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)
Susan S. Newton
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, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) UNION STANDARD(R) EQUITY FUND 3/31/06
SEMIANNUAL REPORT
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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EXPENSE TABLE 3
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PORTFOLIO OF INVESTMENTS 5
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FINANCIAL STATEMENTS 9
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NOTES TO FINANCIAL STATEMENTS 17
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BOARD REVIEW OF INVESTMENT
ADVISORY AGREEMENT 23
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PROXY VOTING POLICIES AND
INFORMATION 23
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QUARTERLY PORTFOLIO DISCLOSURE 23
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CONTACT INFORMATION BACK COVER
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS INTENDED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm
in our everyday lives. What does all of this mean to you as an investor?
In times like these, it helps to know that you're working with a seasoned
investment professional who has experience to guide you through difficult
times. At MFS(R), we believe our investment management team has the knowledge
and confidence to navigate through difficult cycles and at the
same time see through adversity to find investment opportunities for our
clients and shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer - through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
May 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Stocks 98.1%
Cash & Other Assets 1.9%
TOP 10 HOLDINGS
General Electric Co. 4.2%
------------------------------------------------
Exxon Mobil Corp. 4.2%
------------------------------------------------
Johnson & Johnson 2.6%
------------------------------------------------
J.P. Morgan Chase & Co. 2.4%
------------------------------------------------
Altria Group, Inc. 2.3%
------------------------------------------------
International Business Machines Corp. 2.2%
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Bank of America Corp. 2.2%
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Verizon Communications, Inc. 2.1%
------------------------------------------------
Merck & Co., Inc. 2.1%
------------------------------------------------
Goldman Sachs Group, Inc. 2.1%
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EQUITY SECTORS
Financial Services 17.6%
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Technology 14.3%
------------------------------------------------
Industrial Goods & Services 14.2%
------------------------------------------------
Health Care 10.8%
------------------------------------------------
Consumer Staples 9.0%
------------------------------------------------
Energy 8.6%
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Utilities & Communications 6.9%
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Basic Materials 5.0%
------------------------------------------------
Retailing 4.5%
------------------------------------------------
Leisure 4.5%
------------------------------------------------
Transportation 1.2%
------------------------------------------------
Autos & Housing 0.8%
------------------------------------------------
Special Products & Services 0.7%
------------------------------------------------
Percentages are based on net assets as of 3/31/06.
The portfolio is actively managed, and current holdings may be different.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
OCTOBER 1, 2005 THROUGH MARCH 31, 2006.
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, 2005 through
March 31, 2006.
ACTUAL EXPENSES
The first line for each share class in the following table 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 following table 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.
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Expenses
Beginning Ending Paid During
Annualized Account Account Period (p)
Expense Value Value 10/01/05
Share Class Ratio 10/01/05 3/31/06 -3/31/06
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Actual 1.30% $1,000.00 $1,070.60 $6.71
A -----------------------------------------------------------------
Hypothetical(h) 1.30% $1,000.00 $1,018.45 $6.54
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Actual 1.95% $1,000.00 $1,066.20 $10.05
B -----------------------------------------------------------------
Hypothetical(h) 1.95% $1,000.00 $1,015.21 $9.80
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Actual 1.95% $1,000.00 $1,066.20 $10.05
C -----------------------------------------------------------------
Hypothetical(h) 1.95% $1,000.00 $1,015.21 $9.80
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Actual 0.95% $1,000.00 $1,071.60 $4.91
I -----------------------------------------------------------------
Hypothetical(h) 0.95% $1,000.00 $1,020.19 $4.78
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(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS (unaudited) - 3/31/06
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based
asset classes.
