UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7992
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MFS SERIES TRUST XI
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
James F. DesMarais
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: September 30
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Date of reporting period: March 31, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) MID CAP VALUE FUND 3/31/05
SEMIANNUAL REPORT
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M F S(SM)
INVESTMENT MANAGEMENT(R)
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION TO SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 8
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EXPENSE TABLE 13
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PORTFOLIO OF INVESTMENTS 15
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FINANCIAL STATEMENTS 21
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NOTES TO FINANCIAL STATEMENTS 45
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RESULTS OF SHAREHOLDER MEETING 59
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PROXY VOTING POLICIES AND INFORMATION 60
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QUARTERLY PORTFOLIO DISCLOSURE 60
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
Last summer and fall, I wrote to you about enhancements that MFS(R) was making
to its investment process. Our goal, as always, was to deliver strong
performance across all asset classes. I am now happy to report to you that 2004
was a very successful year for MFS, relative to our peers in the mutual fund
industry. While there will always be room for improvement, we believe the
enhancements we have made to our investment process resulted in significantly
improved performance across the MFS Family of Funds(R).
You may remember some of the enhancements I outlined last year. They included
o increasing collaboration and information sharing among our investment
personnel across asset classes, through an Investment Management Committee
with members from our Domestic Equity, International Equity, Fixed Income,
and Quantitative Research teams
o increasing the number of analysts supporting our portfolio managers and
doubling the average investment experience of our domestic equity analyst
staff
o making additional use of our most-seasoned portfolio managers to mentor
research analysts
o combining more quantitative, top-down risk control and security analysis
with our traditional bottom-up research process
o opening a research office in Mexico City to complement our existing staff
in Boston, London, Singapore, and Tokyo
The effect of these enhancements, I believe, is evident in the recent
performance of our funds. For the 12 months ended March 31, 2005, 68% of MFS
domestic equity funds, 88% of MFS international equity funds, and 90% of MFS
fixed-income funds delivered results in the top half of their Lipper peer
groups.
Our longer-term performance also benefited from our ongoing commitment to the
MFS Original Research(R) process: 69% of MFS funds were in the top half of
their respective Lipper categories over the 3-, 5-, and 10-year periods ended
March 31, 2005.
Of course, I cannot offer any guarantees that our performance will repeat
itself. Still, I am confident that the recent enhancements to our investment
process will continue to benefit shareholders in 2005 and beyond.
What I can tell you with certainty is that the way you manage your investments
will determine how well you take advantage of the performance that financial
markets deliver. Historically, individual investors have tended to underperform
the markets. For example, a 2003 study by DALBAR, Inc. showed that over the
nearly two decades from 1984 through 2002, the average U.S. stock investor
earned a 2.6% average annual return at a time when U.S. stocks, as measured by
the Standard & Poor's 500 Stock Index, delivered a 12.2% average annual
return.(1)
This huge discrepancy, in our view, occurred because nonprofessional investors
generally did not adhere to the basic principles followed by most professional
investors: allocate among asset classes, diversify within each asset class, and
rebalance one's portfolio on a routine schedule. I elaborated on this "ADR"
theme in fund reports over the last few months of 2004. For more information on
how to apply a Disciplined Diversification(SM) strategy to your portfolio using
the principles of ADR, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Web site, MFS.COM.
As always, we appreciate your confidence in MFS, and you can be sure of our
continued commitment to do the best we can to help you pursue your long-term
financial goals.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
May 16, 2005
It is not possible to invest directly in an index.
Lipper rankings and performance are based on historical average annual returns
of Class A shares, and do not include any sales charges. Past performance is
no guarantee of future results.
Asset allocation and diversification cannot guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
(1) Source: DALBAR July 2003 update to its Quantitative Analysis of Investment
Behavior; DALBAR, Inc., is a financial-services market research firm
headquartered in Boston, MA.
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PORTFOLIO COMPOSITION
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PORTFOLIO STRUCTURE
Stocks 98.2%
Cash & Other Net Assets 1.8%
TOP TEN HOLDINGS
Smurfit-Stone Container Corp. 2.3%
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Owens-Illinois, Inc. 2.1%
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Bowater, Inc. 1.9%
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Devon Energy Corp. 1.8%
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Media General, Inc., "A" 1.6%
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GlobalSantaFe Corp. 1.6%
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Ameritrade Holding Corp. 1.5%
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Sovereign Bancorp, Inc. 1.5%
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Zions Bancorporation 1.4%
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North Fork Bancorporation, Inc. 1.4%
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SECTOR WEIGHTINGS
Financial Services 23.2%
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Leisure 11.3
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Energy 10.3
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Basic Materials 10.2
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Technology 8.7
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Health Care 7.9
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Retailing 7.6
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Utilities & Communications 7.4
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Industrial Goods & Services 4.4
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Autos & Housing 3.1
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Special Products & Services 2.3
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Consumer Staples 0.9
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Transportation 0.9
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Percentages are based on net assets as of 3/31/05.
The portfolio is actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the six months ended March 31, 2005, Class A shares of the MFS Mid Cap
Value Fund provided a total return of 10.71%, at net asset value. In
comparison, the fund's benchmark, the Russell Midcap Value Index, returned
14.34%. The fund's investment objective is capital appreciation. The fund
invests, under normal market conditions, at least 80% of its net assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of companies with
medium market capitalizations that MFS believes are undervalued in the market
relative to their long-term potential.
MARKET ENVIRONMENT
Stocks experienced considerable volatility during the six months ended March
31, 2005. Investors endured skyrocketing oil prices, a volatile and retreating
U.S. dollar, record U.S. budget and trade deficits, and war in Iraq.
Fundamental economic factors, however, such as corporate spending and earnings,
continued to improve around the globe. Over the course of the period, investors
seemed to conclude that the global economic recovery, although modest, was
still intact. In the end, fundamental economic factors triumphed and most
equity markets delivered positive results for the period as a whole.
DETRACTORS FROM PERFORMANCE
Stock selection and, to a lesser extent, our overweighted position in the
technology sector was the largest detractor to performance relative to the
fund's benchmark the Russell Midcap Value Index. Our position in Solectron (not
an index constituent) dampened results as that stock's value decreased
measurably. Also, our avoidance of index constituent Apple Computer hurt
performance as that stock more than doubled in value over the period.
Stock selection in the retailing and leisure sectors also detracted from
results. Our returns in both sectors lagged that of the overall index. Our
holding of apparel maker Kellwood Co. (not an index constituent) held back
results as that stock proved disappointing over the period. Although leisure
was a top detracting sector, no individual leisure stocks were among the fund's
top detractors over the period.
Other detractors consisted of financial services firms Ameritrade Holding,
Friedman, Billings, Ramsey Group and Countrywide Financial. Elsewhere, our
decision not to hold the utilities company TXU Corp., and energy firm Valero
Energy (both of which are held in the index) hurt results as those stocks
increased in value significantly during the period. Other stocks that detracted
from relative results included our overweighted positions in special products
and services firm SIRVA, Inc., and basic materials firm Smurfit-Stone
Container.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the autos and housing sector boosted results relative to the
fund's benchmark. Within the sector, our decision to avoid vehicle electronics
firm Delphi (an index constituent) aided results.
Underweighting the financial services industry also aided results. Positions
within the sector that contributed to performance included our holdings in Legg
Mason, and avoiding poor-performing AON Corp.
Industrial goods and services was a top contributing sector, however, no
individual stocks within the sector were among the fund's top contributors over
the period.
Stocks in other sectors that aided relative results included our overweighted
positions in basic materials firm Owens-Illinois and energy firms Devon Energy,
GlobalSantaFe, and Range Resources. Other positive stories included health care
concern Community Health Systems, telecommunications firm Andrew Corp.* and
consumer staples company Smithfield Foods.*
Respectfully,
/s/ Constantinos G. Mokas
Constantinos G. Mokas
Portfolio Manager
* Security was not held in the portfolio at period-end.
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
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PERFORMANCE SUMMARY THROUGH 3/31/05
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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. Performance results reflect the percentage change
in net asset value, including the reinvestment of any dividends and capital
gains distributions. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR I SHARES CALL 1-888-808-6374.) MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
HIGH SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE.
THE PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TOTAL RETURNS
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Average annual
without sales charge
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Class
Share class inception date 6-mo 1-yr 3-yr Life*
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A 8/31/01 10.71% 11.82% 9.11% 11.01%
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B 11/01/01 10.42% 11.20% 8.44% 10.41%
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C 11/01/01 10.33% 11.10% 8.44% 10.40%
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I 11/01/01 10.85% 12.21% 9.50% 11.40%
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R** 12/31/02 10.57% 11.76% 9.05% 10.96%
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R3** 10/31/03 10.46% 11.40% 8.88% 10.81%
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529A 7/31/02 10.54% 11.57% 8.84% 10.78%
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529B 7/31/02 10.15% 10.84% 8.20% 10.23%
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529C 7/31/02 10.21% 10.90% 8.28% 10.30%
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Average annual
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Comparative benchmarks 6-mo 1-yr 3-yr Life*
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Average mid-cap value fund+ 11.68% 12.84% 10.25% 11.69%
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Russell Midcap Value Index# 14.34% 18.34% 12.96% 13.54%
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Average annual
with sales charge
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Share class
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A 4.35% 5.39% 6.98% 9.19%
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B 6.42% 7.20% 7.58% 9.75%
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C 9.33% 10.10% 8.44% 10.40%
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529A 4.19% 5.15% 6.71% 8.96%
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529B 6.15% 6.84% 7.34% 9.58%
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529C 9.21% 9.90% 8.28% 10.30%
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I, R and R3 Class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
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Cumulative without
sales charge
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A 10.71% 11.82% 29.91% 45.42%
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B 10.42% 11.20% 27.51% 42.58%
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C 10.33% 11.10% 27.50% 42.58%
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I 10.85% 12.21% 31.28% 47.23%
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R** 10.57% 11.76% 29.68% 45.16%
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R3** 10.46% 11.40% 29.06% 44.47%
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529A 10.54% 11.57% 28.92% 44.30%
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529B 10.15% 10.84% 26.67% 41.79%
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529C 10.21% 10.90% 26.94% 42.09%
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* For the period from the commencement of the fund's investment operations,
August 31, 2001, through March 31, 2005. Index information is from
September 1, 2001.
** Effective April 1, 2005, Class R1 shares have been renamed "Class R
shares", and Class R2 shares have been renamed "Class R3 shares."
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
Periods less than one year are actual, not annualized.
INDEX DEFINITION
Russell Midcap Value Index - is constructed to provide a comprehensive
barometer for the value securities in the mid-cap segment of the U.S. equity
universe. Companies in this index generally have lower price-to-book ratios and
lower forecasted growth values.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
R1, R2, R4 and R5 shares were available for sale on April 1, 2005. Therefore,
no performance information is available.
Class A and 529A results including sales charge reflect the deduction of the
maximum 5.75% sales charge. Class B and 529B results including sales charge
reflect the deduction of the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C and 529C results
including sales charge (assuming redemption within one year from the end of the
prior month of purchase) reflect the deduction of the 1% CDSC. Class R shares
have no initial sales charge or CDSC and are available only to existing
shareholders. Class I and Class R3 shares have no initial sales charge or CDSC.
Class I shares are available only to certain investors, and Class R3 shares are
available only to certain retirement plans. Class 529 shares are only available
in conjunction with qualified tuition programs, such as the MFS 529 Savings
Plan. There also is an additional annual fee, which is detailed in the program
description, on qualified tuition programs. If this fee was reflected, the
performance for Class 529 shares would have been lower. This annual fee is
waived for Oregon residents and for those accounts with assets of $25,000 or
more.
Performance for share classes offered after Class A shares includes the
performance of the fund's Class A shares for periods prior to their offering.
This blended class performance has been adjusted to take into account
differences in sales loads, if any, applicable to these share classes, but has
not been adjusted to take into account differences in class specific operating
expenses (such as Rule 12b-1 fees). Compared to performance these share classes
would have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the share class to which it is blended, and
lower performance for share classes with lower operating expenses than the
share class to which it is blended.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio is subject to market risk, which is the risk that the price of a
security held by the fund may decline due to changing economic, political or
market conditions, or disappointing earnings results.
The fund may invest in securities that are undervalued based on its belief that
the market value of these securities will rise due to anticipated events and
investor perceptions. If these events do not occur or are delayed, or if
investor perceptions about the securities do not improve, the market price of
these securities may not rise as expected or may fall.
Prices of value company securities held by the fund may decline due to changing
economic, political or market conditions, or due to the financial condition of
the company which issued the security. If anticipated events do not occur or
are delayed, or if investor perceptions about the securities do not improve,
the market price of value company securities may not rise as expected or may
fall. Investments in medium-capitalization companies can be riskier and more
volatile than investments in companies with larger market capitalizations.
Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC-listed
companies may have limited product lines, markets or financial resources. Many
OTC stocks trade less frequently and in smaller volume than exchange-listed
stocks. The values of these stocks may be more volatile than exchange-listed
stocks, and the fund may experience difficulty in buying and selling these
stocks at prevailing market prices.
The fund has engaged and may engage in active and frequent trading to achieve
its principal investment strategies. This may result in the realization and
distribution to shareholders of higher capital gains, as compared to a fund
with less active trading policies, which would increase your tax liability
unless you hold your shares through a tax deferred or exempt vehicle (such as
an IRA). Frequent trading also increases transaction costs, which could detract
from the fund's performance.
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
The fund may participate in the initial public offering (IPO) market, and a
significant portion of the fund's returns may be attributable to its investment
in IPO's, which may have a magnified investment performance impact during the
periods when the fund has a small asset base. Like any past performance, there
is no assurance that, as the fund's assets grow, it will continue to experience
substantially similar performance by investment in IPOs.
Please see the prospectus for further information regarding these and other
risk considerations.
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EXPENSE TABLE
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FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM
OCTOBER 1, 2004, THROUGH MARCH 31, 2005.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period October 1, 2004 through March 31,
2005.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- --------------
Share Class
- --------------
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Expenses
Paid During
Annualized Beginning Ending Period**
Expense Account Value Account Value 10/01/04-
Ratio 10/01/04 3/31/05 3/31/05
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Actual 1.36% $1,000 $1,107 $7.14
A -----------------------------------------------------------------------
Hypothetical* 1.36% $1,000 $1,018 $6.84
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Actual 2.01% $1,000 $1,104 $10.54
B ------------------------------------------------------------------------
Hypothetical* 2.01% $1,000 $1,015 $10.10
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Actual 2.01% $1,000 $1,103 $10.54
C -----------------------------------------------------------------------
Hypothetical* 2.01% $1,000 $1,015 $10.10
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Actual 1.01% $1,000 $1,109 $5.31
I -----------------------------------------------------------------------
Hypothetical* 1.01% $1,000 $1,020 $5.09
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Actual 1.55% $1,000 $1,106 $8.14
R1 -----------------------------------------------------------------------
Hypothetical* 1.55% $1,000 $1,017 $7.79
- -------------------------------------------------------------------------------
Actual 1.79% $1,000 $1,105 $9.39
R2 -----------------------------------------------------------------------
Hypothetical* 1.79% $1,000 $1,016 $9.00
- -------------------------------------------------------------------------------
Actual 1.61% $1,000 $1,105 $8.45
529A -----------------------------------------------------------------------
Hypothetical* 1.61% $1,000 $1,017 $8.10
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Actual 2.26% $1,000 $1,102 $11.84
529B -----------------------------------------------------------------------
Hypothetical* 2.26% $1,000 $1,014 $11.35
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Actual 2.27% $1,000 $1,102 $11.90
529C -----------------------------------------------------------------------
Hypothetical* 2.27% $1,000 $1,014 $11.40
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* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the
most recent six month period, as shown above, multiplied by the average
account value over the period, multiplied by the number of days in the
period, divided by the number of days in the year. Expenses paid do not
include any applicable sales charges (loads) or redemption fees. If these
transaction costs had been included, your costs would have been higher.
