<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) UNION STANDARD(R)
EQUITY FUND
SEMIANNUAL REPORT o MARCH 31, 2000
-----------------------------------------
MUTUAL FUND GIFT KITS (see page 27)
-----------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 22
Trustees and Officers ..................................................... 29
MFS(R) ORIGINAL RESEARCH(SM)
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,
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 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)
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 MFS 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
For the six months ended March 31, 2000, Class A shares of the Fund provided a
total return of -4.70%, Class B shares -5.08%, Class C shares -5.01%, and
Class I shares -4.54%. These returns assume the reinvestment of any
distributions but exclude the effects of any sales charges and compare to a
17.50% 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, for the same period. The
Fund's returns also compare to a 9.84% return for the average large-cap value
fund tracked by Lipper Inc., an independent firm that reports mutual fund
performance.
Q. CAN YOU TELL US ABOUT THE RECENT CHANGES TO THE PORTFOLIO?
A. On March 1, we became co-managers of the Fund, replacing Mitchell Dynan.
Since that time, we have significantly restructured the portfolio in an
effort to improve relative returns. Over the past few years the technology
sector has become the largest in the S&P 500, and we believe it will
continue to be an important factor in the U.S. economy's future productivity
gains. Technology firms have relatively little union representation,
however, and they are largely absent from the Union Conscious List. In order
to help balance the portfolio against this widening sector deficit, we
decided to more fully utilize the Fund's existing 35% investment capability
outside the Union Conscious List. The Fund's largest holdings now include
names such as Cisco, Intel, Time Warner, AT&T, and Oracle, all of which we
believe can help provide favorable long-term growth and relative stability
given their industry leadership positions and their strong potential
earnings growth. As part of the portfolio restructuring, we also have
implemented a quantitative process to monitor risk and to enhance the
contribution of MFS Original Research(R) to the Fund's stock selection.
Q. IT WAS A DIFFICULT PERIOD FOR FUND PERFORMANCE. WHAT PRIMARY FACTORS
CAUSED THE FUND TO LAG THE S&P 500 AND THE LIPPER AVERAGE?
A. During most of the period, investors continued to pour money into technology
stocks, which helped drive the strong performance of the S&P 500. As a
result, the Fund's significant underweighting in technology and
telecommunications stocks compared to its benchmark and its Lipper peer
group was the primary detractor from relative performance. Although we've
recently used more of the Fund's latitude to purchase additional technology
shares, during most of the period we avoided these names.
Q. WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
A. CMS Energy was a significant detractor but has been since sold out of the
portfolio. The company cut its earnings outlook and announced a corporate
restructuring. Another detractor was Xerox, which posted poor earnings in
each of the last two quarters and its stock suffered corresponding price
declines. Among consumer goods holdings, Dial Corp. reported poor revenues,
and its stock price depreciated significantly. The Fund's positions in
pharmaceutical companies such as Bristol-Myers Squibb, Johnson & Johnson,
and Schering Plough were also poor performers. Despite some company-
specific problems within the industry, this industry has attracted more
recent interest as investors look beyond technology for earnings growth.
Q. WHAT WORKED WELL FOR THE FUND DURING THE PAST SIX MONTHS?
A. Our largest position, multi-industry company General Electric, appreciated
over 30% during the period and had the greatest positive impact on the
portfolio. The best absolute performer held by the Fund was Corning Inc., a
technology-related stock that experienced much better-than-expected demand
for its fiber-optic products. Although we sold our positions in Marsh &
McLennan and Hartford Financial Services and we are now underweighted in
financial services, these names along with Citigroup contributed to
performance despite the negative impact of higher interest rates. The Fund's
positions in American Home Products and Time Warner, both merger-related
issues, also helped performance.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. The Fund remains committed to companies and industries that have strong
union representation. By focusing on the highest-quality companies with
dependable earnings growth across a wide range of industries, we believe the
portfolio is well positioned for long-term growth. We believe that the
recent market gyrations reflect a necessary adjustment of relative value
within the U.S. equity market, and that this period is best weathered by the
Fund's more balanced posture.