Common Stocks - 98.1%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 3.1%
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Lockheed Martin Corp. 11,063 $ 831,163
Northrop Grumman Corp. 10,809 738,147
-----------
$ 1,569,310
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Banks & Credit Companies - 5.5%
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Bank of America Corp. 24,296 $ 1,106,440
J.P. Morgan Chase & Co. 29,600 1,232,544
Ryder System, Inc. 10,088 451,741
-----------
$ 2,790,725
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Broadcast & Cable TV - 3.2%
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Time Warner, Inc. 38,370 $ 644,232
Viacom, Inc., "B" (n) 11,223 435,451
Walt Disney Co. 19,900 555,011
-----------
$ 1,634,694
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Brokerage & Asset Managers - 6.1%
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Bear Stearns Cos., Inc. 5,200 $ 721,240
Goldman Sachs Group, Inc. 6,600 1,035,936
Lehman Brothers Holdings, Inc. 5,500 794,915
Merrill Lynch & Co., Inc. 6,496 511,625
-----------
$ 3,063,716
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Business Services - 0.7%
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Accenture Ltd., "A" 11,900 $ 357,833
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Chemicals - 2.4%
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Dow Chemical Co. 9,600 $ 389,760
PPG Industries, Inc. 7,100 449,785
Rohm & Haas Co. 7,200 351,864
-----------
$ 1,191,409
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Computer Software - 3.0%
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Adobe Systems, Inc. (n) 14,900 $ 520,308
Compuware Corp. (n) 62,468 489,124
Microsoft Corp. 19,320 525,697
-----------
$ 1,535,129
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Computer Software - Systems - 3.7%
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Apple Computer, Inc. (n) 11,500 $ 721,280
International Business Machines Corp. 13,600 1,121,592
-----------
$ 1,842,872
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Construction - 0.8%
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Masco Corp. 12,700 $ 412,623
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Consumer Goods & Services - 3.5%
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Colgate-Palmolive Co. 10,900 $ 622,390
Kimberly-Clark Corp. 7,440 430,032
Procter & Gamble Co. 12,560 723,707
-----------
$ 1,776,129
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Electrical Equipment - 4.2%
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General Electric Co. 61,348 $ 2,133,683
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Electronics - 4.6%
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Amphenol Corp., "A" 7,448 $ 388,637
Intel Corp. 38,100 737,235
PerkinElmer, Inc. 17,883 419,714
SanDisk Corp. (n) 5,900 339,368
Texas Instruments, Inc. 13,165 427,468
-----------
$ 2,312,422
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Energy - Independent - 0.7%
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Frontier Oil Corp. 6,000 $ 356,100
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Energy - Integrated - 7.9%
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Chevron Corp. 15,100 $ 875,347
ConocoPhillips 16,200 1,023,030
Exxon Mobil Corp. 34,732 2,113,790
-----------
$ 4,012,167
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Food & Drug Stores - 2.6%
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CVS Corp. 22,540 $ 673,270
Kroger Co. 31,800 647,448
-----------
$ 1,320,718
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Food & Non-Alcoholic Beverages - 3.2%
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General Mills, Inc. 12,789 $ 648,147
PepsiCo, Inc. 17,100 988,209
-----------
$ 1,636,356
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Forest & Paper Products - 1.4%
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International Paper Co. 19,700 $ 681,029
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Gaming & Lodging - 1.3%
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Harrah's Entertainment, Inc. 8,253 $ 643,404
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General Merchandise - 1.9%
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Federated Department Stores, Inc. 6,119 $ 446,687
J.C. Penney Co., Inc. 8,500 513,485
-----------
$ 960,172
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Insurance - 6.0%
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American International Group, Inc. 13,738 $ 907,944
Hartford Financial Services Group, Inc. 8,697 700,543
MetLife, Inc. 15,000 725,550
St. Paul Travelers Cos., Inc. 16,100 672,819
-----------
$ 3,006,856
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Machinery & Tools - 6.9%
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AGCO Corp. (n) 21,000 $ 435,540
Cummins, Inc. 6,600 693,660
Deere & Co. 6,900 545,445
Harsco Corp. 5,500 454,410
Illinois Tool Works, Inc. 7,300 703,063
Parker Hannifin Corp. 3,700 298,257
Timken Co. 11,587 373,912
-----------
$ 3,504,287
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Medical & Health Technology & Services - 2.5%
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Express Scripts, Inc. (n) 3,700 $ 325,230
HCA, Inc. 11,400 522,006
Manor Care, Inc. 9,000 399,150
