for the Vertex All Cap and Vertex Contrarian Funds.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
VERTEX ALL CAP FUND (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 21.50 $ 10.10 $ 10.00
---------- ---------- ----------
Income from investment operations# -
Net investment loss(S) $ (0.42) $ (0.21) $ (0.07)
Net realized and unrealized gain on investments and
foreign currency 21.91 12.30 0.17
---------- ---------- ----------
Total from investment operations $ 21.49 $ 12.09 $ 0.10
---------- ---------- ----------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $ (4.35) $ (0.69) $ --
---------- ---------- ----------
Net asset value - end of period $ 38.64 $ 21.50 $ 10.10
========== ========== ==========
Total return 107.75%++ 125.33% 1.00%++
Ratios (to average net assets)/Supplemental data(S):
Expenses##(+) 2.81%+ 2.08% 2.39%+
Net investment loss (2.56)%+ (1.26)% (1.43)%+
Portfolio turnover 1,112% 1,249% 446%
Net assets at end of period (000 Omitted) $ 15,703 $ 4,948 $ 1,031
(S) Subject to reimbursement by the Fund, the investment adviser has voluntarily agreed, under a temporary expense reimbursement
agreement to pay all of the Fund's operating expenses, exclusive of management and distribution and service fees, in excess of
2.00%. In consideration, the Fund pays the investment adviser a fee not greater than 2.00% of average daily net assets. Prior
to March 1, 2000, the investment adviser voluntarily waived its fee. In addition, the distributor voluntarily waived its fee
for the periods indicated. To the extent actual expenses were over/ under this limitation and the waivers had not been in
place, the net investment loss per share and the ratios would have been:
Net investment loss $ (0.80) $ (0.56) $ (0.36)
Ratios (to average net assets):
Expenses## 5.11%+ 4.26% 8.62%+
Net investment loss (4.86)%+ (3.44)% (7.66)%+
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Excluding dividend expense on securities sold short, the ratio of expenses to average net assets was 2.81%, 2.00%, and 2.00%
for the six months ended March 31, 2000, the year ended September 30, 1999, and the period ended September 30, 1998,
respectively.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
VERTEX CONTRARIAN FUND (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 23.44 $ 9.58 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations# -
Net investment income (loss)(S) $ (0.02) $ (0.37) $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency 39.86 14.45 (0.46)
---------- ---------- ----------
Total from investment operations $ 39.84 $ 14.08 $ (0.42)
---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ -- $ (0.02) --
From net realized gain on investments and
foreign currency transactions (8.34) (0.20) --
---------- ---------- ----------
Total distributions declared to shareholders $ (8.34) $ (0.22) --
---------- ---------- ----------
Net asset value - end of period $ 54.94 $ 23.44 $ 9.58
========== ========== ==========
Total return 179.88%++ 155.74% (4.20)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses##(+) 2.90%+ 2.41% 2.03%+
Net investment income (loss) (2.70)%+ (1.97)% 0.91%+
Portfolio turnover 1,042% 1,553% 243%
Net assets at end of period (000 Omitted) $ 25,850 $ 4,263 $ 389
(S) Subject to reimbursement by the Fund, the investment adviser has voluntarily agreed, under a temporary expense reimbursement
agreement to pay all of the Fund's operating expenses, exclusive of management and distribution and service fees, in excess of
2.00%. In consideration, the Fund pays the investment adviser a fee not greater than 2.00% of average daily net assets. Prior
to March 1, 2000, the investment adviser voluntarily waived its fee. In addition, the distributor voluntarily waived its fee
for the periods indicated. To the extent actual expenses were over this limitation and the waivers had not been in place, the
net investment loss per share and the ratios would have been:
Net investment loss $ (0.05) $ (0.92) $ (0.64)
Ratios (to average net assets):
Expenses## 6.02%+ 5.36% 15.69%+
Net investment loss (5.82)%+ (4.92)% (12.78)%+
* For the period from the commencement of the Fund's investment operations, May 1, 1998, through September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Excluding dividend expense on securities sold short, the ratio of expenses to average net assets was 2.87%, 2.02%, and 2.03%
for the six months ended March 31, 2000, the year ended September 30, 1999, and the period ended September 30, 1998,
respectively.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
Vertex All Cap Fund and Vertex Contrarian Fund (each Fund) are nondiversified
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. Each 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.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Short Sales - Each Fund may enter into short sales. A short sale transaction
involves selling a security which the Fund does not own with the intent of
purchasing it later at a lower price. The Fund will realize a gain if the
security price decreases and a loss if the security price increases between the
date of the short sale and the date on which the Fund must replace the borrowed
security. Losses can exceed the proceeds from short sales and can be greater
than losses from the actual purchase of a security. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of the
premium, dividends, or interest the Fund may be required to pay in connection
with a short sale. Whenever the Fund engages in short sales, its custodian
segregates cash or marketable securities in an amount that, when combined with
the amount of proceeds from the short sale deposited with the broker, at least
equals the current market value of the security sold short.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the security
on such date.
Fees Paid Indirectly - Each Fund's custody fee is 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 Statements of
Operations.