/s/ James M. Perkins /s/ Lisa B. Nurme
James M. Perkins Lisa B. Nurme
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.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
- --------------------------------------------------------------------------------
JAMES M. PERKINS IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND A
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND. HE 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 ON
MARCH 1, 2000. HE IS A GRADUATE OF DARTMOUTH COLLEGE.
LISA B. NURME IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND DIRECTOR OF CONSERVATIVE PORTFOLIO MANAGEMENT. SHE IS PORTFOLIO
MANAGER OF MFS(R) EQUITY INCOME FUND AND THE EQUITY INCOME SERIES
OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. SHE IS ALSO A
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND, MFS(R) TOTAL
RETURN FUND, MFS(R) TOTAL RETURN SERIES (PART OF MFS(R) VARIABLE
INSURANCE TRUST(SM)), AND THE TOTAL RETURN SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS. SHE JOINED MFS IN 1987 AS A RESEARCH
ANALYST. SHE WAS NAMED INVESTMENT OFFICER IN 1990, ASSISTANT VICE
PRESIDENT IN 1991, VICE PRESIDENT IN 1992, PORTFOLIO MANAGER IN 1995,
SENIOR VICE PRESIDENT IN 1998, AND DIRECTOR OF CONSERVATIVE PORTFOLIO
MANAGEMENT IN 1999. MS. NURME IS A GRADUATE OF THE UNIVERSITY OF NORTH
CAROLINA, WHERE SHE WAS ELECTED TO PHI BETA KAPPA.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYST. 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 other 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>
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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: $73.7 MILLION NET ASSETS AS OF MARCH 31, 2000
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH MARCH 31, 2000
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years Life*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge -4.70% - 8.24% +36.95% +113.56% +118.37%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- - 8.24% +11.05% + 16.39% + 13.41%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Including Sales Charge -- -13.52% + 8.88% + 15.02% + 12.33%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years Life*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge -5.08% - 8.84% +34.96% +110.45% +115.19%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- - 8.84% +10.51% + 16.05% + 13.14%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Including Sales Charge -- -11.98% + 9.69% + 15.82% + 13.14%
- ------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, January 14, 1994, through
March 31, 2000.
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years Life*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge -5.01% - 8.78% +35.19% +110.81% +115.56%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- - 8.78% +10.57% + 16.09% + 13.17%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Including Sales Charge -- - 9.56% +10.57% + 16.09% + 13.17%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years Life*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge -4.54% - 7.90% +38.49% +115.96% +120.83%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- - 7.90% +11.47% + 16.65% + 13.61%
- ------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, January 14, 1994, through
March 31, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
The Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to shares redeemed within 12 months. Class I shares have
no sales charge and are only available to certain institutional investors.
Class A, B, and C share performance include the performance of the Fund's Class
I shares for periods prior to their inception (blended performance). Class A
blended performance has been adjusted to take into account the initial sales
charge applicable to Class A shares. Class B and C blended performance has been
adjusted to take into account the CDSC applicable to Class B and C shares. These
blended performance figures have not been adjusted to take into account the
differences in class-specific operating expenses. Because operating expenses for
Class A, B, and C shares are higher than those of Class I shares, the blended
Class A, B, and C share performance is higher than it would have been had Class
A, B, and C shares been offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume 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.