*** Effective April 1, 2005, Class R1 shares have been renamed "Class R
shares", and Class R2 shares have been renamed "Class R3 shares." The new
Class R1 and Class R2 shares and Class R4 and R5 shares, which were
established on March 31, 2005 and were available for sale to the public on
April 1, 2005, had no operating activity.
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PORTFOLIO OF INVESTMENTS (unaudited) - 3/31/05
- ----------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 98.2%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------
Aerospace - 1.0%
- ----------------------------------------------------------------------------------------------
Alliant Techsystems, Inc.* 83,000 $5,930,350
- ----------------------------------------------------------------------------------------------
Apparel Manufacturers - 2.2%
- ----------------------------------------------------------------------------------------------
Kellwood Co. 100,000 $2,879,000
- ----------------------------------------------------------------------------------------------
Polo Ralph Lauren Corp., "A" 136,000 5,276,800
- ----------------------------------------------------------------------------------------------
Reebok International Ltd. 109,000 4,828,700
- ----------------------------------------------------------------------------------------------
$12,984,500
- ----------------------------------------------------------------------------------------------
Banks & Credit Companies - 11.9%
- ----------------------------------------------------------------------------------------------
Assured Guaranty Ltd. 200,000 $3,590,000
- ----------------------------------------------------------------------------------------------
Countrywide Financial Corp. 200,000 6,492,000
- ----------------------------------------------------------------------------------------------
First Horizon National Corp. 200,000 8,158,000
- ----------------------------------------------------------------------------------------------
Mercantile Bankshares Corp. 125,600 6,388,016
- ----------------------------------------------------------------------------------------------
NewAlliance Bancshares, Inc. 300,000 4,200,000
- ----------------------------------------------------------------------------------------------
North Fork Bancorporation, Inc. 300,000 8,322,000
- ----------------------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 150,000 7,722,000
- ----------------------------------------------------------------------------------------------
Signature Bank* 59,260 1,570,983
- ----------------------------------------------------------------------------------------------
Sovereign Bancorp, Inc. 400,000 8,864,000
- ----------------------------------------------------------------------------------------------
TCF Financial Corp. 250,000 6,787,500
- ----------------------------------------------------------------------------------------------
Zions Bancorporation 125,000 8,627,500
- ----------------------------------------------------------------------------------------------
$70,721,999
- ----------------------------------------------------------------------------------------------
Biotechnology - 1.5%
- ----------------------------------------------------------------------------------------------
MedImmune, Inc.* 240,000 $5,714,400
- ----------------------------------------------------------------------------------------------
Neurocrine Biosciences, Inc.* 90,000 3,425,400
- ----------------------------------------------------------------------------------------------
$9,139,800
- ----------------------------------------------------------------------------------------------
Broadcast & Cable TV - 5.9%
- ----------------------------------------------------------------------------------------------
ADVO, Inc. 109,000 $4,082,050
- ----------------------------------------------------------------------------------------------
Citadel Broadcasting Corp.* 400,000 5,492,000
- ----------------------------------------------------------------------------------------------
Dex Media, Inc. 250,000 5,162,500
- ----------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc.* 600,000 7,368,000
- ----------------------------------------------------------------------------------------------
Radio One, Inc., "D"* 500,000 7,375,000
- ----------------------------------------------------------------------------------------------
Univision Communications, Inc., "A"* 210,000 5,814,900
- ----------------------------------------------------------------------------------------------
$35,294,450
- ----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 4.9%
- ----------------------------------------------------------------------------------------------
Ameritrade Holding Corp.* 900,000 $9,189,000
- ----------------------------------------------------------------------------------------------
Federated Investors, Inc., "B" 150,000 4,246,500
- ----------------------------------------------------------------------------------------------
Friedman, Billings, Ramsey Group, Inc., "A" 400,000 6,348,000
- ----------------------------------------------------------------------------------------------
Legg Mason, Inc. 50,000 3,907,000
- ----------------------------------------------------------------------------------------------
Mellon Financial Corp. 200,000 5,708,000
- ----------------------------------------------------------------------------------------------
$29,398,500
- ----------------------------------------------------------------------------------------------
Business Services - 2.3%
- ----------------------------------------------------------------------------------------------
Ceridian Corp.* 300,000 $5,115,000
- ----------------------------------------------------------------------------------------------
Fiserv, Inc.* 150,000 5,970,000
- ----------------------------------------------------------------------------------------------
SIRVA, Inc.* 400,000 2,844,000
- ----------------------------------------------------------------------------------------------
$13,929,000
- ----------------------------------------------------------------------------------------------
Chemicals - 1.9%
- ----------------------------------------------------------------------------------------------
Nalco Holding Co.* 273,600 $5,151,888
- ----------------------------------------------------------------------------------------------
PPG Industries, Inc. 90,000 6,436,800
- ----------------------------------------------------------------------------------------------
$11,588,688
- ----------------------------------------------------------------------------------------------
Computer Software - 3.6%
- ----------------------------------------------------------------------------------------------
Check Point Software Technologies Ltd.* 250,000 $5,435,000
- ----------------------------------------------------------------------------------------------
Citrix Systems, Inc.* 190,000 4,525,800
- ----------------------------------------------------------------------------------------------
McAfee, Inc.* 250,000 5,640,000
- ----------------------------------------------------------------------------------------------
TIBCO Software, Inc.* 800,000 5,960,000
- ----------------------------------------------------------------------------------------------
$21,560,800
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 1.0%
- ----------------------------------------------------------------------------------------------
Sun Microsystems, Inc.* 1,500,000 $6,060,000
- ----------------------------------------------------------------------------------------------
Construction - 3.1%
- ----------------------------------------------------------------------------------------------
Eagle Materials, Inc. 70,000 $5,665,800
- ----------------------------------------------------------------------------------------------
Headwaters, Inc.* 200,000 6,564,000
- ----------------------------------------------------------------------------------------------
Pulte Homes, Inc. 87,000 6,405,810
- ----------------------------------------------------------------------------------------------
$18,635,610
- ----------------------------------------------------------------------------------------------
Containers - 4.4%
- ----------------------------------------------------------------------------------------------
Owens-Illinois, Inc.* 500,000 $12,570,000
- ----------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp.* 900,000 13,923,000
- ----------------------------------------------------------------------------------------------
$26,493,000
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 2.9%
- ----------------------------------------------------------------------------------------------
Hubbell, Inc., "B" 100,000 $5,110,000
- ----------------------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., "A" 200,000 6,112,000
- ----------------------------------------------------------------------------------------------
W.W. Grainger, Inc. 100,000 6,227,000
- ----------------------------------------------------------------------------------------------
$17,449,000
- ----------------------------------------------------------------------------------------------
Electronics - 1.6%
- ----------------------------------------------------------------------------------------------
Diebold, Inc. 120,000 $6,582,000
- ----------------------------------------------------------------------------------------------
Silicon Laboratories, Inc.* 100,000 2,971,000
- ----------------------------------------------------------------------------------------------
$9,553,000
- ----------------------------------------------------------------------------------------------
Energy - Independent - 6.2%
- ----------------------------------------------------------------------------------------------
Devon Energy Corp. 225,000 $10,743,750
- ----------------------------------------------------------------------------------------------
EOG Resources, Inc. 150,000 7,311,000
- ----------------------------------------------------------------------------------------------
Newfield Exploration Co.* 90,000 6,683,400
- ----------------------------------------------------------------------------------------------
Noble Energy, Inc. 90,000 6,121,800
- ----------------------------------------------------------------------------------------------
Range Resources Corp. 250,000 5,840,000
- ----------------------------------------------------------------------------------------------
$36,699,950
- ----------------------------------------------------------------------------------------------
Food & Drug Stores - 1.3%
- ----------------------------------------------------------------------------------------------
Kroger Co.* 350,000 $5,610,500
- ----------------------------------------------------------------------------------------------
Rite Aid Corp.* 515,300 2,040,588
- ----------------------------------------------------------------------------------------------
$7,651,088
- ----------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 0.9%
- ----------------------------------------------------------------------------------------------
Dean Foods Co.* 150,000 $5,145,000
- ----------------------------------------------------------------------------------------------
Forest & Paper Products - 1.9%
- ----------------------------------------------------------------------------------------------
Bowater, Inc. 300,000 $11,301,000
- ----------------------------------------------------------------------------------------------
General Merchandise - 1.0%
- ----------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 200,000 $6,072,000
- ----------------------------------------------------------------------------------------------
Health Maintenance Organizations - 1.0%
- ----------------------------------------------------------------------------------------------
CIGNA Corp. 70,000 $6,251,000
- ----------------------------------------------------------------------------------------------
Insurance - 4.5%
- ----------------------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. 60,000 $1,512,600
- ----------------------------------------------------------------------------------------------
Conseco, Inc.* 400,000 8,168,000
- ----------------------------------------------------------------------------------------------
Endurance Specialty Holdings Ltd. 200,000 7,568,000
- ----------------------------------------------------------------------------------------------
Genworth Financial, Inc., "A" 163,100 4,488,512
- ----------------------------------------------------------------------------------------------
Safeco Corp. 100,000 4,871,000
- ----------------------------------------------------------------------------------------------
$26,608,112
- ----------------------------------------------------------------------------------------------
Leisure & Toys - 1.2%
- ----------------------------------------------------------------------------------------------
Hasbro, Inc. 350,000 $7,157,500
- ----------------------------------------------------------------------------------------------
Machinery & Tools - 0.5%
- ----------------------------------------------------------------------------------------------
Roper Industries, Inc. 44,000 $2,882,000
- ----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 3.5%
- ----------------------------------------------------------------------------------------------
Apria Healthcare Group, Inc.* 189,400 $6,079,740
- ----------------------------------------------------------------------------------------------
Community Health Systems, Inc.* 132,000 4,608,120
- ----------------------------------------------------------------------------------------------
Healthsouth Corp.* 800,000 4,280,000
- ----------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 527,600 6,083,228
- ----------------------------------------------------------------------------------------------
$21,051,088
- ----------------------------------------------------------------------------------------------
Medical Equipment - 0.8%
- ----------------------------------------------------------------------------------------------
Inamed Corp.* 65,000 $4,542,200
- ----------------------------------------------------------------------------------------------
Metals & Mining - 0.8%
- ----------------------------------------------------------------------------------------------
Aber Diamond Corp. 150,000 $4,549,287
- ----------------------------------------------------------------------------------------------
Natural Gas - Distribution - 1.5%
- ----------------------------------------------------------------------------------------------
AGL Resources, Inc. 140,000 $4,890,200
- ----------------------------------------------------------------------------------------------
Sempra Energy 100,000 3,984,000
- ----------------------------------------------------------------------------------------------
$8,874,200
- ----------------------------------------------------------------------------------------------
Oil Services - 4.1%
- ----------------------------------------------------------------------------------------------
Cooper Cameron Corp.* 100,000 $5,721,000
- ----------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 250,000 9,260,000
- ----------------------------------------------------------------------------------------------
Noble Corp. 75,000 4,215,750
- ----------------------------------------------------------------------------------------------
Pride International, Inc.* 200,000 4,968,000
- ----------------------------------------------------------------------------------------------
$24,164,750
- ----------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.7%
- ----------------------------------------------------------------------------------------------
Solectron Corp.* 1,200,000 $4,164,000
- ----------------------------------------------------------------------------------------------
Pharmaceuticals - 1.1%
- ----------------------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc.* 300,000 $6,765,000
- ----------------------------------------------------------------------------------------------
Printing & Publishing - 3.0%
- ----------------------------------------------------------------------------------------------
Lamar Advertising Co., "A"* 100,000 $4,029,000
- ----------------------------------------------------------------------------------------------
Media General, Inc., "A" 150,000 9,277,500
- ----------------------------------------------------------------------------------------------
Washington Post Co., "B" 5,000 4,470,000
- ----------------------------------------------------------------------------------------------
$17,776,500
- ----------------------------------------------------------------------------------------------
Real Estate - 1.9%
- ----------------------------------------------------------------------------------------------
Boston Properties, Inc. 50,000 $3,011,500
- ----------------------------------------------------------------------------------------------
Crescent Real Estate Equities Co. 215,100 3,514,734
- ----------------------------------------------------------------------------------------------
HomeBanc Corp. 550,000 4,862,000
- ----------------------------------------------------------------------------------------------
$11,388,234
- ----------------------------------------------------------------------------------------------
Restaurants - 1.2%
- ----------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 150,000 $6,868,500
- ----------------------------------------------------------------------------------------------
Specialty Chemicals - 1.2%
- ----------------------------------------------------------------------------------------------
Lyondell Chemical Co. 250,000 $6,980,000
- ----------------------------------------------------------------------------------------------
Specialty Stores - 3.1%
- ----------------------------------------------------------------------------------------------
OfficeMax, Inc. 218,100 $7,306,350
- ----------------------------------------------------------------------------------------------
Regis Corp. 150,000 6,139,500
- ----------------------------------------------------------------------------------------------
Sports Authority, Inc.* 180,000 4,950,000
- ----------------------------------------------------------------------------------------------
$18,395,850
- ----------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.4%
- ----------------------------------------------------------------------------------------------
PanAmSat Holding Corp. 150,000 $2,550,000
- ----------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.8%
- ----------------------------------------------------------------------------------------------
ADC Telecommunications, Inc.* 3,000,000 $5,970,000
- ----------------------------------------------------------------------------------------------
Avaya, Inc.* 400,000 4,672,000
- ----------------------------------------------------------------------------------------------
$10,642,000
- ----------------------------------------------------------------------------------------------
Telephone Services - 3.1%
- ----------------------------------------------------------------------------------------------
CenturyTel, Inc. 125,000 $4,105,000
- ----------------------------------------------------------------------------------------------
IDT Corp., "B"* 365,000 5,398,350
- ----------------------------------------------------------------------------------------------
MCI, Inc. 250,000 6,230,000
- ----------------------------------------------------------------------------------------------
Syniverse Holdings, Inc.* 200,000 2,760,000
- ----------------------------------------------------------------------------------------------
$18,493,350
- ----------------------------------------------------------------------------------------------
Trucking - 0.9%
- ----------------------------------------------------------------------------------------------
CNF, Inc. 116,200 $5,436,998
- ----------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.4%
- ----------------------------------------------------------------------------------------------
Calpine Corp.* 720,600 $2,017,680
- ----------------------------------------------------------------------------------------------
Cinergy Corp. 98,000 3,970,960
- ----------------------------------------------------------------------------------------------
CMS Energy Corp.* 400,000 5,216,000
- ----------------------------------------------------------------------------------------------
FPL Group, Inc. 84,200 3,380,630
- ----------------------------------------------------------------------------------------------
$14,585,270
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $547,963,252) $585,733,574
- ----------------------------------------------------------------------------------------------
Short-Term Obligation - 0.3%
- ----------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------
Societe Generale Time Deposit, 2.875%, due 4/01/05,
at Amortized Cost $1,684,000 $1,684,000
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $549,647,252) $587,417,574
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.5% 9,072,448
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $596,490,022
- ----------------------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- -------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 3/31/05
ASSETS
Investments, at value (identified cost, $549,647,252) $587,417,574
- --------------------------------------------------------------------------------------------------
Cash 1,176
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 13,154,539
- --------------------------------------------------------------------------------------------------
Receivable for fund shares sold 3,904,558
- --------------------------------------------------------------------------------------------------
Interest and dividends receivable 585,711
- --------------------------------------------------------------------------------------------------
Total assets $605,063,558
- --------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $7,756,533
- --------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 683,079
- --------------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------------
Management fee 12,194
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 27,816
- --------------------------------------------------------------------------------------------------
Distribution and service fee 5,139
- --------------------------------------------------------------------------------------------------
Administrative fee 257
- --------------------------------------------------------------------------------------------------
Program manager fee 9
- --------------------------------------------------------------------------------------------------
Administrative service fee 6
- --------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 88,503
- --------------------------------------------------------------------------------------------------
Total liabilities $8,573,536
- --------------------------------------------------------------------------------------------------
Net assets $596,490,022
- --------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $524,996,441
- --------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 37,770,597
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments
and foreign currency transactions 34,042,714
- --------------------------------------------------------------------------------------------------
Accumulated net investment loss (319,730)
- --------------------------------------------------------------------------------------------------
Net assets $596,490,022
- --------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 44,736,153
- --------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $118,369,513
- --------------------------------------------------------------------------------------------------
Shares outstanding 8,885,088
- --------------------------------------------------------------------------------------------------
Net asset value per share $13.32
- --------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$13.32) $14.13
- --------------------------------------------------------------------------------------------------
Class B shares
Net assets $106,887,570
- --------------------------------------------------------------------------------------------------
Shares outstanding 8,199,984
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.04
- --------------------------------------------------------------------------------------------------
Class C shares
Net assets $35,515,266
- --------------------------------------------------------------------------------------------------
Shares outstanding 2,723,517
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.04
- --------------------------------------------------------------------------------------------------
Class I shares
Net assets $325,444,384
- --------------------------------------------------------------------------------------------------
Shares outstanding 24,152,476
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.47
- --------------------------------------------------------------------------------------------------
Class R shares (formerly Class R1)
Net assets $8,053,681
- --------------------------------------------------------------------------------------------------
Shares outstanding 606,379
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.28
- --------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $50,000
- --------------------------------------------------------------------------------------------------
Shares outstanding 3,837
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.03
- --------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $50,000
- --------------------------------------------------------------------------------------------------
Shares outstanding 3,837
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.03
- --------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R3 shares (formerly Class R2)
Net assets $673,981
- --------------------------------------------------------------------------------------------------
Shares outstanding 51,007
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.21
- --------------------------------------------------------------------------------------------------
Class R4 shares
Net assets $50,000
- --------------------------------------------------------------------------------------------------
Shares outstanding 3,754
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.32
- --------------------------------------------------------------------------------------------------
Class R5 shares
Net assets $50,000
- --------------------------------------------------------------------------------------------------
Shares outstanding 3,754
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $13.32
- --------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $904,133
- --------------------------------------------------------------------------------------------------
Shares outstanding 68,431
- --------------------------------------------------------------------------------------------------
Net asset value per share $13.21
- --------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$13.21) $14.02
- --------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $159,239
- --------------------------------------------------------------------------------------------------
Shares outstanding 12,311
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.93
- --------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $282,255
- --------------------------------------------------------------------------------------------------
Shares outstanding 21,778
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.96
- --------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C,
Class 529B, and Class 529C shares.