-----------
$ 1,246,386
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Medical Equipment - 2.0%
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Fisher Scientific International, Inc. (n) 7,475 $ 508,674
Zimmer Holdings, Inc. (n) 7,735 522,886
-----------
$ 1,031,560
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Network & Telecom - 3.0%
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Cisco Systems, Inc. (n) 16,960 $ 367,523
Corning, Inc. (n) 28,900 777,699
QUALCOMM, Inc. 7,000 354,270
-----------
$ 1,499,492
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Pharmaceuticals - 6.3%
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Johnson & Johnson 22,438 $ 1,328,778
Merck & Co., Inc. 29,790 1,049,502
Wyeth 16,201 786,073
-----------
$ 3,164,353
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Specialty Chemicals - 1.2%
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Praxair, Inc. 10,900 $ 601,135
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Telephone Services - 4.2%
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AT&T, Inc. 16,150 $ 436,696
BellSouth Corp. 18,531 642,099
Verizon Communications, Inc. 30,845 1,050,581
-----------
$ 2,129,376
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Tobacco - 2.3%
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Altria Group, Inc. 16,188 $ 1,147,082
- --------------------------------------------------------------------------------------------------
Trucking - 1.2%
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CNF, Inc. 7,300 $ 364,562
YRC Worldwide, Inc. (n) 6,800 258,808
-----------
$ 623,370
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Utilities - Electric Power - 2.7%
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CMS Energy Corp. (n) 29,900 $ 387,205
PPL Corp. 11,300 332,220
TXU Corp. 14,900 666,924
-----------
$ 1,386,349
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TOTAL COMMON STOCKS (IDENTIFIED COST, $40,488,162) $49,570,737
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Short-Term Obligations - 1.1%
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Citigroup Funding, Inc., 4.83%, due 4/03/06, at Amortized Cost(y) $ 566,000 $ 565,848
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $41,054,010) $50,136,585
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Other Assets, Less Liabilities - 0.8% 388,060
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NET ASSETS - 100.0% $50,524,645
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(n) Non-income producing security.
(y) The rate shown represents an annualized yield at time of purchase.
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 the fund.
AT 3/31/06
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $41,054,010) $50,136,585
Cash 673
Receivable for fund shares sold 350,043
Dividends receivable 65,679
Receivable from investment adviser 48,045
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Total assets $50,601,025
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for fund shares reacquired $5,668
Payable to affiliates
Management fee 903
Shareholder servicing costs 2,227
Distribution and service fees 193
Administrative services fee 43
Payable for independent trustees' compensation 211
Accrued expenses and other liabilities 67,135
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Total liabilities $76,380
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Net assets $50,524,645
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NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $49,125,950
Unrealized appreciation (depreciation) on investments 9,082,575
Accumulated net realized gain (loss) on investments (7,904,242)
Undistributed net investment income 220,362
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Net assets $50,524,645
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Shares of beneficial interest outstanding 3,846,741
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Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $10,583,203
Shares outstanding 808,761
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Net asset value per share $13.09
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Offering price per share (100/94.25 X net asset value per share) $13.89
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,098,285
Shares outstanding 162,923
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Net asset value and offering price per share $12.88
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Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,187,888
Shares outstanding 92,678
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Net asset value and offering price per share $12.82
- ------------------------------------------------------------------------------------------------------
Class I shares
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Net assets $36,655,269
Shares outstanding 2,782,379
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Net asset value, offering price, and redemption price per share $13.17
- ------------------------------------------------------------------------------------------------------
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 earned in investment income and
accrued in expenses. It also describes any gains and/or losses generated by
fund operations.