PORTFOLIO CONCENTRATION AS OF MARCH 31, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 29.3%
UTILITIES & COMMUNICATIONS 14.1%
INDUSTRIAL GOODS & SERVICES 10.3%
HEALTH CARE 8.7%
CONSUMER STAPLES 7.2%
TOP 10 STOCK HOLDINGS
GENERAL ELECTRIC CO. 6.1% BRISTOL-MYERS SQUIBB CO. 2.8%
Diversified manufacturing and financial Pharmaceutical products company
services conglomerate
TIME WARNER, INC. 2.5%
MICROSOFT CORP. 4.3% Publishing and entertainment
Computer software and systems company company
AT&T CORP. 2.0%
CISCO SYSTEMS, INC. 4.2% Telecommunications and services
Computer network developer company
ORACLE CORP. 1.9%
INTEL CORP. 3.7% Database software developer and
Semiconductor manufacturer manufacturer
ANHEUSER-BUSCH COS., INC. 1.8%
EXXON MOBIL CORP. 3.2% International beverage company
International oil and gas company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- March 31, 2000
<CAPTION>
Stocks - 97.6%
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ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 96.8%
Aerospace - 2.2%
General Dynamics Corp. 14,780 $ 735,305
United Technologies Corp. 14,300 903,581
-----------
$ 1,638,886
- --------------------------------------------------------------------------------------------------------
Airlines - 0.4%
UAL Corp. 5,200 $ 311,350
- --------------------------------------------------------------------------------------------------------
Automotive - 0.6%
Harley-Davidson, Inc. 5,700 $ 452,438
- --------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.5%
Firstar Corp. 15,900 $ 364,706
- --------------------------------------------------------------------------------------------------------
Business Machines - 3.9%
Hewlett-Packard Co. 4,800 $ 636,300
International Business Machines Corp. 8,600 1,014,800
Sun Microsystems, Inc.* 9,500 890,180
Xerox Corp. 12,600 327,600
-----------
$ 2,868,880
- --------------------------------------------------------------------------------------------------------
Business Services - 2.6%
DST Systems, Inc.* 8,300 $ 538,981
First Data Corp. 20,400 902,700
United Parcel Service, Inc. 7,930 499,590
-----------
$ 1,941,271
- --------------------------------------------------------------------------------------------------------
Chemicals - 0.8%
Rohm & Haas Co. 12,800 $ 571,200
- --------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 1.0%
Dell Computer Corp.* 13,900 $ 749,731
- --------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 5.5%
America Online, Inc.* 14,000 $ 941,500
Microsoft Corp.* 29,000 3,081,250
-----------
$ 4,022,750
- --------------------------------------------------------------------------------------------------------
Computer Software - Services - 1.7%
EMC Corp.* 5,900 $ 737,500
Yahoo, Inc.* 2,900 496,988
-----------
$ 1,234,488
- --------------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.2%
Computer Associates International, Inc. 3,600 $ 213,075
Oracle Corp.* 17,700 1,381,706
-----------
$ 1,594,781
- --------------------------------------------------------------------------------------------------------
Conglomerates - 1.8%
Tyco International Ltd. 26,340 $ 1,313,708
- --------------------------------------------------------------------------------------------------------
Construction Services - 0.6%
Martin Marietta Materials, Inc. 10,079 $ 478,753
- --------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.1%
Clorox Co. 21,140 $ 687,050
Colgate-Palmolive Co. 13,860 781,357
Dial Corp. 27,100 372,625
Kimberly-Clark Corp. 8,000 448,000
-----------
$ 2,289,032
- --------------------------------------------------------------------------------------------------------
Electrical Equipment - 6.8%
Emerson Electric Co. 11,200 $ 592,200
General Electric Co. 28,440 4,413,532
-----------
$ 5,005,732
- --------------------------------------------------------------------------------------------------------
Electronics - 5.0%
Analog Devices, Inc.* 4,400 $ 354,475
Intel Corp. 20,200 2,665,137
LSI Logic Corp.* 4,200 305,025
Micron Technology, Inc.* 3,000 378,000
-----------
$ 3,702,637
- --------------------------------------------------------------------------------------------------------
Energy - 0.5%
Dynegy, Inc. 5,400 $ 338,850
- --------------------------------------------------------------------------------------------------------
Entertainment - 3.7%
CBS Corp.* 16,200 $ 917,325
Time Warner, Inc. 17,900 1,790,000
-----------
$ 2,707,325
- --------------------------------------------------------------------------------------------------------
Financial Institutions - 2.3%