Effective April 1, 2005, Class R1 shares have been renamed "Class R shares," and Class R2 shares
have been renamed "Class R3 shares." In addition, on March 31, 2005, the fund established the
following new Class R1 and Class R2 shares and Class R4 and Class R5 shares, which were available
for sale to the public on April 1, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
SIX MONTHS ENDED 3/31/05
NET INVESTMENT LOSS
Income
- --------------------------------------------------------------------------------------------------
Dividends $3,099,306
- --------------------------------------------------------------------------------------------------
Interest 120,766
- --------------------------------------------------------------------------------------------------
Foreign taxes withheld (7,256)
- --------------------------------------------------------------------------------------------------
Total investment income $3,212,816
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $2,000,936
- --------------------------------------------------------------------------------------------------
Trustees' compensation 6,158
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 358,329
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 180,948
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 507,605
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 155,384
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 10,606
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R3) 1,088
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 1,364
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 752
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 1,076
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 974
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 188
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 269
- --------------------------------------------------------------------------------------------------
Administrative service fee (Class R3) 544
- --------------------------------------------------------------------------------------------------
Administrative fee 20,653
- --------------------------------------------------------------------------------------------------
Custodian fee 66,700
- --------------------------------------------------------------------------------------------------
Printing 35,686
- --------------------------------------------------------------------------------------------------
Postage 18,001
- --------------------------------------------------------------------------------------------------
Auditing fees 18,775
- --------------------------------------------------------------------------------------------------
Legal fees 7,232
- --------------------------------------------------------------------------------------------------
Miscellaneous 165,805
- --------------------------------------------------------------------------------------------------
Total expenses $3,559,073
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (29,046)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (1,194)
- --------------------------------------------------------------------------------------------------
Net expenses $3,528,833
- --------------------------------------------------------------------------------------------------
Net investment loss $(316,017)
- --------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- --------------------------------------------------------------------------------------------------
Investment transactions $40,888,933
- --------------------------------------------------------------------------------------------------
Foreign currency transactions 23,078
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $40,912,011
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- --------------------------------------------------------------------------------------------------
Investments $9,408,817
- --------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 275
- --------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $9,409,092
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $50,321,103
- --------------------------------------------------------------------------------------------------
Change in net assets from operations $50,005,086
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
3/31/05 9/30/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment loss $(316,017) $(647,034)
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 40,912,011 46,447,399
- --------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 9,409,092 14,170,885
- -------------------------------------------------------- ------------ ------------
Change in net assets from operations $50,005,086 $59,971,250
- -------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and foreign
currency transactions
- --------------------------------------------------------------------------------------------------
Class A $(8,797,219) $--
- --------------------------------------------------------------------------------------------------
Class B (8,915,181) --
- --------------------------------------------------------------------------------------------------
Class C (2,709,307) --
- --------------------------------------------------------------------------------------------------
Class I (24,365,961) (268,460)
- --------------------------------------------------------------------------------------------------
Class R (230,955) (1,085)
- --------------------------------------------------------------------------------------------------
Class R3 (21,100) (6)
- --------------------------------------------------------------------------------------------------
Class 529A (65,333) --
- --------------------------------------------------------------------------------------------------
Class 529B (13,148) --
- --------------------------------------------------------------------------------------------------
Class 529C (16,670) --
- -------------------------------------------------------- ------------ ------------
Total distributions declared to shareholders $(45,134,874) $(269,551)
- -------------------------------------------------------- ------------ ------------
Change in net assets from fund share transactions $141,931,741 $165,644,917
- -------------------------------------------------------- ------------ ------------
Redemption fees $9 $1,121
- -------------------------------------------------------- ------------ ------------
Total change in net assets $146,801,962 $225,347,737
- -------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $449,688,060 $224,340,323
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated net investment
loss of $319,730 and $3,713, respectively) $596,490,022 $449,688,060
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual
period and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects
financial results for a single fund share. The total returns in the table represent the rate by which an investor would
have earned (or lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ------------------------------------------ ENDED
CLASS A 3/31/05 2004 2003 2002 9/30/01*
(UNAUDITED)
Net asset value, beginning of period $13.13 $10.72 $8.56 $8.74 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $(0.01) $(0.02) $0.01 $0.02 $0.02
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.43 2.43 2.15 (0.20) (1.28)
- ----------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.42 $2.41 $2.16 $(0.18) $(1.26)
- ----------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $-- $-- $-- $(0.00)+++ $--
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions (1.23) -- -- (0.00)+++ --
- ----------------------------------------------- ------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.23) $-- $-- $(0.00)+++ $--
- ----------------------------------------------- ------ ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $-- $--
- ----------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $13.32 $13.13 $10.72 $8.56 $8.74
- ----------------------------------------------- ------ ------ ------ ------ ------
Total return (%)(+)& 10.71++ 22.48 25.23 (2.03) (12.60)++
- ----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ------------------------------------------ ENDED
CLASS A (CONTINUED) 3/31/05 2004 2003 2002 9/30/01*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.36+ 1.34 1.34 1.37 1.00+
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.15)+ (0.17) 0.10 0.22 2.24+
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113 66
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $118,370 $83,631 $47,603 $26,013 $262
- ----------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees and
expenses, such that Other Expenses do not exceed 0.25% annually. To the extent that the expense reimbursement fee
exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the current
agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the fund entered into a similar
expense arrangement without reimbursement. This new arrangement will be in effect until January 31, 2006. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. To the extent actual
expenses were over (under) this limitation, and the reimbursement had not been in place, the net investment loss per
share and the ratios would have been:
Net investment loss $(0.01)^ $(0.02) $(0.01) $(0.02) $(0.88)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.36+^ 1.36 1.50 1.83 120.50+
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.15)+^ (0.19) (0.06) (0.24) (117.26)+
- ----------------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, August 31, 2001, through September 30, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS B 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $12.91 $10.61 $8.53 $9.24^^
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.05) $(0.10) $(0.05) $(0.04)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.41 2.40 2.13 (0.67)
- ----------------------------------------------------- ------ ------ ------ ------
Total from investment operations $1.36 $2.30 $2.08 $(0.71)
- ----------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $-- $-- $(0.00)+++
- ----------------------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- ----------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $13.04 $12.91 $10.61 $8.53
- ----------------------------------------------------- ------ ------ ------ ------
Total return (%)& 10.42++ 21.68 24.38 (7.67)++^^
- ----------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS B (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.01+ 1.99 1.99 2.02+
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (0.80)+ (0.82) (0.54) (0.44)+
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $106,888 $88,348 $65,799 $44,390
- ----------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which
are defined as the fund's operating expenses, exclusive of management, distribution and service, and certain
other fees and expenses, such that Other Expenses do not exceed 0.25% annually. To the extent that the expense
reimbursement fee exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by
MFS under the current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the
fund entered into a similar expense arrangement without reimbursement. This new arrangement will be in effect
until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer
service fees paid to Tarantino LLC. To the extent actual expenses were over (under) this limitation, and the
reimbursement had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.05)^ $(0.10) $(0.07) $(0.09)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.01+^ 2.01 2.14 2.48+
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (0.80)+^ (0.84) (0.69) (0.90)+
- ----------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class B shares, November 1, 2001, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would
be lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.37 and (8.95)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public
shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS C 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $12.92 $10.61 $8.53 $9.24^^
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.05) $(0.10) $(0.05) $(0.04)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.40 2.41 2.13 (0.67)
- ----------------------------------------------------- ------ ------ ------ ------
Total from investment operations $1.35 $2.31 $2.08 $(0.71)
- ----------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $-- $-- $(0.00)+++
- ----------------------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- ----------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $13.04 $12.92 $10.61 $8.53
- ----------------------------------------------------- ------ ------ ------ ------
Total return (%)& 10.33++ 21.77 24.38 (7.67)++^^
- ----------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS C (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.01+ 1.99 1.99 2.02+
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (0.80)+ (0.82) (0.54) (0.46)+
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $35,515 $25,482 $16,369 $11,348
- ----------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which
are defined as the fund's operating expenses, exclusive of management, distribution and service, and certain
other fees and expenses, such that Other Expenses do not exceed 0.25% annually. To the extent that the expense
reimbursement fee exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by
MFS under the current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the
fund entered into a similar expense arrangement without reimbursement. This new arrangement will be in effect
until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer
service fees paid to Tarantino LLC. To the extent actual expenses were over (under) this limitation, and the
reimbursement had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.05)^ $(0.10) $(0.07) $(0.09)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.01+^ 2.01 2.14 2.48+
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (0.80)+^ (0.84) (0.69) (0.92)+
- ----------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class C shares, November 1, 2001, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would
be lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.37 and (8.95)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public
shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ------------------------------- ENDED
CLASS I 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $13.25 $10.80 $8.59 $9.24^^
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.01 $0.02 $0.04 $0.06
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.44 2.45 2.17 (0.71)
- --------------------------------------------------- ------ ------ ------ ------
Total from investment operations $1.45 $2.47 $2.21 $(0.65)
- --------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $-- $-- $-- $(0.00)+++
- --------------------------------------------------- ------ ------ ------ ------
From net realized gain on investments and
foreign currency transactions $(1.23) $(0.02) $-- $(0.00)+++
- --------------------------------------------------- ------ ------ ------ ------
Total distributions declared to shareholders $(1.23) $(0.02) $-- $(0.00)+++
- --------------------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- --------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $13.47 $13.25 $10.80 $8.59
- --------------------------------------------------- ------ ------ ------ ------
Total return (%)& 10.85++ 22.93 25.58 (6.89)++^^
- ----------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ------------------------------- ENDED
CLASS I (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.01+ 0.99 1.00 1.02+
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 0.20+ 0.18 0.43 0.99+
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $325,444 $249,118 $93,944 $4,655
- ----------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which
are defined as the fund's operating expenses, exclusive of management, and certain other fees and expenses, such
that Other Expenses do not exceed 0.25% annually. To the extent that the expense reimbursement fee exceeds the
fund's actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the current
agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the fund entered into a
similar expense arrangement without reimbursement. This new arrangement will be in effect until January 31, 2006.
In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino
LLC. To the extent actual expenses were over (under) this limitation, and the reimbursement had not been in
place, the net investment income per share and the ratios would have been:
Net investment income $0.01^ $0.02 $0.03 $0.03
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.01+^ 1.01 1.16 1.48+
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 0.20+^ 0.16 0.27 0.53+
- ----------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class I shares, November 1, 2001, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would
be lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.37 and (8.18)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public
shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
CLASS R (FORMERLY CLASS R1)** 3/31/05 9/30/04 9/30/03*
(UNAUDITED)
Net asset value, beginning of period $13.11 $10.72 $9.11^^
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.02) $(0.04) $(0.00)+++
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 1.42 2.44 1.61++++
- ------------------------------------------------------ ------ ------ ------
Total from investment operations $1.40 $2.40 $1.61
- ------------------------------------------------------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and foreign
currency transactions $(1.23) $(0.01) $--
- --------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $--
- ------------------------------------------------------ ------ ------ ------
Net asset value, end of period $13.28 $13.11 $10.72
- ------------------------------------------------------ ------ ------ ------
Total return (%)& 10.57++ 22.43 17.67++^^
- --------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
CLASS R (FORMERLY CLASS R1)** (CONTINUED) 3/31/05 9/30/04 9/30/03*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.55+ 1.50 1.49+
- --------------------------------------------------------------------------------------------------------------
Net investment loss (0.26)+ (0.30) (0.06)+
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158
- --------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $8,054 $1,941 $260
- --------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses",
which are defined as the fund's operating expenses, exclusive of management, distribution and service,
and certain other fees and expenses, such that Other Expenses do not exceed 0.25% annually. To the extent
that the expense reimbursement fee exceeds the fund's actual expenses, the excess will be applied to
unreimbursed amounts paid by MFS under the current agreement. This agreement terminated on January 31,
2005. Effective February 1, 2005, the fund entered into a similar expense arrangement without
reimbursement. This new arrangement will be in effect until January 31, 2006. In addition, effective June
7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. To the
extent actual expenses were over (under) this limitation, and the reimbursement had not been in place,
the net investment loss per share and the ratios would have been:
Net investment loss $(0.02)^ $(0.04) $(0.02)
- --------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.55+^ 1.52 1.65+
- --------------------------------------------------------------------------------------------------------------
Net investment loss (0.26)+^ (0.32) (0.22)+
- --------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002, through September 30, 2003.