Tax Matters and Distributions - Each Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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. Each Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - Each Fund has an investment advisory agreement with Vertex
Investment Management, Inc. (Vertex), a wholly owned subsidiary of Massachusetts
Financial Services Company (MFS), to provide overall investment advisory and
administrative services, and general office facilities. The management fee is
computed daily and paid monthly at an annual rate of 2.00% of each Fund's
average daily net assets. Each Fund also pays Vertex, at the end of each month,
the fee of 2.00% (prorated for the month based upon the number of days in the
month) of such Fund's average daily net assets (computed over the course of that
month), adjusted upward or downward by 0.20% of such Fund's average daily net
assets (computed over the course of the Performance Period, defined below) for
each full percentage point that the Fund's performance during the prior 12
months (the "Performance Period") exceeds or lags the performance of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The
maximum adjustment (up or down) for each Fund's fiscal year shall not exceed
2.00%, so that the minimum and maximum management fee paid by each Fund during
any fiscal year will be 0.00% and 4.00%, respectively. The S&P 500 Index is a
broad-based, popular, unmanaged index commonly used to measure common stock
total return performance. It is comprised of 500 widely held common stocks
listed on the NYSE, AMEX, and OTC Market. Prior to March 1, 2000, the investment
adviser had voluntarily agreed to waive its fee, which is shown as a reduction
of expenses on the Statements of Operations.
Each Fund has a temporary expense reimbursement agreement whereby Vertex has
voluntarily agreed to pay all of the Fund's operating expenses, exclusive of
management, distribution, and service fees. Each Fund in turn will pay Vertex an
expense reimbursement fee not greater than 2.00% of average daily net assets. To
the extent that the expense reimbursement fee exceeds the Fund's actual
expenses, the excess will be applied to amounts paid by Vertex in prior years.
At March 31, 2000, the aggregate unreimbursed expenses were as follows:
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
---------------------------------------------------
$10,281 $106,776
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from Vertex. Certain officers and
Trustees of the Trust are officers or directors of Vertex, MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator - Each Fund has an administrative services agreement with MFS to
provide each Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund incurs 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, did not
receive any sales charges on sales on Class A shares of each Fund for the six
months ended March 31, 2000.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that each Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of each Fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each Fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. There
were no contingent deferred sales charges imposed on Class A shares of each Fund
during the six months ended March 31, 2000.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an 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 were as follows:
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
- ---------------------------------------------------------------------
Purchases
- ---------
Investments $123,766,515 $209,543,356
------------ ------------
Sales
- -----
Investments $123,372,122 $192,056,968
------------ ------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each Fund, as computed on a federal income tax basis, are
as follows:
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
- ------------------------------------------------------------------------------
Aggregate cost $ 13,538,349 $ 33,069,653
------------ ------------
Gross unrealized appreciation $ 838,883 $ 3,031,322
Gross unrealized depreciation (139,176) (2,010,096)
------------ ------------
Net unrealized appreciation $ 699,707 $ 1,021,226
============ ============
(5) Shares of Beneficial Interest
Each Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED MARCH 31, 2000
------------------------------------------------------------
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 207,751 $ 7,264,956 263,839 $ 11,419,539
Shares issued to shareholders in
reinvestment of distributions 36,759 1,042,852 47,478 1,722,520
Shares reacquired (68,278) (2,526,002) (22,669) (1,012,892)
------------ ------------ ------------ ------------
Net increase 176,232 $ 5,781,806 288,648 $ 12,129,167
============ ============ ============ ============
<CAPTION>
Class A Shares
YEAR ENDED SEPTEMBER 30, 1999
------------------------------------------------------------
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 182,815 $ 2,787,764 163,296 $ 2,741,669
Shares issued to shareholders in
reinvestment of distributions 9,053 106,915 1,324 17,005
Shares reacquired (63,819) (905,932) (23,405) (441,345)
------------ ------------ ------------ ------------
Net increase 128,049 $ 1,988,747 141,215 $ 2,317,329
============ ============ ============ ============
</TABLE>
(6) Line of Credit
Each Fund participates in a $35 million committed secured line of credit,
provided by State Street Bank and Trust Company under a line of credit
agreement. Each Fund may borrow up to 50% of its net assets to invest in
portfolio securities or for liquidity or defensive purposes. Each loan is
secured by assets of that Fund. Interest is charged to each Fund, based on its
borrowings, at a rate equal to the Overnight Federal Funds Rate plus 0.50%. In
addition, a commitment fee of 0.09% per annum is charged based on the daily
unused portion of the committed line of credit and allocated among the
participating funds at the end of each quarter. The maximum amounts outstanding
during the six months ended March 31, 2000, and the amounts outstanding at the
period end were as follows:
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
- ------------------------------------------------------------------------------
Maximum loan outstanding $ 8,142,446 $ 11,917,609
Average loan outstanding 2,258,927 4,977,355
Loan outstanding at March 31, 2000 -- 11,452,837
Interest expense and weighted average interest rate incurred on the borrowings
for the six months ended March 31, 2000, were as follows:
VERTEX ALL CAP FUND VERTEX CONTRARIAN FUND
- ------------------------------------------------------------------------------
Interest expense $ 69,379 $ 155,840
Weighted average interest rate 6.0190% 6.1593%
Interest rate at March 31, 2000 -- 6.8125%
<PAGE>
VERTEX(SM) ALL CAP FUND
VERTEX(SM) CONTRARIAN FUND
Vertex Investment Management, Inc.
500 Boylston Street
Boston, MA 02116-3741
(C)2000 Vertex Investment Management, Inc.
Vertex investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116. VER-3-XI 5/00 1M