Citigroup, Inc. 16,700 $ 990,519
Morgan Stanley Dean Witter & Co. 4,800 391,500
Schwab (Charles) Corp. 5,400 306,787
-----------
$ 1,688,806
- --------------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.9%
Anheuser-Busch Cos., Inc. 21,300 $ 1,325,925
Hershey Foods Corp. 6,300 307,125
Keebler Foods Co. 16,500 473,344
Quaker Oats Co. 13,300 806,312
-----------
$ 2,912,706
- --------------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.4%
Bowater, Inc. 7,700 $ 410,988
Weyerhaeuser Co. 11,000 627,000
-----------
$ 1,037,988
- --------------------------------------------------------------------------------------------------------
Machinery - 1.0%
Deere & Co., Inc. 9,200 $ 349,600
Ingersoll Rand Co. 9,700 429,225
-----------
$ 778,825
- --------------------------------------------------------------------------------------------------------
Medical and Health Products - 8.1%
American Home Products Corp. 17,120 $ 918,060
Bristol-Myers Squibb Co. 34,780 2,008,545
Johnson & Johnson Co. 15,760 1,104,185
Merck & Co., Inc. 18,700 1,161,737
Schering Plough Corp. 21,400 786,450
-----------
$ 5,978,977
- --------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.4%
PE Corp. 2,800 $ 270,200
- --------------------------------------------------------------------------------------------------------
Metals and Minerals - 1.0%
Alcoa, Inc. 10,200 $ 716,550
- --------------------------------------------------------------------------------------------------------
Oils - 6.2%
Chevron Corp. 13,160 $ 1,216,478
Conoco, Inc. 39,200 1,004,500
Exxon Mobil Corp. 29,861 2,323,559
-----------
$ 4,544,537
- --------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.6%
New York Times Co. 9,800 $ 420,788
- --------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.4%
Cendant Corp.* 16,900 $ 312,650
- --------------------------------------------------------------------------------------------------------
Special Products and Services - 0.4%
SPX Corp.* 2,600 $ 296,238
- --------------------------------------------------------------------------------------------------------
Stores - 2.5%
Costco Wholesale Corp.* 15,600 $ 819,975
CVS Corp. 19,300 724,956
TJX Cos., Inc. 12,500 277,344
-----------
$ 1,822,275
- --------------------------------------------------------------------------------------------------------
Supermarkets - 1.9%
Kroger Co.* 38,080 $ 668,780
Safeway, Inc.* 15,720 711,330
-----------
$ 1,380,110
- --------------------------------------------------------------------------------------------------------
Telecommunications - 18.0%
Alltel Corp. 9,300 $ 586,481
AT&T Corp. 25,900 1,456,875
Bell Atlantic Corp. 21,100 1,289,738
Cisco Systems, Inc.* 39,400 3,046,112
Corning, Inc. 4,800 931,200
General Motors Corp., "H"* 3,300 410,850
GTE Corp. 11,100 788,100
Lucent Technologies, Inc. 12,600 765,450
Motorola, Inc. 3,500 498,313
Nortel Networks Corp. 7,700 970,200
QUALCOMM, Inc.* 4,800 716,700
SBC Communications, Inc. 22,308 936,936
Sprint Corp. 13,940 878,220
-----------
$13,275,175
- --------------------------------------------------------------------------------------------------------
Transportation - 0.6%
Union Pacific Corp. 11,800 $ 461,675
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 3.7%
AES Corp.* 5,700 $ 448,875
NiSource, Inc. 46,500 784,688
Pinnacle West Capital Corp. 23,330 657,614
Texas Utilities Co. 28,600 849,062
-----------
$ 2,740,239
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.4%
Columbia Energy Group 5,300 $ 314,025
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.1%
BellSouth Corp. 16,700 $ 784,900
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $71,323,182
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 0.8%
Canada - 0.8%
Seagrams Ltd. (Conglomerates) 9,700 $ 577,150
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $62,507,254) $71,900,332
- --------------------------------------------------------------------------------------------------------
Short-Term Obligation - 3.1%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 4/03/00,
at Amortized Cost $ 2,255 $ 2,254,242
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $64,761,496) $74,154,574
Other Assets, Less Liabilities - (0.7)% (500,217)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $73,654,357
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
MARCH 31, 2000
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $64,761,496) $74,154,574
Cash 4,955
Receivable for Fund shares sold 39,867
Dividends and interest receivable 74,221
Other assets 507
-----------