** Effective April 1, 2005, Class R1 shares have been renamed Class R.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
++++ The per share amount is not in accordance with the net realized and unrealized gain/ loss for the period
because of the timing of sales of fund shares and the amount of per share realized and unrealized gains
and losses at such time.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance
would be lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.16 and 17.03%, respectively, have been
revised to reflect the net asset value from the day prior to the class' inception date. The net asset
value and total return previously reported were from inception date, the date the share class was first
available to public shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED PERIOD ENDED
CLASS R3 (FORMERLY CLASS R2)** 3/31/05 9/30/04*
(UNAUDITED)
Net asset value, beginning of period $13.06 $11.39^^
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.04) $(0.06)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments and foreign currency 1.42 1.74++++
- ------------------------------------------------------------------- ------ ------
Total from investment operations $1.38 $1.68
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $(0.01)
- -----------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $13.21 $13.06
- ------------------------------------------------------------------- ------ ------
Total return (%)& 10.46++ 14.79++^^
- -----------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS
ENDED PERIOD ENDED
CLASS R3 (FORMERLY CLASS R2)** (CONTINUED) 3/31/05 9/30/04*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.79+ 1.76+
- -----------------------------------------------------------------------------------------------------
Net investment loss (0.59)+ (0.62)+
- -----------------------------------------------------------------------------------------------------
Portfolio turnover 65 128
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $674 $212
- -----------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other
Expenses", which are defined as the fund's operating expenses, exclusive of management,
distribution and service, and certain other fees and expenses, such that Other Expenses do not
exceed 0.50% annually. To the extent that the expense reimbursement fee exceeds the fund's
actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the
current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005,
the fund entered into a similar expense arrangement without reimbursement. This new arrangement
will be in effect until January 31, 2006. In addition, effective June 7, 2004, the investment
adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC.
To the extent actual expenses were over (under) this limitation, and the reimbursement had not
been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.04)^ $(0.06)
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.79+^ 1.78+
- -----------------------------------------------------------------------------------------------------
Net investment loss (0.59)+^ (0.64)+
- -----------------------------------------------------------------------------------------------------
* For the period from the inception of Class R3 shares, October 31, 2003, through
September 30, 2004.
** Effective April 1, 2005, Class R2 shares have been renamed Class R3.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
++++ The per share amount is not in accordance with the net realized and unrealized gain/loss for
the period because of the timing of sales of fund shares and the amount of per share realized
and unrealized gains and losses at such time.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which
performance would be lower.
^ The reimbursement impact per share amount and ratios weres less than $0.01 and 0.01%,
respectively.
^^ The net asset value and total return previously reported as $11.43 and 14.39%, respectively,
have been revised to reflect the net asset value from the day prior to the class' inception
date. The net asset value and total return previously reported were from inception date, the
date the share class was first available to public shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529A 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $13.05 $10.68 $8.55 $9.24^^
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income (loss)(S) $(0.03) $(0.05) $(0.02) $0.01
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.42 2.42 2.15 (0.70)
- ------------------------------------------------ ------ ------ ------ ------
Total from investment operations $1.39 $2.37 $2.13 $(0.69)
- ------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- ------------------------------------------------ ------ ------ ------ ------
Net asset value, end of period $13.21 $13.05 $10.68 $8.55
- ------------------------------------------------ ------ ------ ------ ------
Total return (%)(+)& 10.54++ 22.19 24.91 (7.47)++^^
- ------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529A (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.61+ 1.60 1.59 1.62+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.40)+ (0.42) (0.18) 0.50+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $904 $643 $262 $7
- ------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees
and expenses, such that Other Expenses do not exceed 0.50% annually. To the extent that the expense reimbursement
fee exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the
current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the fund entered into
a similar expense arrangement without reimbursement. This new arrangement will be in effect until January 31, 2006.
In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC.
To the extent actual expenses were over (under) this limitation, and the reimbursement had not been in place, the
net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $(0.03)^ $(0.05) $(0.03) $0.00+++
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.61+^ 1.62 1.75 2.08+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.40)+^ (0.44) (0.34) 0.04+
- ------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have
been lower.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be
lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.25 and (7.57)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529B 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $12.84 $10.58 $8.52 $9.22
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment loss(S) $(0.07) $(0.13) $(0.08) $(0.00)+++
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) gain on
investments and foreign currency 1.39 2.39 2.14 (0.70)
- ------------------------------------------------ ------ ------ ------ ------
Total from investment operations $1.32 $2.26 $2.06 $(0.70)
- ------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- ------------------------------------------------ ------ ------ ------ ------
Net asset value, end of period $12.93 $12.84 $10.58 $8.52
- ------------------------------------------------ ------ ------ ------ ------
Total return (%)& 10.15++ 21.36 24.18 (7.59)++
- ------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529B (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.26+ 2.24 2.24 2.27+
- ------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.05)+ (1.07) (0.82) (0.20)+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $159 $135 $59 $5
- ------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees
and expenses, such that Other Expenses do not exceed 0.50% annually. To the extent that the expense reimbursement
fee exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the
current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the fund entered into
a similar expense arrangement without reimbursement. This new arrangement will be in effect until January 31, 2006.
In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC.
To the extent actual expenses were over (under) this limitation, and the reimbursement had not been in place, the
net investment loss per share and the ratios would have been:
Net investment loss $(0.07)^ $(0.13) $(0.10) $(0.01)
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.26+^ 2.26 2.40 2.73+
- ------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.05)+^ (1.09) (0.98) (0.66)+
- ------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be
lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529C 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
Net asset value, beginning of period $12.86 $10.59 $8.52 $9.22^^
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment loss(S) $(0.07) $(0.13) $(0.08) $(0.00)+++
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.40 2.40 2.15 (0.70)
- ------------------------------------------------ ------ ------ ------ ------
Total from investment operations $1.33 $2.27 $2.07 $(0.70)
- ------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $(1.23) $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $-- $--
- ------------------------------------------------ ------ ------ ------ ------
Net asset value, end of period $12.96 $12.86 $10.59 $8.52
- ------------------------------------------------ ------ ------ ------ ------
Total return (%)& 10.21++ 21.44 24.30 (7.59)++^^
- ------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30 PERIOD
ENDED ----------------------------- ENDED
CLASS 529C (CONTINUED) 3/31/05 2004 2003 9/30/02*
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27+ 2.24 2.24 2.27+
- ------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.04)+ (1.06) (0.85) (0.20)+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 128 158 113
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $282 $178 $44 $5
- ------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees
and expenses, such that Other Expenses do not exceed 0.50% annually. To the extent that the expense reimbursement
fee exceeds the fund's actual expenses, the excess will be applied to unreimbursed amounts paid by MFS under the
current agreement. This agreement terminated on January 31, 2005. Effective February 1, 2005, the fund entered into
a similar expense arrangement without reimbursement. This new arrangement will be in effect until January 31, 2006.
In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC.
To the extent actual expenses were over (under) this limitation, and the reimbursement had not been in place, the
net investment loss per share and the ratios would have been:
Net investment loss $(0.07)^ $(0.13) $(0.10) $(0.01)
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.27+^ 2.26 2.40 2.73+
- ------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.04)+^ (1.08) (1.01) (0.66)+
- ------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be
lower.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
^^ The net asset value and total return previously reported as $9.23 and (7.69)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public shareholders.
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Mid Cap Value Fund (the fund) is a diversified series of MFS Series Trust
XI (the trust). The trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
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 in the fund's portfolio for which
market quotations are available are valued at the last sale or official closing
price as reported by an independent pricing service on the primary market or
exchange on which they are primarily traded, or at the last quoted bid price
for securities in which there were no sales during the day. Equity securities
traded over the counter are valued at the last sales price traded each day as
reported by an independent pricing service, or to the extent there are no sales
reported, such securities are valued on the basis of quotations obtained from
brokers and dealers. Bonds and other fixed income securities (other than
short-term obligations) in the fund's portfolio are valued at an evaluated bid
price as reported by an independent pricing service, or to the extent a
valuation is not reported by a pricing service, such securities are valued on
the basis of quotes from brokers and dealers. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer-supplied valuations.
All other short-term obligations in the fund's portfolio are valued at
amortized cost, which approximates market value as determined by the Board of
Trustees. 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. When pricing service information or
market quotations are not readily available, securities are priced at fair
value as determined under the direction of the Board of Trustees. For example,
significant events (such as movement in the U.S. securities market, or other
regional and local developments) may occur between the time that foreign
markets close (where the security is principally traded) and the time that the
fund calculates its net asset value (generally, the close of the NYSE) that may
impact the value of securities traded in these foreign markets. In these cases,
the fund may utilize information from an external vendor or other sources to
adjust closing market quotations of foreign equity securities to reflect what
it believes to be the fair value of the securities as of the fund's valuation
time. Because the frequency of significant events is not predictable, fair
valuation of foreign equity securities may occur on a frequent basis.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a joint
trading account for the purpose of entering into one or more repurchase
agreements.
FOREIGN CURRENCY TRANSLATION - 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 TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund will charge a 2% redemption fee (which is retained by the
fund) on proceeds from Class A, Class B, Class C, and Class I shares redeemed
or exchanged within 5 business days following their acquisition (either by
purchase or exchange). Effective April 1, 2005, the fund will no longer charge
a redemption fee. See the fund's prospectus for details. Any redemption fees
charged are accounted for as an addition to paid-in capital.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded
on the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the statement of operations, or in unrealized gain/loss if the security is
still held by the fund.
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. During the six months ended March 31, 2005, the fund's custodian fees
were reduced by $8,077 under this arrangement. The fund has entered into a
commission recapture agreement, under which certain brokers will credit the
fund a portion of the commissions generated, to offset certain expenses of the
fund. For the six months ended March 31, 2005, the fund's miscellaneous
expenses were reduced by $20,969 under this agreement. These amounts are shown
as a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, real estate investment trusts, wash
sales, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended September 30,
2004 and September 30, 2003 was as follows:
9/30/04 9/30/03
Distributions declared from:
----------------------------------------------------------
Ordinary income $269,551 $--
----------------------------------------------------------
As of September 30, 2004, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $27,125,462
----------------------------------------------------------
Undistributed long-term capital gain 11,888,715
----------------------------------------------------------
Unrealized appreciation 27,634,747
----------------------------------------------------------
Other temporary differences (25,555)
----------------------------------------------------------
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 and Class 529B
shares will convert to Class A and Class 529A shares, respectively,
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 0.75% of
the fund's average daily net assets.
MFS has contractually agreed, subject to reimbursement, to bear a portion of
the fund's "Other Expenses", which are defined as the fund's operating
expenses, exclusive of management, distribution and service, and certain other
fees and expenses, such that Other Expenses do not exceed 0.25% annually for
Class A, Class B, Class C, Class I, and Class R shares and o.50% annually for
Class R3, Class 529A, Class 529B, and Class 529C shares. This arrangement is
effected by MFS bearing all of the fund's Other Expenses (exclusive of Class R3
administrative service fee in the case of the Class R3 shares and tuition
program manager fees in the case of the 529 share classes) during the fund's
fiscal year, and the fund paying MFS an expense reimbursement fee not greater
than 0.25% 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 unreimbursed amounts paid by MFS under the current agreement. This
agreement terminated on January 31, 2005. Effective February 1, 2005, the fund
entered into a similar expense arrangement without reimbursement. This new
arrangement will be in effect until January 31, 2006.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, and pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the fund, all of whom
receive remuneration for their services to the fund from MFS. Certain officers
and Trustees of the fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The fund's investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings Footnote. On July 28,
2004, the fund accrued an estimate of the amount to be received pursuant to
this matter in the amount of $5,358, which did not have a material impact on
the net asset value per share based on the shares outstanding on the day the
proceeds were recorded. The proceeds were paid to the fund on February 16,
2005.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
fund paid MFS an administrative fee up to the following annual percentage rates
of the fund's average daily net assets:
BEGINNING OF
PERIOD THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
- ----------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
- ----------------------------------------------------------------------------
For the six months ended March 31, 2005, the fund paid MFS $20,653, equivalent
to 0.00774% of average daily net assets, to partially reimburse MFS for the
costs of providing administrative services.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to Class R1, Class R2, Class R3
(formerly Class R2), Class R4, and Class R5 shares. These services include
various administrative, recordkeeping, and communication/educational services
with respect to the retirement plans which invest in these shares, and may be
provided directly by MFS or by a third party. Effective April 1, 2005, the fund
pays an annual plan administration and service fee in an amount up to 0.45%,
0.40%, 0.25%, 0.15%, and 0.10% solely from the assets of Class R1, Class R2,
Class R3 (formerly Class R2), Class R4, and Class R5 shares, respectively, to
MFS for the provision of these services. Prior to April 1, 2005, the fund paid
an annual 0.25% plan administration and service fee solely from the assets of
Class R3 (formerly Class R2) shares to MFS for the provision of these services.
The new Class R1 and Class R2 shares and Class R4 and R5 shares, which were
established on March 31, 2005 and were available for sale to the public on
April 1, 2005, had no operating activity.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$57,519 and $1,169 for the six months ended March 31, 2005, as its portion of
the sales charge on sales of Class A and Class 529A shares of the fund,
respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R (formerly Class R1), Class R1, Class R2, Class R3 (formerly Class R2),
Class R4, Class 529A, Class 529B, and Class 529C shares (Class R5 shares are
not subject to the plan) 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 an annual
percentage of its average daily net assets attributable to certain share
classes as compensation for services provided by MFD and financial
intermediaries in connection with the distribution and servicing of its shares.