SIX MONTHS ENDED 3/31/06
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $465,297
Interest 15,766
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Total investment income $481,063
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $156,730
Distribution and service fees 32,435
Shareholder servicing costs 29,927
Administrative services fee 7,128
Independent trustees' compensation 1,392
Custodian fee 11,135
Shareholder communications 18,125
Auditing fees 21,915
Legal fees 2,258
Registration fees 23,757
Miscellaneous 4,754
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Total expenses $309,556
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Fees paid indirectly (1,451)
Reduction of expenses by investment adviser (48,394)
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Net expenses $259,711
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Net investment income $221,352
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified
cost basis) $1,545,114
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Change in unrealized appreciation (depreciation) on investments $1,570,901
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $3,116,015
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Change in net assets from operations $3,337,367
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SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
3/31/06 9/30/05
(UNAUDITED)
CHANGE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $221,352 $489,194
Net realized gain (loss) on investments 1,545,114 3,526,902
Net unrealized gain (loss) on investments 1,570,901 1,992,392
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $3,337,367 $6,008,488
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DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class A $(87,994) $(41,591)
Class B (1,748) --
Class C (2,548) (128)
Class I (396,025) (253,272)
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Total distributions declared to shareholders $(488,315) $(294,991)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $610,106 $870,203
- ------------------------------------------------------------------------------------------------------
Redemption fees $-- $20
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Total change in net assets $3,459,158 $6,583,720
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NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 47,065,487 40,481,767
At end of period (including undistributed net investment
income of $220,362 and $487,325, respectively) $50,524,645 $47,065,487
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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. 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 share class (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 9/30
ENDED -----------------------------------------------------------------
CLASS A 3/31/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $12.33 $10.82 $9.49 $8.09 $9.98 $12.91
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.04 $0.10 $0.06 $0.05 $0.03 $0.02
Net realized and unrealized gain (loss)
on investments and foreign currency 0.83 1.47 1.33 1.38 (1.90) (2.88)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.87 $1.57 $1.39 $1.43 $(1.87) $(2.86)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.06) $(0.06) $(0.03) $(0.02) $(0.07)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.09 $12.33 $10.82 $9.49 $8.09 $9.98
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 7.06(n) 14.51 14.64 17.66(j) (18.76) (22.27)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.50(a) 1.54 1.52 1.57 1.44 1.47
Expenses after expense reductions (f) 1.30(a) 1.30 1.30 1.26 1.20 1.22
Net investment income 0.70(a) 0.88 0.54 0.57 0.30 0.18
Portfolio turnover 24 48 59 59 48 69
Net assets at end of period (000 Omitted) $10,583 $9,994 $7,896 $6,634 $5,872 $9,493
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED -----------------------------------------------------------------
CLASS B 3/31/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $12.09 $10.62 $9.33 $7.98 $9.89 $12.82
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.00(w) $0.03 $(0.01) $(0.01) $(0.03) $(0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency 0.80 1.44 1.30 1.36 (1.88) (2.87)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.80 $1.47 $1.29 $1.35 $(1.91) $(2.92)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.01) $-- $-- $-- $-- $(0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.88 $12.09 $10.62 $9.33 $7.98 $9.89
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.62(n) 13.84 13.83 16.92(j) (19.31) (22.77)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.15(a) 2.19 2.17 2.21 2.09 2.12
Expenses after expense reductions (f) 1.95(a) 1.95 1.95 1.90 1.85 1.87
Net investment income (loss) 0.05(a) 0.25 (0.11) (0.08) (0.34) (0.46)
Portfolio turnover 24 48 59 59 48 69
Net assets at end of period (000 Omitted) $2,098 $2,082 $2,234 $2,082 $2,534 $3,211
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED -----------------------------------------------------------------
CLASS C 3/31/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $12.06 $10.59 $9.30 $7.95 $9.85 $12.76
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.00(w) $0.03 $(0.01) $(0.01) $(0.03) $(0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency 0.80 1.44 1.30 1.36 (1.87) (2.86)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.80 $1.47 $1.29 $1.35 $(1.90) $(2.91)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.04) $(0.00)(w) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.82 $12.06 $10.59 $9.30 $7.95 $9.85
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.62(n) 13.90 13.87 16.98(j) (19.29) (22.81)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.15(a) 2.19 2.17 2.20 2.09 2.12
Expenses after expense reductions (f) 1.95(a) 1.95 1.95 1.89 1.85 1.87
Net investment income (loss) 0.06(a) 0.23 (0.11) (0.07) (0.34) (0.47)
Portfolio turnover 24 48 59 59 48 69
Net assets at end of period (000 Omitted) $1,188 $790 $659 $466 $697 $1,088
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED -----------------------------------------------------------------
CLASS I 3/31/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $12.43 $10.90 $9.56 $8.15 $10.06 $13.03
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.07 $0.15 $0.09 $0.08 $0.07 $0.06
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.81 1.47 1.34 1.40 (1.92) (2.91)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.88 $1.62 $1.43 $1.48 $(1.85) $(2.85)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.14) $(0.09) $(0.09) $(0.07) $(0.06) $(0.12)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.17 $12.43 $10.90 $9.56 $8.15 $10.06
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 7.16(n) 14.94 14.98 18.22(j) (18.53) (22.05)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.15(a) 1.19 1.17 1.22 1.09 1.12
Expenses after expense reductions (f) 0.95(a) 0.95 0.95 0.91 0.85 0.87
Net investment income 1.05(a) 1.23 0.89 0.92 0.65 0.52
Portfolio turnover 24 48 59 59 48 69
Net assets at end of period
(000 Omitted) $36,655 $34,200 $29,693 $25,809 $27,658 $38,108
- ------------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(j) 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 Class A, Class B, Class C, and Class I total
returns for the year ended September 30, 2003 would have been lower by
approximately 0.73%, 0.74%, 0.74%, and 0.72%, respectively.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been
lower.