Total assets $74,274,124
-----------
Liabilities:
Payable for Fund shares reacquired $ 617,851
Payable to affiliates -
Management fee 1,310
Reimbursement fee 403
Distribution and service fee 203
-----------
Total liabilities $ 619,767
-----------
Net assets $73,654,357
===========
Net assets consist of:
Paid-in capital $64,911,947
Unrealized appreciation on investments 9,393,078
Accumulated net realized loss on investments (1,079,600)
Accumulated undistributed net investment income 428,932
-----------
Total $73,654,357
===========
Shares of beneficial interest outstanding 5,489,446
=========
Class A shares:
Net asset value per share
(net assets of $11,119,873 / 833,591 shares of
beneficial interest outstanding) $13.34
======
Offering price per share (100 / 94.25 of net asset value
per share) $14.15
======
Class B shares:
Net asset value and offering price per share
(net assets of $2,510,753 / 189,026 shares of beneficial
interest outstanding) $13.28
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,085,539 / 82,052 shares of beneficial
interest outstanding) $13.23
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $58,938,192 / 4,384,777 shares of
beneficial interest outstanding) $13.44
======
On sales of $50,000 or more, the offering price of Class A is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2000
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 653,920
Interest 187,154
-----------
Total investment income $ 841,074
-----------
Expenses -
Management fee $ 279,234
Trustees' compensation 2,700
Shareholder servicing agent fee 42,959
Distribution and service fee (Class A) 22,642
Distribution and service fee (Class B) 15,717
Distribution and service fee (Class C) 8,381
Administrative fee 4,609
Custodian fee 15,310
Printing 22,223
Postage 4,814
Auditing fees 2,000
Legal fees 2,635
Miscellaneous 22,793
-----------
Total expenses $ 446,017
Reduction of expenses by investment adviser (30,214)
Fees paid indirectly (3,912)
-----------
Net expenses $ 411,891
-----------
Net investment income $ 429,183
-----------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on investment
transactions $ (972,841)
Change in unrealized depreciation on investments (2,817,147)
-----------
Net realized and unrealized loss on investments $(3,789,988)
-----------
Decrease in net assets from operations $(3,360,805)
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 429,183 $ 861,667
Net realized gain (loss) on investments (972,841) 12,658,549
Net unrealized loss on investments (2,817,147) (8,556,998)
------------ ------------
Increase (decrease) in net assets from operations $ (3,360,805) $ 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 (Class A) (1,872,010) (996,694)
From net realized gain on investments (Class B) (466,947) (238,729)
From net realized gain on investments (Class C) (333,356) (101,449)
From net realized gain on investments (Class I) (9,120,052) (6,183,480)
------------ ------------
Total distributions declared to shareholders $(12,464,326) $ (8,309,623)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $(14,789,942) $ 16,821,625
------------ ------------
Total increase (decrease) in net assets $(30,615,073) $ 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 $428,932 and $671,710, respectively) $ 73,654,357 $104,269,430
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, PERIOD ENDED
SIX MONTHS ENDED ----------------------------- SEPTEMBER 30,
MARCH 31, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
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) $ 0.06 $ 0.10 $ 0.10 $ 0.03
Net realized and unrealized gain (loss) on
investments (0.68) 0.88 1.92 0.24
------ ------ ------ ------
Total from investment operations $(0.62) $ 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 (2.28) (1.38) (1.39) --
------ ------ ------ ------
Total distributions declared to shareholders $(2.37) $(1.50) $(1.57) $ --
------ ------ ------ ------
Net asset value - end of period $13.34 $16.33 $16.85 $16.40
====== ====== ====== ======
Total return(+) (4.70)%++ 5.56% 13.31% 1.67%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.21%+ 1.21% 1.21% 1.21%+
Net investment income 0.76%+ 0.56% 0.57% 0.86%+
Portfolio turnover 48% 58% 43% 49%
Net assets at end of period (000 omitted) $11,120 $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## 1.28%+ 1.30% 1.32% 1.34%+
Net investment income 0.69%+ 0.47% 0.45% 0.72%+
* For the period from the inception of Class A, August 7, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, PERIOD ENDED
SIX MONTHS ENDED ----------------------------- SEPTEMBER 30,