One component of the plan is a distribution fee and another is a service fee
paid by MFD to financial intermediaries that enter into sales or service
agreements with MFD or its affiliates based on the average daily net assets of
accounts attributable to such intermediaries. The fees are calculated based on
each class' average daily net assets. The new Class R1 and Class R2 shares and
Class R4 and Class R5 shares, which were established on March 31, 2005, and
were available for sale to the public on April 1, 2005, had no operating
activity. The maximum distribution and service fees for each class of shares
are as follows:
CLASS A CLASS B CLASS C CLASS R CLASS R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.50% 0.25%
- --------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.75% 0.50%
CLASS R3 CLASS R4 CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.25% 0.00% 0.25% 0.75% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.50% 0.25% 0.50% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
MFD may retain all or a portion of the service fee, including for accounts for which there is no financial intermediary
of record. Service fees retained by MFD for the six months ended March 31, 2005 amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS R3
Service Fee Retained by MFD $2,278 $264 $206 $10 $--
- --------------------------------------------------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained by MFD $591 $14 $42
- --------------------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the six months ended March 31, 2005 were as follows:
CLASS A CLASS B CLASS C CLASS R
Effective Annual Percentage Rates 0.35% 1.00% 1.00% 0.50%
- --------------------------------------------------------------------------------------------------------------------------
CLASS R3 CLASS 529A CLASS 529B CLASS 529C
Effective Annual Percentage Rates 0.50% 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
Payment of the 0.15% per annum portion of the 529A distribution fee that is not currently being charged will be
implemented on such date as the Trustees of the Trust may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent deferred sales charge in the event of a
shareholder redemption within, for Class A shares, 12 months following the purchase, and, for Class C and Class 529C
shares, the first year of purchase. A contingent deferred sales charge is imposed on shareholder redemptions of Class B
and Class 529B 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, 2005 were as
follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales
Charges Imposed $2,554 $112,943 $936 $-- $188
- ----------------------------------------------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties that administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD, or a third party which
contracts with MFD, provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the Board of Trustees that oversees the fund. The services provided
by MFD, or a third party with which MFD contracts, include recordkeeping and
tax reporting and account services, as well as services designed to maintain
the program's compliance with the Internal Revenue Code and other regulatory
requirements.
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as shareholder
servicing agent. The fee, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the
fund's Trustees. For the period July 1, 2004 through December 31, 2004, the
fund was charged up to 0.0861% of its average daily net assets. For the period
January 1, 2005 through February 28, 2005, the fund was charged up to 0.1035%
of its average daily net assets. Effective March 1, 2005, the fund is charged
up to 0.1159% of its average daily net assets. For the six months ended March
31, 2005, the fund paid MFSC a fee of $260,574 for shareholder services which
equated to 0.0977% of the fund's average daily net assets. Shareholder service
costs include out of pocket expenses and sub accounting services expenses paid
by MFSC on behalf of the fund and subsequently reimbursed to MFSC which
amounted to $52,349, and other costs paid by the fund directly to unaffiliated
vendors for the six months ended March 31, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$440,822,541 and $341,079,204, 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 $550,395,852
----------------------------------------------------------
Gross unrealized appreciation $56,593,362
----------------------------------------------------------
Gross unrealized depreciation (19,571,640)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $37,021,722
----------------------------------------------------------
(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:
Six months ended 3/31/05 Year ended 9/30/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 3,003,375 $40,808,638 4,107,516 $51,494,984
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 615,471 8,278,087 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (1,102,832) (14,897,556) (2,179,922) (27,535,296)
- ---------------------------------------------------------------------------------------------------------
Net change 2,516,014 $34,189,169 1,927,594 $23,959,688
- ---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,932,263 $25,711,300 2,831,033 $34,800,800
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 616,207 8,121,609 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (1,190,881) (15,772,937) (2,191,259) (27,129,931)
- ---------------------------------------------------------------------------------------------------------
Net change 1,357,589 $18,059,972 639,774 $7,670,869
- ---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 795,918 $10,638,468 1,026,389 $12,711,531
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 181,133 2,389,140 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (226,294) (3,002,927) (596,090) (7,403,467)
- ---------------------------------------------------------------------------------------------------------
Net change 750,757 $10,024,681 430,299 $5,308,064
- ---------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 3,729,845 $50,555,344 10,169,305 $127,364,640
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,792,931 24,365,935 22,465 268,460
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (176,242) (2,405,468) (86,164) (1,077,151)
- ---------------------------------------------------------------------------------------------------------
Net change 5,346,534 $72,515,811 10,105,606 $126,555,949
- ---------------------------------------------------------------------------------------------------------
CLASS R SHARES
Shares sold 483,547 $6,429,372 230,207 $2,780,682
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 16,112 216,231 92 1,085
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (41,388) (554,191) (106,453) (1,310,117)
- ---------------------------------------------------------------------------------------------------------
Net change 458,271 $6,091,412 123,846 $1,471,650
- ---------------------------------------------------------------------------------------------------------
Period ended 3/31/05***
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 3,837 $50,000
- -----------------------------------------------------------------------
Net change 3,837 $50,000
- -----------------------------------------------------------------------
CLASS R2 SHARES
Shares sold 3,837 $50,000
- -----------------------------------------------------------------------
Net change 3,837 $50,000
- -----------------------------------------------------------------------
Six months ended 3/31/05 Period ended 9/30/04*
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES
Shares sold 60,178 $806,626 30,506 $371,498
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,580 21,100 0** 6
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (26,996) (361,449) (14,262) (174,359)
- ---------------------------------------------------------------------------------------------------------
Net change 34,762 $466,277 16,244 $197,145
- ---------------------------------------------------------------------------------------------------------
Period ended 3/31/05***
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 3,754 $50,000
- -----------------------------------------------------------------------
Net change 3,754 $50,000
- -----------------------------------------------------------------------
CLASS R5 SHARES
Shares sold 3,754 $50,000
- -----------------------------------------------------------------------
Net change 3,754 $50,000
- -----------------------------------------------------------------------
Six months ended 3/31/05 Year ended 9/30/04
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 14,357 $193,663 25,613 $315,099
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 4,894 65,333 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (110) (1,529) (882) (12,742)
- ---------------------------------------------------------------------------------------------------------
Net change 19,141 $257,467 24,731 $302,357
- ---------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 776 $10,152 5,024 $60,832
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,005 13,149 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (20) (261) (8) (94)
- ---------------------------------------------------------------------------------------------------------
Net change 1,761 $23,040 5,016 $60,738
- ---------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 8,176 $107,480 9,658 $118,556
- ---------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,270 16,670 -- --
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (1,473) (20,238) (8) (99)
- ---------------------------------------------------------------------------------------------------------
Net change 7,973 $103,912 9,650 $118,457
- ---------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R3 shares, October 31, 2003, through September 30, 2004.
** Share amount was less than 1.
*** The new Class R1 and Class R2 shares and Class R4 and R5 shares, which were established on March 31,
2005, and were available for sale to the public on April 1, 2005, had no operating activity.
The fund is one of several MFS mutual funds in which the MFS Asset Allocation
Funds may invest. The MFS Asset Allocation Funds do not invest in the
underlying MFS funds for the purpose of exercising management or control. At
the end of the period, the MFS Moderate Allocation Fund, MFS Growth Allocation
Fund, and MFS Aggressive Growth Allocation Fund were the owners of record of
approximately 12.5%, 24.9%, and 16.4%, respectively, of the total outstanding
shares.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the fund for the six months ended March 31, 2005 was $1,841, and
is included in miscellaneous expense. The fund had no significant borrowings
during the six months ended March 31, 2005.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under
the terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. The SEC
settlement order states that MFS failed to adequately disclose to the Boards of
Trustees and to shareholders of the MFS funds the specifics of its preferred
arrangements with certain brokerage firms selling MFS fund shares. The SEC
settlement order states that MFS had in place policies designed to obtain best
execution of all MFS fund trades. As part of the settlement, MFS retained an
independent compliance consultant to review the completeness of its current
policies and practices regarding disclosure to MFS fund trustees and to MFS
fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial intermediaries who support the sale of MFS
fund shares. Pursuant to the SEC order, on July 28, 2004, MFS transferred these
settlement amounts to the SEC, and those MFS funds entitled to these settlement
amounts accrued an estimate of their pro rata portion of these amounts. The
final distribution plan was approved by the SEC on January 21, 2005, and the
affected MFS funds received the payment on February 16, 2005.
In addition, in February 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain
MFS retail funds was false and misleading because, although the prospectuses
for those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer
and former President also reached agreement with the SEC in which they agreed
to, among other terms, monetary fines and temporary suspensions from
association with any investment adviser or registered investment company. These
individuals have resigned their positions with, and will not be returning to,
MFS and the MFS funds. Under the terms of the February Settlements, MFS and the
executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to
increase certain management fees during this period. MFS has also paid an
administrative fine to NH in the amount of $1 million, which will be used for
investor education purposes (NH retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former Trustees of these MFS funds, and
certain officers of MFS have been named as defendants in multiple lawsuits
filed in federal and state courts. The lawsuits variously have been commenced
as class actions or individual actions on behalf of investors who purchased,
held or redeemed shares of the MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
lawsuits generally allege that some or all of the defendants (i) permitted or
acquiesced in market timing and/or late trading in some of the MFS funds,
inadequately disclosed MFS' internal policies concerning market timing and such
matters (ii) received excessive compensation as fiduciaries to the MFS funds,
or (iii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of MFS fund shares and inadequately disclosed MFS' use
of fund assets in this manner. The actions assert that some or all of the
defendants violated the federal securities laws, including the Securities Act
of 1933 and the Securities Exchange Act of 1934, the Investment Company Act of
1940 and the Investment Advisers Act of 1940, the Employee Retirement Income
Security Act of 1974, as well as fiduciary duties and other violations of
common law. Insofar as any of the actions is appropriately brought derivatively
on behalf of any of the MFS funds, any recovery will inure to the benefit of
the MFS funds. The defendants are reviewing the allegations of the multiple
complaints and will respond appropriately. Additional lawsuits based on similar
allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions allocated
in recognition of MFS fund sales. It is not clear whether these amounts will be
sufficient to compensate shareholders for all of the damage they allegedly
sustained, whether certain shareholders or putative class members may have
additional claims to compensation, or whether the damages that may be awarded
in any of the actions will exceed these amounts. In the event the MFS funds
incur any losses, costs or expenses in connection with such lawsuits, the
Boards of Trustees of the affected MFS funds may pursue claims on behalf of
such funds against any party that may have liability to the funds in respect
thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the MFS funds.
- -------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING (unaudited) -3/31/05
- -------------------------------------------------------------------------------
At a special meeting of shareholders of MFS Mid Cap Value Fund, which was held
on March 23, 2005, the following actions were taken:
ITEM 1. To elect a Board of Trustees:
NUMBER OF DOLLARS
-----------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
Lawrence H. Cohn, M.D. $499,682,691.97 $8,755,056.01
- -------------------------------------------------------------------------------
David H. Gunning 499,705,576.86 8,732,171.12
- -------------------------------------------------------------------------------
William R. Gutow 499,684,657.77 8,753,090.21
- -------------------------------------------------------------------------------
Michael Hegarty 499,551,638.26 8,886,109.72
- -------------------------------------------------------------------------------
J. Atwood Ives 499,776,875.73 8,660,872.25
- -------------------------------------------------------------------------------
Amy B. Lane 499,531,941.03 8,905,806.95
- -------------------------------------------------------------------------------
Robert J. Manning 499,738,594.75 8,699,153.23
- -------------------------------------------------------------------------------
Lawrence T. Perera 499,558,998.58 8,878,749.40
- -------------------------------------------------------------------------------
Robert C. Pozen 499,807,748.41 8,629,999.57
- -------------------------------------------------------------------------------
J. Dale Sherratt 499,681,096.34 8,756,651.64
- -------------------------------------------------------------------------------
Laurie J. Thomsen 499,630,109.61 8,807,638.37
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
Type of Information Phone number Hours, Eastern Time
- -------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- -------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- -------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MDV-SEM-05/05 50M
MFS(R) UNION STANDARD EQUITY FUND 3/31/05
SEMIANNUAL REPORT
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
M F S(SM)
INVESTMENT MANAGEMENT(R)
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION TO SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
--------------------------------------------------
PORTFOLIO COMPOSITION 4
--------------------------------------------------
MANAGEMENT REVIEW 5
--------------------------------------------------
PERFORMANCE SUMMARY 8
--------------------------------------------------
EXPENSE TABLE 12
--------------------------------------------------
PORTFOLIO OF INVESTMENTS 14
--------------------------------------------------
FINANCIAL STATEMENTS 19
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 31
--------------------------------------------------
RESULTS OF SHAREHOLDER MEETING 41
--------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 42
--------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 42
--------------------------------------------------
CONTACT INFORMATION BACK COVER
--------------------------------------------------
- -------------------------------------------------------------------------------
LETTER FROM THE CEO
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
Last summer and fall, I wrote to you about enhancements that MFS(R) was making
to its investment process. Our goal, as always, was to deliver strong
performance across all asset classes. I am now happy to report to you that 2004
was a very successful year for MFS, relative to our peers in the mutual fund
industry. While there will always be room for improvement, we believe the
enhancements we have made to our investment process resulted in significantly
improved performance across the MFS Family of Funds(R).
You may remember some of the enhancements I outlined last year.
They included
o increasing collaboration and information sharing among our investment
personnel across asset classes, through an Investment Management Committee
with members from our Domestic Equity, International Equity, Fixed Income,
and Quantitative Research teams
o increasing the number of analysts supporting our portfolio managers and
doubling the average investment experience of our domestic equity analyst
staff
o making additional use of our most-seasoned portfolio managers to mentor
research analysts
o combining more quantitative, top-down risk control and security analysis
with our traditional bottom-up research process
o opening a research office in Mexico City to complement our existing staff
in Boston, London, Singapore, and Tokyo
The effect of these enhancements, I believe, is evident in the recent
performance of our funds. For the 12 months ended March 31, 2005, 68% of MFS
domestic equity funds, 88% of MFS international equity funds, and 90% of MFS
fixed-income funds delivered results in the top half of their Lipper peer
groups.
Our longer-term performance also benefited from our ongoing commitment to the
MFS Original Research(R) process: 69% of MFS funds were in the top half of
their respective Lipper categories over the 3-, 5-, and 10-year periods ended
March 31, 2005.
Of course, I cannot offer any guarantees that our performance will repeat
itself. Still, I am confident that the recent enhancements to our investment
process will continue to benefit shareholders in 2005 and beyond.
What I can tell you with certainty is that the way you manage your investments
will determine how well you take advantage of the performance that financial
markets deliver. Historically, individual investors have tended to underperform
the markets. For example, a 2003 study by DALBAR, Inc. showed that over the
nearly two decades from 1984 through 2002, the average U.S. stock investor
earned a 2.6% average annual return at a time when U.S. stocks, as measured by
the Standard & Poor's 500 Stock Index, delivered a 12.2% average annual
return.(1)
This huge discrepancy, in our view, occurred because nonprofessional investors
generally did not adhere to the basic principles followed by most professional
investors: allocate among asset classes, diversify within each asset class, and
rebalance one's portfolio on a routine schedule. I elaborated on this "ADR"
theme in fund reports over the last few months of 2004. For more information on
how to apply a Disciplined Diversification(SM) strategy to your portfolio using
the principles of ADR, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Web site, MFS.COM.
As always, we appreciate your confidence in MFS, and you can be sure of our
continued commitment to do the best we can to help you pursue your long-term
financial goals.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
May 16, 2005
It is not possible to invest directly in an index.
Lipper rankings and performance are based on historical average annual returns
of Class A shares, and do not include any sales charges. Past performance is no
guarantee of future results.