(s) From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS(R) Union Standard(R) Equity Fund (the fund) is a 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, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales during
the day, equity securities are generally valued at the last quoted bid price
as reported by an independent pricing service on the market or exchange on
which they are primarily traded. Short-term instruments with a maturity at
issuance of 365 days or less are generally valued at amortized cost, which
approximates market value. Securities and other assets generally valued on the
basis of information from an independent pricing service may also be valued on
the basis of information from brokers and dealers. 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.
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 charged a 2% redemption fee (which was 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 no longer charges 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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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, 2006, the fund's custodian
fees were reduced by $1,451 under this arrangement. This amount is shown as a
reduction of total expenses on the Statement of Operations. 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, 2006, the fund did
not receive any credits under this agreement. Effective January 1, 2006, the
commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the fund
in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share.
Temporary differences which arise from recognizing certain items of income,
expense, gain or loss in different periods for financial statement and tax
purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals and non-
taxable distributions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
Ordinary income (including any short-term
capital gains) $294,991 $270,063
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF MARCH 31, 2006
Cost of investments $41,068,950
-----------------------------------------------------------
Gross appreciation $10,379,179
Gross depreciation (1,311,544)
-----------------------------------------------------------
Net unrealized appreciation (depreciation) $9,067,635
AS OF SEPTEMBER 30, 2006
Undistributed ordinary income $487,325
Capital loss carryforwards (9,434,416)
Net unrealized appreciation (depreciation) 7,496,734
The aggregate cost above includes prior fiscal year end tax adjustments.
As of September 30, 2005, the fund had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
September 30, 2010 $(3,259,471)
September 30, 2011 (5,556,028)
September 30, 2012 (618,917)
-----------------------------------------------------------
Total $(9,434,416)
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of the fund's average daily net assets.
The investment adviser has contractually agreed to pay a portion of the fund's
operating expenses, exclusive of management, distribution and service, and
certain other fees and expenses, such that operating expenses do not exceed
0.30% annually of the fund's average daily net assets. This contractual fee
arrangement will continue until February 1, 2007. For the six months ended
March 31, 2006, this reduction amounted to $48,231 and is reflected as a
reduction of total expenses in the Statement of Operations.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $3,045 for the six months ended March 31, 2006,
as its portion of the initial sales charge on sales of Class A shares of the
fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) FEE
Class A 0.10% 0.25% 0.35% 0.35% $17,744
Class B 0.75% 0.25% 1.00% 1.00% 10,500
Class C 0.75% 0.25% 1.00% 1.00% 4,191
- --------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $32,435
(1) In accordance with the distribution plan for certain classes, the fund pays distribution and/or
service fees up to these annual percentage rates of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the distribution plan for the six
months ended March 31, 2006 based on each class' average daily net assets.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. All contingent
deferred sales charges are paid to MFD and during the six months ended March
31, 2006, were as follows:
AMOUNT
Class A $11
Class B 1,227
Class C 208
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the six months ended March 31, 2006, the fee was $23,149, which equated to
0.0960% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the six months ended March 31, 2006, these
costs amounted to $3,063.
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, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000.
The administrative services fee incurred for the six months ended
March 31, 2006 was equivalent to an annual effective rate of 0.0296% of the
fund's average daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to 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, MFD, and MFSC.
OTHER - 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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended March 31, 2006, the fee paid to Tarantino
LLC was $197. MFS has agreed to reimburse the fund for a portion of the
payments made by the funds to Tarantino LLC in the amount of $163, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office
space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$11,866,551 and $11,375,231, respectively.