MARCH 31, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
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 income (loss)(S) $ 0.01 $(0.02) $(0.01) $(0.01)
Net realized and unrealized gain (loss) on
investments (0.68) 0.88 1.94 0.20
------ ------ ------ ------
Total from investment operations $(0.67) $ 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 (2.28) (1.38) (1.39) --
------ ------ ------ ------
Total distributions declared to shareholders $(2.28) $(1.44) $(1.55) $ --
------ ------ ------ ------
Net asset value - end of period $13.28 $16.23 $16.81 $16.43
====== ====== ====== ======
Total return (5.08)%++ 4.86% 12.65% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86%+ 1.86% 1.86% 1.86%+
Net investment income (loss) 0.12%+ (0.10)% (0.05)% (0.37)%+
Portfolio turnover 48% 58% 43% 49%
Net assets at end of period (000 omitted) $2,511 $3,448 $2,405 $17
(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 loss per share and the ratios would have been:
Net investment loss $ -- $(0.04) $(0.03) $(0.01)
Ratios (to average net assets):
Expenses## 1.93%+ 1.95% 1.97% 1.99%+
Net investment income (loss) 0.05%+ (0.19)% (0.17)% (0.52)%+
* For the period from the inception of Class B, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, PERIOD ENDED
SIX MONTHS ENDED ----------------------------- SEPTEMBER 30,
MARCH 31, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
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) $ 0.01 $(0.02) $(0.02) $ 0.01
Net realized and unrealized gain (loss) on
investments (0.67) 0.88 1.95 0.18
------ ------ ------ ------
Total from investment operations $(0.66) $ 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 (2.28) (1.38) (1.39) --
------ ------ ------ ------
Total distributions declared to shareholders $(2.32) $(1.45) $(1.56) $ --
------ ------ ------ ------
Net asset value - end of period $13.23 $16.21 $16.80 $16.43
====== ====== ====== ======
Total return (5.01)%++ 4.92% 12.70% 1.17%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.86%+ 1.86% 1.86% 1.86%+
Net investment income (loss) 0.10%+ (0.10)% (0.10)% 0.63%+
Portfolio turnover 48% 58% 43% 49%
Net assets at end of period (000 omitted) $1,085 $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 (loss) per share and the ratios would have been:
Net investment income (loss) $ -- $(0.04) $(0.04) $ 0.01
Ratios (to average net assets):
Expenses## 1.93%+ 1.95% 1.97% 1.99%+
Net investment income (loss) 0.03%+ (0.19)% (0.22)% 0.49%+
* For the period from the inception of Class C, August 11, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ---------------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 9.64
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.08 $ 0.16 $ 0.16 $ 0.17 $ 0.18 $ 0.17
Net realized and unrealized gain
(loss) on investments (0.68) 0.88 1.94 4.01 2.25 2.14
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.60) $ 1.04 $ 2.10 $ 4.18 $ 2.43 $ 2.31
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.15) $(0.18) $(0.19) $(0.15) $(0.10)
From net realized gain on
investments (2.28) (1.38) (1.39) (1.41) (0.28) --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(2.43) $(1.53) $(1.57) $(1.60) $(0.43) $(0.10)
------ ------ ------ ------ ------ ------
Net asset value - end of period $13.44 $16.47 $16.96 $16.43 $13.85 $11.85
====== ====== ====== ====== ====== ======
Total return (4.54)%++ 5.97% 13.74% 32.51% 20.96% 24.21%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.86%+ 0.86% 0.86% 0.98% 1.01% 1.03%
Net investment income 1.10%+ 0.90% 0.95% 1.12% 1.36% 1.58%
Portfolio turnover 48% 58% 43% 49% 81% 125%
Net assets at end of period (000
omitted) $58,938 $85,880 $76,408 $68,527 $49,318 $35,842
(S) Effective February 1, 1997, 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 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 $ 0.07 $ 0.14 $ 0.14 $ 0.15 $ 0.18 $ 0.16
Ratios (to average net assets):
Expenses## 0.93%+ 0.95% 0.97% 1.11% 1.03% 1.12%
Net investment income 1.03%+ 0.81% 0.83% 0.98% 1.33% 1.49%
+ 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>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a diversified series of MFS
Series Trust XI. The Trust 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 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 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. The
dividend and interest income earned on the securities loaned is accounted for
in the same manner as other dividend and interest income. At March 31, 2000,
there were no securities on loan.