Asset allocation and diversification cannot guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
(1) Source: DALBAR July 2003 update to its Quantitative Analysis of Investment
Behavior; DALBAR, Inc., is a financial-services market research firm
headquartered in Boston, MA.
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
Stocks 97.6%
Cash & Other Net Assets 2.4%
TOP TEN HOLDINGS
Exxon Mobil Corp. 4.5%
------------------------------------------------
General Electric Co. 4.3%
------------------------------------------------
Johnson & Johnson 2.7%
------------------------------------------------
Bank of America Corp. 2.4%
------------------------------------------------
Altria Group, Inc. 2.2%
------------------------------------------------
Microsoft Corp. 2.1%
------------------------------------------------
Procter & Gamble Co. 2.0%
------------------------------------------------
Intel Corp. 2.0%
------------------------------------------------
Citigroup, Inc. 1.7%
------------------------------------------------
Dell, Inc. 1.7%
------------------------------------------------
SECTOR HOLDINGS
Financial Services 15.3%
------------------------------------------------
Technology 13.5%
------------------------------------------------
Industrial Goods & Services 13.4%
------------------------------------------------
Consumer Staples 10.8%
------------------------------------------------
Health Care 9.5%
------------------------------------------------
Leisure 8.4%
------------------------------------------------
Utilities & Communications 8.0%
------------------------------------------------
Energy 7.0%
------------------------------------------------
Retailing 4.2%
------------------------------------------------
Basic Materials 3.4%
------------------------------------------------
Transportation 2.2%
------------------------------------------------
Autos & Housing 1.9%
------------------------------------------------
Percentages are based on net assets as of 3/31/05.
The portfolio is actively managed, and current holdings may be different.
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
SUMMARY OF RESULTS
For the six months ended March 31, 2005, Class A shares of the MFS Union
Standard Equity Fund provided a total return of 10.14%, at net asset value. In
comparison, the fund's benchmark, the Standard and Poor's 500 Stock Index (the
S&P 500), returned 6.88%. The fund will seek long-term growth of capital. The
fund invests, under normal market conditions, at least 80% of its net assets
plus borrowings (if any) for investment purposes in common stocks and related
securities, of companies which have a unionized workforce and meet certain
labor sensitivity guidelines (union sensitive companies), or do not have a
unionized workforce but meet certain labor sensitivity guidelines and do not
directly compete with companies with a unionized workforce (labor-sensitive
companies). The fund focuses on companies which MFS believes possess
opportunities for long-term growth with emphasis on progressive, well managed
companies.
MARKET ENVIRONMENT
Stocks experienced considerable volatility during the six months ended March
31, 2005. Investors endured skyrocketing oil prices, a volatile and retreating
U.S. dollar, record U.S. budget and trade deficits, and war in Iraq.
Fundamental economic factors, however, such as corporate spending and earnings,
continued to improve around the globe. Over the course of the period, investors
seemed to conclude that the global economic recovery, although modest, was
still intact. In the end, fundamental economic factors triumphed and most
equity markets delivered positive results for the period as a whole.
CONTRIBUTORS TO PERFORMANCE
Our positions in the leisure, retailing, and industrial goods and services
sectors boosted the portfolio's performance relative to the S&P 500. Stock
selection in leisure was the strongest contributor. Casino operator Boyd Gaming
(not an index constituent) was a top overall contributor in this group.
Stock selection was also supportive in retailing. Here, avoiding Wal-Mart
Stores while focusing on Federated Department Stores helped relative
performance. While our overall positioning in industrial goods and services was
beneficial to relative performance, no individual stock in that sector was a
top contributor.
In consumer staples, a combination of stock selection and an overweighted
position in the sector aided results. Tobacco and food conglomerate Altria
Group and agricultural processor Archer-Daniels-Midland* were particularly
strong contributors in this area.
Elsewhere in the portfolio, avoiding insurance provider American International
Group (an index constituent that underperformed the S&P 500) while holding
electric power generator TXU, health care equipment and service provider HCA,
railroad operator Burlington Northern Santa Fe, and CMS Energy yielded positive
contributions to relative performance.
DETRACTORS FROM PERFORMANCE
Stock selection in the technology sector detracted from relative results. The
largest single detractor to relative performance was our position in virus
protection software provider Symantec. Other technology names in the group that
disappointed included online auctioneer eBay, and semiconductor device
manufacturer Cree Inc*.
A combination of underweighting the group and stock selection held back
relative results in the energy sector. Failing to fully participate in the
appreciation of Marathon Oil's* stock price detracted from results in this
area. Other negative contributors included residential mortgage lender
Countrywide Financial and banking conglomerate J.P. Morgan Chase (both from the
financial services sector), as well as telecom services provider Verizon
Communications and diesel engine manufacturer Cummins.
While it averaged 2% of the fund during the period, our cash position held back
relative performance. As with nearly all portfolios, this fund holds some cash
to buy new holdings and to provide liquidity. In a period when equity markets -
as measured by the S&P 500 - rose, holding any cash hurt relative performance.
The index does not have a cash position.
Respectfully,
/s/ James M. Perkins
James M. Perkins
Portfolio Manager
* Security was not held in the portfolio at period-end.
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 3/31/05
- -------------------------------------------------------------------------------
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. Performance results reflect the percentage change
in net asset value, including the reinvestment of any dividends and capital
gains distributions. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR I SHARES CALL 1-888-808-6374.) MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
HIGH SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE.
THE PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 8/07/97 10.14% 11.90% 3.63% -1.91% 6.85%
- ------------------------------------------------------------------------------
B 8/11/97 9.79% 11.15% 2.91% -2.55% 6.34%
- ------------------------------------------------------------------------------
C 8/11/97 9.84% 11.21% 2.95% -2.54% 6.37%
- ------------------------------------------------------------------------------
I 1/14/94 10.31% 12.27% 3.95% -1.58% 7.14%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative benchmarks
- ------------------------------------------------------------------------------
Average large-cap
core fund+ 6.21% 4.03% 0.66% -4.45% 8.87%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Stock
Index# 6.88% 6.69% 2.74% -3.16% 10.79%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge
- --------------------
Share class 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 3.81% 5.47% 1.60% -3.07% 6.21%
- ------------------------------------------------------------------------------
B 5.79% 7.15% 1.95% -2.94% 6.34%
- ------------------------------------------------------------------------------
C 8.84% 10.21% 2.95% -2.54% 6.37%
- ------------------------------------------------------------------------------
I Class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 10.14% 11.90% 11.28% -9.21% 93.89%
- ------------------------------------------------------------------------------
B 9.79% 11.15% 8.97% -12.11% 84.97%
- ------------------------------------------------------------------------------
C 9.84% 11.21% 9.12% -12.08% 85.35%
- ------------------------------------------------------------------------------
I 10.31% 12.27% 12.32% -7.68% 99.38%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
Standard & Poor's 500 Stock Index - is a capitalization-weighted index of 500
widely held equity securities, designed to measure broad U.S. equity
performance.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results including sales charge reflect the deduction of the maximum
5.75% sales charge. Class B results including sales charge reflect the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results including sales charge
(assuming redemption within one year from the end of the prior month of
purchase) reflect the deduction of the 1% CDSC. Class I shares have no sales
charges and are available only to certain investors.
Performance for share classes offered after Class I shares includes the
performance of the fund's Class I shares for periods prior to their offering.
This blended class performance has been adjusted to take into account
differences in sales loads, if any, applicable to these share classes, but has
not been adjusted to take into account differences in class specific operating
expenses (such as Rule 12b-1 fees). Compared to performance these share classes
would have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the share class to which it is blended, and
lower performance for share classes with lower operating expenses than the
share class to which it is blended.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio is susceptible to market risk, which is the risk that the price
of a security held by the fund will fall due to changing economic, political or
market conditions or disappointing earnings results.
The portfolio may concentrate its investments primarily on labor sensitive
companies. By doing so, the portfolio is more susceptible to adverse economic,
political or regulatory developments affecting those companies than is a
portfolio that invests more broadly.
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
Prices of securities react to the economic condition of the company that issued
the security. The fund's investments in an issuer may rise and fall based on
the issuer's actual and anticipated earnings, changes in management and the
potential for takeovers and acquisitions.
The fund's investments may include securities trades in over-the-counter
markets. Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC- listed
companies may have limited product lines, markets or financial resources. Many
OTC stocks trade less frequently and in smaller volume than exchange-listed
stocks. The values of these stocks may be more volatile than exchange-listed
stocks, and the funds may experience difficulty buying and selling these stocks
at prevailing market prices.
Please see the prospectus for further information regarding these and other
risk considerations.
- -------------------------------------------------------------------------------
EXPENSE TABLE
- -------------------------------------------------------------------------------
FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM OCTOBER 1, 2004,
THROUGH MARCH 31, 2005.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, October 1, 2004 through March 31,
2005.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Share Class
- --------------------------------------------------------------------------------
Beginning Ending Expenses
Annualized Account Account Paid During
Expense Value Value Period**
Ratio 10/01/04 3/31/05 10/01/04-3/31/05
- --------------------------------------------------------------------------------
Actual 1.30% $1,000 $1,101 $6.81
A -------------------------------------------------------------------------
Hypothetical* 1.30% $1,000 $1,018 $6.54
-------------------------------------------------------------------------------
Actual 1.95% $1,000 $1,098 $10.20
B -------------------------------------------------------------------------
Hypothetical* 1.95% $1,000 $1,015 $9.80
-------------------------------------------------------------------------------
Actual 1.95% $1,000 $1,098 $10.20
C -------------------------------------------------------------------------
Hypothetical* 1.95% $1,000 $1,015 $9.80
-------------------------------------------------------------------------------
Actual 0.95% $1,000 $1,103 $4.98
I -------------------------------------------------------------------------
Hypothetical* 0.95% $1,000 $1,020 $4.78
- --------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class" annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
- ----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 3/31/05
- ----------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 97.6%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------
Aerospace - 2.2%
- ----------------------------------------------------------------------------------------------
Lockheed Martin Corp. 9,450 $577,017
- ----------------------------------------------------------------------------------------------
Northrop Grumman Corp. 7,100 383,258
- ----------------------------------------------------------------------------------------------
$960,275
- ----------------------------------------------------------------------------------------------
Alcoholic Beverages - 1.0%
- ----------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 9,660 $457,787
- ----------------------------------------------------------------------------------------------
Automotive - 0.8%
- ----------------------------------------------------------------------------------------------
Ford Motor Co. 30,300 $343,299
- ----------------------------------------------------------------------------------------------
Banks & Credit Companies - 8.0%
- ----------------------------------------------------------------------------------------------
Bank of America Corp. 23,996 $1,058,224
- ----------------------------------------------------------------------------------------------
Citigroup, Inc. 16,830 756,340
- ----------------------------------------------------------------------------------------------
CompuCredit Corp.* 12,100 322,102
- ----------------------------------------------------------------------------------------------
Countrywide Financial Corp. 13,900 451,194
- ----------------------------------------------------------------------------------------------
Fannie Mae 6,770 368,627
- ----------------------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 17,900 619,340
- ----------------------------------------------------------------------------------------------
$3,575,827
- ----------------------------------------------------------------------------------------------
Biotechnology - 0.7%
- ----------------------------------------------------------------------------------------------
Genzyme Corp.* 5,700 $326,268
- ----------------------------------------------------------------------------------------------
Broadcast & Cable TV - 5.7%
- ----------------------------------------------------------------------------------------------
Comcast Corp., "A"* 18,453 $623,342
- ----------------------------------------------------------------------------------------------
Time Warner, Inc.* 37,870 664,619
- ----------------------------------------------------------------------------------------------
Viacom, Inc., "B" 16,547 576,332
- ----------------------------------------------------------------------------------------------
Walt Disney Co. 23,800 683,774
- ----------------------------------------------------------------------------------------------
$2,548,067
- ----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.6%
- ----------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 11,010 $623,166
- ----------------------------------------------------------------------------------------------
Morgan Stanley 1,600 91,600
- ----------------------------------------------------------------------------------------------
$714,766
- ----------------------------------------------------------------------------------------------
Chemicals - 2.2%
- ----------------------------------------------------------------------------------------------
Dow Chemical Co. 9,500 $473,575
- ----------------------------------------------------------------------------------------------
PPG Industries, Inc. 7,000 500,640
- ----------------------------------------------------------------------------------------------
$974,215
- ----------------------------------------------------------------------------------------------
Computer Software - 3.0%
- ----------------------------------------------------------------------------------------------
Computer Associates International, Inc. 286 $7,751
- ----------------------------------------------------------------------------------------------
Microsoft Corp. 39,220 947,947
- ----------------------------------------------------------------------------------------------
Symantec Corp.* 18,000 383,940
- ----------------------------------------------------------------------------------------------
$1,339,638
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 3.6%
- ----------------------------------------------------------------------------------------------
Apple Computer, Inc.* 13,000 $541,710
- ----------------------------------------------------------------------------------------------
Dell, Inc.* 19,600 753,032
- ----------------------------------------------------------------------------------------------
Xerox Corp.* 21,000 318,150
- ----------------------------------------------------------------------------------------------
$1,612,892
- ----------------------------------------------------------------------------------------------
Construction - 1.1%
- ----------------------------------------------------------------------------------------------
Masco Corp. 13,600 $471,512
- ----------------------------------------------------------------------------------------------
Consumer Goods & Services - 4.3%
- ----------------------------------------------------------------------------------------------
Colgate-Palmolive Co. 10,800 $563,436
- ----------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 7,340 482,458
- ----------------------------------------------------------------------------------------------
Procter & Gamble Co. 16,760 888,280
- ----------------------------------------------------------------------------------------------
$1,934,174
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 5.6%
- ----------------------------------------------------------------------------------------------
A.O. Smith Corp. 9,200 $265,604
- ----------------------------------------------------------------------------------------------
General Electric Co. 53,370 1,924,522
- ----------------------------------------------------------------------------------------------
Rockwell Automation, Inc. 5,700 322,848
- ----------------------------------------------------------------------------------------------
$2,512,974
- ----------------------------------------------------------------------------------------------
Electronics - 4.9%
- ----------------------------------------------------------------------------------------------
Amphenol Corp., "A" 9,600 $355,584
- ----------------------------------------------------------------------------------------------
Intel Corp. 37,600 873,448
- ----------------------------------------------------------------------------------------------
PerkinElmer, Inc. 21,100 435,293
- ----------------------------------------------------------------------------------------------
Texas Instruments, Inc. 20,500 522,545
- ----------------------------------------------------------------------------------------------
$2,186,870
- ----------------------------------------------------------------------------------------------
Energy - Integrated - 7.0%
- ----------------------------------------------------------------------------------------------
ChevronTexaco Corp. 7,400 $431,494
- ----------------------------------------------------------------------------------------------
ConocoPhillips 6,500 700,960
- ----------------------------------------------------------------------------------------------
Exxon Mobil Corp. 33,632 2,004,467
- ----------------------------------------------------------------------------------------------
$3,136,921
- ----------------------------------------------------------------------------------------------
Food & Drug Stores - 1.3%
- ----------------------------------------------------------------------------------------------
CVS Corp. 10,540 $554,615
- ----------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 3.3%
- ----------------------------------------------------------------------------------------------
Coca-Cola Enterprises, Inc. 11,680 $239,674
- ----------------------------------------------------------------------------------------------
General Mills, Inc. 9,800 481,670
- ----------------------------------------------------------------------------------------------
PepsiCo, Inc. 14,100 747,723
- ----------------------------------------------------------------------------------------------
$1,469,067
- ----------------------------------------------------------------------------------------------
Gaming & Lodging - 1.0%
- ----------------------------------------------------------------------------------------------
Boyd Gaming Corp. 8,700 $453,705
- ----------------------------------------------------------------------------------------------
General Merchandise - 1.9%
- ----------------------------------------------------------------------------------------------
Costco Wholesale Corp. 9,700 $428,546
- ----------------------------------------------------------------------------------------------
Federated Department Stores, Inc. 6,500 413,660
- ----------------------------------------------------------------------------------------------
$842,206
- ----------------------------------------------------------------------------------------------
Insurance - 5.7%
- ----------------------------------------------------------------------------------------------
Genworth Financial, Inc., "A" 12,800 $352,256
- ----------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 5,900 404,504
- ----------------------------------------------------------------------------------------------
MetLife, Inc. 13,200 516,120
- ----------------------------------------------------------------------------------------------
PartnerRe Ltd. 3,800 245,480
- ----------------------------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. 9,400 345,262
- ----------------------------------------------------------------------------------------------
UNUMProvident Corp. 26,100 444,222
- ----------------------------------------------------------------------------------------------
XL Capital Ltd., "A" 3,200 231,584
- ----------------------------------------------------------------------------------------------
$2,539,428
- ----------------------------------------------------------------------------------------------
Internet - 1.2%
- ----------------------------------------------------------------------------------------------
eBay, Inc.* 14,000 $521,640
- ----------------------------------------------------------------------------------------------
Machinery & Tools - 5.6%
- ----------------------------------------------------------------------------------------------
Caterpillar, Inc. 6,000 $548,640
- ----------------------------------------------------------------------------------------------