(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 YEAR ENDED
MARCH 31, 2006 SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 136,324 $1,719,740 275,526 $3,268,191
Class B 13,616 168,393 48,372 567,795
Class C 35,223 445,934 21,507 252,006
Class I 5,481 70,647 7,633 91,490
- ------------------------------------------------------------------------------
190,644 $2,404,714 353,038 $4,179,482
Shares issued to shareholders in
reinvestment of distributions
Class A 6,748 $84,887 3,456 $40,440
Class B 134 1,667 -- --
Class C 131 1,617 8 88
Class I 26,578 336,205 21,537 253,272
- ------------------------------------------------------------------------------
33,591 $424,376 25,001 $293,800
Shares reacquired
Class A (144,584) $(1,824,848) (198,667) $(2,345,095)
Class B (23,039) (287,443) (86,498) (1,014,404)
Class C (8,244) (102,500) (18,115) (209,726)
Class I (334) (4,193) (2,811) (33,854)
- ------------------------------------------------------------------------------
(176,201) $(2,218,984) (306,091) $(3,603,079)
Net change
Class A (1,512) $(20,221) 80,315 $963,536
Class B (9,289) (117,383) (38,126) (446,609)
Class C 27,110 345,051 3,400 42,368
Class I 31,725 402,659 26,359 310,908
- ------------------------------------------------------------------------------
48,034 $610,106 71,948 $870,203
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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, 2006 was $158, and is
included in miscellaneous expense on the Statement of Operations. The fund had
no significant borrowings during the six months ended March 31, 2006.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
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 Proxy Voting 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 trust 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 trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE
Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site 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)
MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
UNE-SEM-5/06 1M
MFS(R) MID CAP VALUE FUND 3/31/06
SEMIANNUAL REPORT
- ---------------------------------------------------
LETTER FROM THE CEO 1
- ---------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------
FINANCIAL STATEMENTS 9
- ---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 22
- ---------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 32
- ---------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 32
- ---------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 32
- ---------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS INTENDED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At
MFS(R), we believe our investment management team has the knowledge and
confidence to navigate through difficult cycles and at the same time see
through adversity to find investment opportunities for our clients and
shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer - through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
May 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Stocks 99.0%
Cash & Other Net Assets 1.0%
TOP 10 HOLDINGS
GlobalSantaFe Corp. 3.0%
------------------------------------------------
McAfee, Inc. 2.7%
------------------------------------------------
Nortel Networks Corp. 2.7%
------------------------------------------------
Investors Financial Services Corp. 2.6%
------------------------------------------------
PETsMART, Inc. 2.5%
------------------------------------------------
Endurance Specialty Holdings, Ltd. 2.5%
------------------------------------------------
Nalco Holding Co. 2.2%
------------------------------------------------
Owens-Illinois, Inc. 2.2%
------------------------------------------------
Williams Cos., Inc. 2.1%
------------------------------------------------
Bowater, Inc. 2.0%
------------------------------------------------
EQUITY SECTORS
Financial Services 25.0%
------------------------------------------------
Technology 12.3%
------------------------------------------------
Energy 11.5%
------------------------------------------------
Utilities & Communications 9.1%
------------------------------------------------
Basic Materials 7.9%
------------------------------------------------
Health Care 7.1%
------------------------------------------------
Retailing 6.8%
------------------------------------------------
Autos & Housing 6.7%
------------------------------------------------
Leisure 5.2%
------------------------------------------------
Transportation 4.0%
------------------------------------------------
Consumer Staples 2.5%
------------------------------------------------
Industrial Goods & Services 0.9%
------------------------------------------------
Percentages are based on net assets as of 3/31/06.
The portfolio is actively managed, and current holdings may be different.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
OCTOBER 1, 2005 THROUGH MARCH 31, 2006.
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, 2005 through
March 31, 2006.