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 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years
after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of the Fund's average daily net assets. The Fund has a temporary expense
reimbursement agreement whereby MFS has voluntarily agreed to pay all of the
Fund's operating expenses, exclusive of management, distribution, and service
fees. The Fund in turn will pay MFS an expense reimbursement fee not greater
than 0.20% of average daily net assets. To the extent that the expense
reimbursement fee exceeds the Fund's actual expenses, the excess will be
applied to amounts paid by MFS in prior years. At March 31, 2000, the
aggregate unreimbursed expenses paid by MFS amounted to $105,359.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of who receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator - The Fund has an administrative service agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0015%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,594 for the six months ended March 31, 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 $739 for the six months ended March 31,
2000. Fees incurred under the distribution plan during the six months March 31,
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 $5 and $3 for Class B and Class C shares, respectively, for the six
months ended March 31, 2000. Fees incurred under the distribution plan during
the six months ended March 31, 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 sale charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended March
31, 2000, were $0, $1,491, and $241 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 and
short-term obligations, aggregated $38,425,327 and $56,096,627 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 $64,761,496
-----------
Gross unrealized appreciation $12,617,349
Gross unrealized depreciation (3,224,271)
-----------
Net unrealized appreciation $ 9,393,078
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 325,224 $ 4,539,396 597,540 $10,381,908
Shares issued to shareholders in
reinvestment of distributions 109,842 1,560,851 26,061 440,486
Shares reacquired (419,915) (5,704,896) (452,782) (7,955,967)
---------- ------------- -------- -----------
Net increase 15,151 $ 395,351 170,819 $ 2,866,427
========== ============= ======== ===========
<CAPTION>
Class B Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 31,302 $ 456,633 123,213 $ 2,145,359
Shares issued to shareholders in
reinvestment of distributions 31,735 449,995 11,183 188,553
Shares reacquired (86,400) (1,216,904) (65,035) (1,159,729)
---------- ------------- -------- -----------
Net increase (decrease) (23,363) $ (310,276) 69,361 $ 1,174,183
========== ============= ======== ===========
<CAPTION>
Class C Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 98,068 $ 1,525,749 37,193 $ 649,762
Shares issued to shareholders in
reinvestment of distributions 21,344 301,374 5,515 92,586
Shares reacquired (134,863) (1,860,183) (8,704) (150,360)
---------- ------------- -------- -----------
Net increase (decrease) (15,451) $ (33,060) 34,004 $ 591,988
========== ============= ======== ===========
<CAPTION>
Class I Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 29,594 $ 417,164 363,605 $ 6,341,173
Shares issued to shareholders in
reinvestment of distributions 679,226 9,712,930 404,208 6,859,447
Shares reacquired (1,539,863) (24,972,051) (57,668) (1,011,593)
---------- ------------- -------- -----------
Net increase (decrease) (831,043) $ (14,841,957) 710,145 $12,189,027
========== ============= ======== ===========
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended March 31, 2000, was $421. The Fund had no borrowings
during the period.
<PAGE>
<TABLE>
MFS(R) UNION STANDARD(R) EQUITY FUND
<S> <C>
TRUSTEES INVESTOR INFORMATION
Jeffrey L. Shames* For information on MFS mutual funds, call your
Chairman and Chief Executive Officer investment professional or, for an information
MFS Investment Management kit, call toll free: 1-800-637-2929 any
business day from 9 a.m. to 5 p.m. Eastern time
Nelson J. Darling, Jr. (or leave a message anytime).
Professional Trustee
INVESTOR SERVICE
William R. Gutow MFS Service Center, Inc.
Private Investor, P.O. Box 2281
Vice Chairman, Capitol Entertainment Boston, MA 02107-9906
Management Company; Real Estate Consultant
For general information, call toll free:
INVESTMENT ADVISER 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business day
DISTRIBUTOR from 9 a.m. to 5 p.m. Eastern time. (To use
MFS Fund Distributors, Inc. this service, your phone must be equipped with
500 Boylston Street a Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges,
CHAIRMAN AND PRESIDENT or stock and bond outlooks, call toll free:
Jeffrey L. Shames* 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
PORTFOLIO MANAGERS
Lisa B. Nurme* WORLD WIDE WEB
James M. Perkins* www.mfs.com
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) UNION STANDARD(R) EQUITY FUND ------------
BULK RATE
[Logo] M F S(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
We invented the mutual fund(R) MFS
------------
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-3 5/00 7.3M 84/284/384/884