Cummins, Inc. 5,900 415,065
- ----------------------------------------------------------------------------------------------
Deere & Co. 7,100 476,623
- ----------------------------------------------------------------------------------------------
Harsco Corp. 6,800 405,348
- ----------------------------------------------------------------------------------------------
PACCAR, Inc. 4,700 340,233
- ----------------------------------------------------------------------------------------------
Timken Co. 11,900 325,346
- ----------------------------------------------------------------------------------------------
$2,511,255
- ----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.4%
- ----------------------------------------------------------------------------------------------
HCA, Inc. 12,000 $642,840
- ----------------------------------------------------------------------------------------------
Medical Equipment - 1.1%
- ----------------------------------------------------------------------------------------------
Zimmer Holdings, Inc.* 6,300 $490,203
- ----------------------------------------------------------------------------------------------
Pharmaceuticals - 6.3%
- ----------------------------------------------------------------------------------------------
Eli Lilly & Co. 5,330 $277,693
- ----------------------------------------------------------------------------------------------
Johnson & Johnson 17,710 1,189,404
- ----------------------------------------------------------------------------------------------
Merck & Co., Inc. 22,590 731,238
- ----------------------------------------------------------------------------------------------
Wyeth 14,960 631,013
- ----------------------------------------------------------------------------------------------
$2,829,348
- ----------------------------------------------------------------------------------------------
Railroad & Shipping - 2.2%
- ----------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 10,680 $575,972
- ----------------------------------------------------------------------------------------------
Norfolk Southern Corp. 11,320 419,406
- ----------------------------------------------------------------------------------------------
$995,378
- ----------------------------------------------------------------------------------------------
Restaurants - 1.7%
- ----------------------------------------------------------------------------------------------
ARAMARK Corp., "B" 11,000 $289,080
- ----------------------------------------------------------------------------------------------
YUM! Brands, Inc. 9,030 467,844
- ----------------------------------------------------------------------------------------------
$756,924
- ----------------------------------------------------------------------------------------------
Specialty Chemicals - 1.2%
- ----------------------------------------------------------------------------------------------
Praxair, Inc. 10,800 $516,888
- ----------------------------------------------------------------------------------------------
Specialty Stores - 1.0%
- ----------------------------------------------------------------------------------------------
TJX Cos., Inc. 18,400 $453,192
- ----------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.8%
- ----------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 20,760 $371,396
- ----------------------------------------------------------------------------------------------
Telephone Services - 4.7%
- ----------------------------------------------------------------------------------------------
BellSouth Corp. 19,900 $523,171
- ----------------------------------------------------------------------------------------------
CenturyTel, Inc. 13,400 440,056
- ----------------------------------------------------------------------------------------------
SBC Communications, Inc. 15,950 377,856
- ----------------------------------------------------------------------------------------------
Verizon Communications, Inc. 20,840 739,820
- ----------------------------------------------------------------------------------------------
$2,080,903
- ----------------------------------------------------------------------------------------------
Tobacco - 2.2%
- ----------------------------------------------------------------------------------------------
Altria Group, Inc. 14,780 $966,464
- ----------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.3%
- ----------------------------------------------------------------------------------------------
CMS Energy Corp.* 37,000 $482,480
- ----------------------------------------------------------------------------------------------
PPL Corp. 6,320 341,217
- ----------------------------------------------------------------------------------------------
TXU Corp. 7,900 629,077
- ----------------------------------------------------------------------------------------------
$1,452,774
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $34,744,267) $43,543,711
- ----------------------------------------------------------------------------------------------
Repurchase Agreement - 2.3%
- ----------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------
Merrill Lynch, 2.8%, dated 3/31/05, due 4/01/05, total to be
received $1,016,079 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at
Cost $1,016,000 $1,016,000
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $35,760,267) $44,559,711
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.1% 48,218
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $44,607,929
- ----------------------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- --------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 3/31/05
ASSETS
Investments, at value (identified cost, $35,760,267) $44,559,711
- --------------------------------------------------------------------------------------------------
Cash 93
- --------------------------------------------------------------------------------------------------
Receivable for fund shares sold 12,390
- --------------------------------------------------------------------------------------------------
Interest and dividends receivable 53,549
- --------------------------------------------------------------------------------------------------
Receivable from investment adviser 2,124
- --------------------------------------------------------------------------------------------------
Other assets 507
- --------------------------------------------------------------------------------------------------
Total assets $44,628,374
- --------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares reacquired $8,636
- --------------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------------
Management fee 793
- --------------------------------------------------------------------------------------------------
Distribution and service fee 165
- --------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 10,851
- --------------------------------------------------------------------------------------------------
Total liabilities $20,445
- --------------------------------------------------------------------------------------------------
Net assets $44,607,929
- --------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $47,906,980
- --------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 8,799,444
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (12,394,097)
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 295,602
- --------------------------------------------------------------------------------------------------
Net assets $44,607,929
- --------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 3,748,395
- --------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $8,839,552
- --------------------------------------------------------------------------------------------------
Shares outstanding 745,349
- --------------------------------------------------------------------------------------------------
Net asset value per share $11.86
- --------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$11.86) $12.58
- --------------------------------------------------------------------------------------------------
Class B shares
Net assets $2,280,476
- --------------------------------------------------------------------------------------------------
Shares outstanding 195,546
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $11.66
- --------------------------------------------------------------------------------------------------
Class C shares
Net assets $676,015
- --------------------------------------------------------------------------------------------------
Shares outstanding 58,124
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per share $11.63
- --------------------------------------------------------------------------------------------------
Class I shares
Net assets $32,811,886
- --------------------------------------------------------------------------------------------------
Shares outstanding 2,749,376
- --------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $11.93
- --------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
SIX MONTHS ENDED 3/31/05
NET INVESTMENT INCOME
Income
- --------------------------------------------------------------------------------------------------
Dividends $522,520
- --------------------------------------------------------------------------------------------------
Interest 9,250
- --------------------------------------------------------------------------------------------------
Total investment income $531,770
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $141,205
- --------------------------------------------------------------------------------------------------
Trustees" compensation 571
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 38,592
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 14,817
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 11,648
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 3,428
- --------------------------------------------------------------------------------------------------
Administrative fee 1,625
- --------------------------------------------------------------------------------------------------
Custodian fee 9,842
- --------------------------------------------------------------------------------------------------
Printing 13,648
- --------------------------------------------------------------------------------------------------
Postage 426
- --------------------------------------------------------------------------------------------------
Auditing fees 22,920
- --------------------------------------------------------------------------------------------------
Legal fees 1,615
- --------------------------------------------------------------------------------------------------
Registration fees 23,856
- --------------------------------------------------------------------------------------------------
Miscellaneous 7,458
- --------------------------------------------------------------------------------------------------
Total expenses $291,651
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (842)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (54,642)
- --------------------------------------------------------------------------------------------------
Net expenses $236,167
- --------------------------------------------------------------------------------------------------
Net investment income $295,603
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain (identified cost basis) on investment
transactions $584,030
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation on investments $3,280,162
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $3,864,192
- --------------------------------------------------------------------------------------------------
Change in net assets from operations $4,159,795
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
3/31/05 9/30/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income $295,603 $295,041
- --------------------------------------------------------------------------------------------------
Net realized gain on investments 584,030 2,663,976
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments 3,280,162 2,245,189
- ------------------------------------------------------------ ------------ ------
Change in net assets from operations $4,159,795 $5,204,206
- ------------------------------------------------------------ ------------ ------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
Class A $(41,590) $(39,787)
- --------------------------------------------------------------------------------------------------
Class C (128) --
- --------------------------------------------------------------------------------------------------
Class I (253,274) (230,276)
- ------------------------------------------------------------ ------------ ------
Total distributions declared to shareholders $(294,992) $(270,063)
- ------------------------------------------------------------ ------------ ------
Change in net assets from fund share transactions $261,339 $556,634
- ------------------------------------------------------------ ------------ ------
Redemption fees $20 $--
- ------------------------------------------------------------ ------------ ------
Total change in net assets $4,126,162 $5,490,777
- -------------------------------------------------------------------------- ------
NET ASSETS
At beginning of period $40,481,767 $34,990,990
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income of $295,602 and $294,991, respectively) $44,607,929 $40,481,767
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial
results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS A 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning
of period $10.82 $9.49 $8.09 $9.98 $12.91 $16.33
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income(S) $0.07 $0.06 $0.05 $0.03 $0.02 $0.07
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.03 1.33 1.38 (1.90) (2.88) (1.12)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total from investment operations $1.10 $1.39 $1.43 $(1.87) $(2.86) $(1.05)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.06) $(0.06) $(0.03) $(0.02) $(0.07) $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions -- -- -- -- -- (2.26)
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- -- -- (0.02)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total distributions declared
to shareholders $(0.06) $(0.06) $(0.03) $(0.02) $(0.07) $(2.37)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Net asset value, end of period $11.86 $10.82 $9.49 $8.09 $9.98 $12.91
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total return (%)&(+) 10.14++ 14.64 17.66^ (18.76) (22.27) (7.77)
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS A (CONTINUED) 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.30+ 1.30 1.26 1.20 1.22 1.22
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.15+ 0.54 0.57 0.30 0.18 0.48
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 15 59 59 48 69 86
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $8,840 $7,896 $6,634 $5,872 $9,493 $10,066
- ------------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees and
expenses, such that Other Expenses do not exceed 0.30% annually. This agreement terminated on January 31, 2005. Effective
February 1, 2005, the fund entered into a similar expense arrangement without reimbursement. This new arrangement will be
in effect until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer service fees
paid to Tarantino LLC. To the extent actual expenses were over this limitation, and the reimbursement had not been in
place, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $0.05 $0.03 $0.02 $0.01 $(0.01) $0.05
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.55+ 1.52 1.57 1.44 1.47 1.36
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.90+ 0.32 0.26 0.06 (0.07) 0.34
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
^ The fund's net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share, the
total return for the year ended September 30, 2003 would have been 0.73% lower.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS B 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning
of period $10.62 $9.33 $7.98 $9.89 $12.82 $16.23
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income (loss)(S) $0.03 $(0.01) $(0.01) $(0.03) $(0.05) $(0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.01 1.30 1.36 (1.88) (2.87) (1.11)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total from investment operations $1.04 $1.29 $1.35 $(1.91) $(2.92) $(1.13)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $-- $-- $-- $-- $(0.01) $--
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions -- -- -- -- -- (2.26)
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- -- -- (0.02)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total distributions declared
to shareholders $-- $-- $-- $-- $(0.01) $(2.28)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Net asset value, end of period $11.66 $10.62 $9.33 $7.98 $9.89 $12.82
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total return (%)& 9.79++ 13.83 16.92^ (19.31) (22.77) (8.37)
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS B (CONTINUED) 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.95+ 1.95 1.90 1.85 1.87 1.87
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.50+ (0.11) (0.08) (0.34) (0.46) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 15 59 59 48 69 86
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $2,280 $2,234 $2,082 $2,534 $3,211 $2,356
- ------------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees and
expenses, such that Other Expenses do not exceed 0.30% annually. This agreement terminated on January 31, 2005. Effective
February 1, 2005, the fund entered into a similar expense arrangement without reimbursement. This new arrangement will be
in effect until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer service fees
paid to Tarantino LLC. To the extent actual expenses were over this limitation, and the reimbursement had not been in
place, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $0.01 $(0.03) $(0.03) $(0.06) $(0.08) $(0.04)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.20+ 2.17 2.21 2.09 2.12 2.01
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.25+ (0.33) (0.39) (0.58) (0.71) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
^ The fund's net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share, the
total return for the year ended September 30, 2003 would have been 0.74% lower.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS C 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning
of period $10.59 $9.30 $7.95 $9.85 $12.76 $16.21
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income (loss)(S) $0.03 $(0.01) $(0.01) $(0.03) $(0.05) $(0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.01 1.30 1.36 (1.87) (2.86) (1.11)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total from investment operations $1.04 $1.29 $1.35 $(1.90) $(2.91) $(1.13)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $--+++ $-- $-- $-- $-- $(0.04)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions -- -- -- -- -- (2.26)
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- -- -- (0.02)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total distributions declared
to shareholders $-- $-- $-- $-- $-- $(2.32)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Net asset value, end of period $11.63 $10.59 $9.30 $7.95 $9.85 $12.76
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total return (%)& 9.84++ 13.87 16.98^ (19.29) (22.81) (8.38)
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS C (CONTINUED) 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.95+ 1.95 1.89 1.85 1.87 1.87
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.51+ (0.11) (0.07) (0.34) (0.47) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 15 59 59 48 69 86
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $676 $659 $466 $697 $1,088 $957
- ------------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees and
expenses, such that Other Expenses do not exceed 0.30% annually. This agreement terminated on January 31, 2005. Effective
February 1, 2005, the fund entered into a similar expense arrangement without reimbursement. This new arrangement will be
in effect until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer service fees
paid to Tarantino LLC. To the extent actual expenses were over this limitation, and the reimbursement had not been in
place, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $0.01 $(0.03) $(0.03) $(0.06) $(0.08) $(0.04)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.20+ 2.17 2.20 2.09 2.12 2.01
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.26+ (0.33) (0.38) (0.58) (0.72) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
^ The fund's net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share, the
total return for the year ended September 30, 2003 would have been 0.74% lower.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS I 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning
of period $10.90 $9.56 $8.15 $10.06 $13.03 $16.47
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income(S) $0.09 $0.09 $0.08 $0.07 $0.06 $0.12
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.03 1.34 1.40 (1.92) (2.91) (1.13)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total from investment operations $1.12 $1.43 $1.48 $(1.85) $(2.85) $(1.01)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.09) $(0.09) $(0.07) $(0.06) $(0.12) $(0.15)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions -- -- -- -- -- (2.26)
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- -- -- (0.02)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total distributions declared
to shareholders $(0.09) $(0.09) $(0.07) $(0.06) $(0.12) $(2.43)
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Net asset value, end of period $11.93 $10.90 $9.56 $8.15 $10.06 $13.03
- ----------------------------------------- ------ ------ ----- ----- ----- ------
Total return (%)& 10.31++ 14.98 18.22^ (18.53) (22.05) (7.45)
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ----------------------------------------------------------------------
CLASS I (CONTINUED) 3/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.95+ 0.95 0.91 0.85 0.87 0.87
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.50+ 0.89 0.92 0.65 0.52 0.84
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 15 59 59 48 69 86
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $32,812 $29,693 $25,809 $27,658 $38,108 $55,327
- ------------------------------------------------------------------------------------------------------------------------------
(S) MFS has contractually agreed, subject to reimbursement, to bear a portion of the fund's "Other Expenses", which are
defined as the fund's operating expenses, exclusive of management, distribution and service, and certain other fees and
expenses, such that Other Expenses do not exceed 0.30% annually. This agreement terminated on January 31, 2005. Effective
February 1, 2005, the fund entered into a similar expense arrangement without reimbursement. This new arrangement will be
in effect until January 31, 2006. In addition, effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of substantially all of Independent Chief Compliance Officer service fees
paid to Tarantino LLC. To the extent actual expenses were over this limitation, and the reimbursement had not been in
place, the net investment income (loss) per share and the ratios would have been:
Net investment income $0.07 $0.07 $0.05 $0.04 $0.03 $0.10
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.20+ 1.17 1.22 1.09 1.12 1.01
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.25+ 0.67 0.61 0.41 0.27 0.70
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without
which performance would be lower.
^ The fund's net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share, the
total return for the year ended September 30, 2003 would have been 0.72% lower.
SEE NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Union Standard Equity Fund (the fund) is a diversified series of MFS Series
Trust XI (the trust). The trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
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 in the fund's portfolio for which
market quotations are available are valued at the last sale or official closing
price as reported by an independent pricing service on the primary market or
exchange on which they are primarily traded, or at the last quoted bid price
for securities in which there were no sales during the day. Equity securities
traded over the counter are valued at the last sales price traded each day as
reported by an independent pricing service, or to the extent there are no sales
reported, such securities are valued on the basis of quotations obtained from
brokers and dealers. 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. When pricing service
information or market quotations are not readily available, securities are
priced at fair value as determined under the direction of the Board of
Trustees. For example, significant events (such as movement in the U.S.
securities market, or other regional and local developments) may occur between
the time that foreign markets close (where the security is principally traded)
and the time that the fund calculates its net asset value (generally, the close
of the NYSE) that may impact the value of securities traded in these foreign
markets. In these cases, the fund may utilize information from an external
vendor or other sources to adjust closing market quotations of foreign equity
securities to reflect what it believes to be the fair value of the securities
as of the fund's valuation time. Because the frequency of significant events is
not predictable, fair valuation of foreign equity securities may occur on a
frequent basis.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a joint
trading account for the purpose of entering into one or more repurchase
agreements.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund will charge a 2% redemption fee (which is retained by the
fund) on proceeds from Class A, Class B, Class C, and Class I shares redeemed
or exchanged within 5 business days following their acquisition (either by
purchase or exchange). Effective April 1, 2005, the fund will no longer charge
a redemption fee. See the fund's prospectus for details. Any redemption fees
charged are accounted for as an addition to paid-in capital.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded
on the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the Statement of Operations, or in unrealized gain/loss if the security is
still held by the fund.
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, for the six months ended March 31, 2005, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for capital losses.
The tax character of distributions declared for the years ended September 30,
2004 and September 30, 2003 was as follows:
9/30/04 9/30/03
Distributions declared from:
----------------------------------------------------------
Ordinary income $270,063 $251,403
----------------------------------------------------------
As of September 30, 2004, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $294,991
----------------------------------------------------------
Capital loss carryforward (12,961,318)
----------------------------------------------------------
Unrealized appreciation 5,502,473
----------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on:
EXPIRATION DATE
September 30, 2008 $(551,829)
----------------------------------------------------------
September 30, 2009 --
----------------------------------------------------------
September 30, 2010 (6,234,544)
----------------------------------------------------------
September 30, 2011 (5,556,028)
----------------------------------------------------------
September 30, 2012 (618,917)
----------------------------------------------------------
Total $(12,961,318)
----------------------------------------------------------
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.
MFS has contractually agreed, subject to reimbursement, to bear a portion of
the fund's "other expenses", which are defined as the fund's operating
expenses, exclusive of management, distribution and service, and certain other
fees and expenses, such that other expenses do not exceed 0.30% annually. This
arrangement is effected by MFS bearing all of the fund's other expenses during
the fund's fiscal year, and the fund paying MFS an expense reimbursement fee
not greater than 0.30% of average daily net assets for Class A, Class B, Class
C, and Class I shares. To the extent that the expense reimbursement fee exceeds
the fund's actual expenses, the excess will be applied to unreimbursed amounts
paid by MFS under the current agreement. This agreement terminated on January
31, 2005. The fund will not be required to reimburse MFS the $97,055 for
expenses borne under this agreement. Effective February 1, 2005, the fund
entered into a similar expense arrangement without reimbursement. This new
arrangement will be in effect until January 31, 2006.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, and pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the fund, all of whom
receive remuneration for their services to the fund from MFS. Certain officers
and Trustees of the fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
fund paid MFS an administrative fee up to the following annual percentage rates
of the fund's average daily net assets:
BEGINNING OF
PERIOD THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
- ----------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
- ----------------------------------------------------------------------------
For the six months ended March 31, 2005, the fund paid MFS $1,625, equivalent to
0.0075% of average daily net assets, to partially reimburse MFS for the costs of
providing administrative services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,097 for the six months ended March 31, 2005, 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 an annual
percentage of its average daily net assets attributable to certain share
classes as compensation for services provided by MFD and financial
intermediaries in connection with the distribution and servicing of its shares.
One component of the plan is a distribution fee and another is a service fee
paid by MFD to financial intermediaries that enter into sales or service
agreements with MFD or its affiliates based on the average daily net assets of
accounts attributable to such intermediaries. The fees are calculated based on
each class" average daily net assets. The maximum distribution and service fees
for each class of shares are as follows:
CLASS A CLASS B CLASS C
Distribution Fee 0.10% 0.75% 0.75%
- -----------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00%
- -----------------------------------------------------------------------------
MFD may retain all or a portion of the service fee, including for accounts for
which there is no financial intermediary of record. Service fees retained by
MFD for the six months ended March 31, 2005 amounted to:
CLASS A CLASS B CLASS C
Service Fee Retained by MFD $657 $10 $2
- -------------------------------------------------------------------------------
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within, for Class A shares, 12
months following the purchase, and, for Class C shares, the first year of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended March
31, 2005 were as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $18 $2,827 $32
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as shareholder
servicing agent. The fee, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the
fund's Trustees. For the period July 1, 2004 through December 31, 2004, the
fund was charged up to 0.0861% of its average daily net assets. For the period
January 1, 2005 through February 28, 2005, the fund was charged up to 0.1035%
of its average daily net assets. Effective March 1, 2005, the fund is charged
up to 0.1159% of its average daily net assets. For the six months ended March
31, 2005, the fund paid MFSC a fee of $21,090 for shareholder services which
equated to 0.0971% of the fund's average daily net assets. Shareholder service
costs include out of pocket expenses and sub accounting services expenses paid
by MFSC on behalf of the fund and subsequently reimbursed to MFSC which
amounted to $13,393, and other costs paid by the fund directly to unaffiliated
vendors for the six months ended March 31, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$6,353,974 and $6,175,061, 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 $35,760,267
----------------------------------------------------------
Gross unrealized appreciation $10,592,799
----------------------------------------------------------
Gross unrealized depreciation (1,793,355)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $8,799,444
----------------------------------------------------------
(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:
Six months ended 3/31/05 Year ended 9/30/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 121,059 $1,407,945 213,353 $2,233,782
- -------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 3,456 40,440 3,811 38,452
- -------------------------------------------------------------------------------------------------------
Shares reacquired (109,124) (1,269,005) (186,115) (1,959,847)
- -------------------------------------------------------------------------------------------------------
Net change 15,391 $179,380 31,049 $312,387
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 19,730 $228,040 31,750 $329,460
- -------------------------------------------------------------------------------------------------------
Shares reacquired (34,522) (396,794) (44,606) (458,733)
- -------------------------------------------------------------------------------------------------------
Net change (14,792) $(168,754) (12,856) $(129,273)
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 3,073 $35,220 24,913 $258,228
- -------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 8 88 -- --
- -------------------------------------------------------------------------------------------------------
Shares reacquired (7,125) (79,624) (12,834) (132,873)
- -------------------------------------------------------------------------------------------------------
Net change (4,044) $(44,316) 12,079 $125,355
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 4,536 $53,450 4,903 $53,372
- -------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 21,537 253,274 22,710 230,276
- -------------------------------------------------------------------------------------------------------
Shares reacquired (992) (11,695) (3,304) (35,483)
- -------------------------------------------------------------------------------------------------------
Net change 25,081 $295,029 24,309 $248,165
- -------------------------------------------------------------------------------------------------------
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the fund for the six months ended March 31, 2005 was $150, and is
included in miscellaneous expense. The fund had no significant borrowings
during the six months ended March 31, 2005.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under
the terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. The SEC
settlement order states that MFS failed to adequately disclose to the Boards of
Trustees and to shareholders of the MFS funds the specifics of its preferred
arrangements with certain brokerage firms selling MFS fund shares. The SEC
settlement order states that MFS had in place policies designed to obtain best
execution of all MFS fund trades. As part of the settlement, MFS retained an
independent compliance consultant to review the completeness of its current
policies and practices regarding disclosure to MFS fund trustees and to MFS
fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial intermediaries who support the sale of MFS
fund shares. Pursuant to the SEC order, on July 28, 2004, MFS transferred these
settlement amounts to the SEC, and those MFS funds entitled to these settlement
amounts accrued an estimate of their pro rata portion of these amounts. The
final distribution plan was approved by the SEC on January 21, 2005, and the
affected MFS funds received the payment on February 16, 2005.
In addition, in February 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain
MFS retail funds was false and misleading because, although the prospectuses
for those funds in the regulators" view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS" former Chief Executive Officer
and former President also reached agreement with the SEC in which they agreed
to, among other terms, monetary fines and temporary suspensions from
association with any investment adviser or registered investment company. These
individuals have resigned their positions with, and will not be returning to,
MFS and the MFS funds. Under the terms of the February Settlements, MFS and the
executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to
increase certain management fees during this period. MFS has also paid an
administrative fine to NH in the amount of $1 million, which will be used for
investor education purposes (NH retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former Trustees of these MFS funds, and
certain officers of MFS have been named as defendants in multiple lawsuits
filed in federal and state courts. The lawsuits variously have been commenced
as class actions or individual actions on behalf of investors who purchased,
held or redeemed shares of the MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
lawsuits generally allege that some or all of the defendants (i) permitted or
acquiesced in market timing and/or late trading in some of the MFS funds,
inadequately disclosed MFS" internal policies concerning market timing and such
matters (ii) received excessive compensation as fiduciaries to the MFS funds,
or (iii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of MFS fund shares and inadequately disclosed MFS" use
of fund assets in this manner. The actions assert that some or all of the
defendants violated the federal securities laws, including the Securities Act
of 1933 and the Securities Exchange Act of 1934, the Investment Company Act of
1940 and the Investment Advisers Act of 1940, the Employee Retirement Income
Security Act of 1974, as well as fiduciary duties and other violations of
common law. Insofar as any of the actions is appropriately brought derivatively
on behalf of any of the MFS funds, any recovery will inure to the benefit of
the MFS funds. The defendants are reviewing the allegations of the multiple
complaints and will respond appropriately. Additional lawsuits based on similar
allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions allocated
in recognition of MFS fund sales. It is not clear whether these amounts will be
sufficient to compensate shareholders for all of the damage they allegedly
sustained, whether certain shareholders or putative class members may have
additional claims to compensation, or whether the damages that may be awarded
in any of the actions will exceed these amounts. In the event the MFS funds
incur any losses, costs or expenses in connection with such lawsuits, the
Boards of Trustees of the affected MFS funds may pursue claims on behalf of
such funds against any party that may have liability to the funds in respect
thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the MFS funds.
- ------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING (unaudited) - 3/31/05
- ------------------------------------------------------------------------------
At a special meeting of shareholders of MFS Union Standard Equity Fund, which
was held on March 23, 2005, the following actions were taken:
ITEM 1. To elect a Board of Trustees:
NUMBER OF DOLLARS
--------------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
Lawrence H. Cohn 499,682,691.97 8,755,056.01
- ------------------------------------------------------------------------------
David H. Gunning 499,705,576.86 8,732,171.12
- ------------------------------------------------------------------------------
William R. Gutow 499,684,657.77 8,753,090.21
- ------------------------------------------------------------------------------
Michael Hegarty 499,551,638.26 8,886,109.72
- ------------------------------------------------------------------------------
J. Atwood Ives 499,776,875.73 8,660,872.25
- ------------------------------------------------------------------------------
Amy B. Lane 499,531,941.03 8,905,806.95
- ------------------------------------------------------------------------------
Robert J. Manning 499,738,594.75 8,699,153.23
- ------------------------------------------------------------------------------
Lawrence T. Perera 499,558,998.58 8,878,749.40
- ------------------------------------------------------------------------------
Robert C. Pozen 499,807,748.41 8,629,999.57
- ------------------------------------------------------------------------------
J. Dale Sherratt 499,681,096.34 8,756,651.64
- ------------------------------------------------------------------------------
Laurie J. Thomsen 499,630,109.61 8,807,638.37
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
A general description of the MFS funds" proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
Type of Information Phone number Hours, Eastern Time
- -------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- -------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- -------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
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M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
UNE-SEM-05/05 3M
ITEM 2. CODE OF ETHICS.
The Registrant has amended its Code of Ethics to reflect that the Registrant's
Principal Financial Officer has changed.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) as conducted within
90 days of the filing date of this Form N-CSR, the registrant's principal
financial officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit: Code of Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST XI
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By (Signature and Title)* ROBERT J. MANNING
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Robert J. Manning, President
Date: May 24, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ROBERT J. MANNING
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Robert J. Manning, President
(Principal Executive Officer)
Date: May 24, 2005
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By (Signature and Title)* MARIA F. DWYER
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Maria F. Dwyer, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: May 24, 2005
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* Print name and title of each signing officer under his or her signature.