ACTUAL EXPENSES
The first line for each share class in the following table 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 following table 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.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 10/01/05-
Class Ratio 10/01/05 3/31/06 3/31/06
- --------------------------------------------------------------------------------
Actual 1.34% $1,000.00 $1,065.80 $6.90
A ------------------------------------------------------------------------
Hypothetical (h) 1.34% $1,000.00 $1,018.25 $6.74
- --------------------------------------------------------------------------------
Actual 1.99% $1,000.00 $1,061.60 $10.23
B -------------------------------------------------------------------------
Hypothetical (h) 1.99% $1,000.00 $1,015.01 $10.00
- --------------------------------------------------------------------------------
Actual 1.99% $1,000.00 $1,062.30 $10.23
C ------------------------------------------------------------------------
Hypothetical (h) 1.99% $1,000.00 $1,015.01 $10.00
- --------------------------------------------------------------------------------
Actual 0.99% $1,000.00 $1,067.10 $5.10
I ------------------------------------------------------------------------
Hypothetical (h) 0.99% $1,000.00 $1,020.00 $4.99
- --------------------------------------------------------------------------------
Actual 1.49% $1,000.00 $1,064.60 $7.67
R ------------------------------------------------------------------------
Hypothetical (h) 1.49% $1,000.00 $1,017.50 $7.49
- --------------------------------------------------------------------------------
Actual 2.09% $1,000.00 $1,061.60 $10.74
R1 ------------------------------------------------------------------------
Hypothetical (h) 2.09% $1,000.00 $1,014.51 $10.50
- --------------------------------------------------------------------------------
Actual 1.74% $1,000.00 $1,063.70 $8.95
R2 ------------------------------------------------------------------------
Hypothetical (h) 1.74% $1,000.00 $1,016.26 $8.75
- --------------------------------------------------------------------------------
Actual 1.64% $1,000.00 $1,064.30 $8.44
R3 ------------------------------------------------------------------------
Hypothetical (h) 1.64% $1,000.00 $1,016.75 $8.25
- --------------------------------------------------------------------------------
Actual 1.39% $1,000.00 $1,065.00 $7.16
R4 ------------------------------------------------------------------------
Hypothetical (h) 1.39% $1,000.00 $1,018.00 $6.99
- --------------------------------------------------------------------------------
Actual 1.09% $1,000.00 $1,066.40 $5.62
R5 ------------------------------------------------------------------------
Hypothetical (h) 1.09% $1,000.00 $1,019.50 $5.49
- --------------------------------------------------------------------------------
Actual 1.59% $1,000.00 $1,063.50 $8.18
529A ------------------------------------------------------------------------
Hypothetical (h) 1.59% $1,000.00 $1,017.00 $8.00
- --------------------------------------------------------------------------------
Actual 2.24% $1,000.00 $1,060.60 $11.51
529B ------------------------------------------------------------------------
Hypothetical (h) 2.24% $1,000.00 $1,013.76 $11.25
- --------------------------------------------------------------------------------
Actual 2.24% $1,000.00 $1,060.40 $11.51
529C ------------------------------------------------------------------------
Hypothetical (h) 2.24% $1,000.00 $1,013.76 $11.25
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS (unaudited) - 3/31/06
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based
asset classes.
Common Stocks - 99.0%
- ---------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ---------------------------------------------------------------------------------------------------
Automotive- 1.0%
- ---------------------------------------------------------------------------------------------------
Johnson Controls, Inc. 100,000 $ 7,593,000
- ---------------------------------------------------------------------------------------------------
Banks & Credit Companies - 14.4%
- ---------------------------------------------------------------------------------------------------
BankUnited Financial Corp., "A" 160,000 $ 4,326,400
Commerce Bancorp, Inc. 310,000 11,361,500
Compass Bancshares, Inc. 175,000 8,856,750
First Horizon National Corp. 220,000 9,163,000
Investors Financial Services Corp. 450,000 21,091,500
Marshall & Ilsley Corp. 43,500 1,895,730
Mercantile Bankshares Corp. 200,000 7,690,000
North Fork Bancorporation, Inc. 300,000 8,649,000
PNC Financial Services Group, Inc. 180,000 12,115,800
Sovereign Bancorp, Inc. 550,000 12,050,500
TCF Financial Corp. 275,000 7,081,250
Zions Bancorporation 125,000 10,341,250
------------
$114,622,680
- ---------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.5%
- ---------------------------------------------------------------------------------------------------
Mellon Financial Corp. 300,000 $ 10,680,000
Waddell & Reed Financial, Inc., "A" 400,000 9,240,000
------------
$ 19,920,000
- ---------------------------------------------------------------------------------------------------
Chemicals - 2.2%
- ---------------------------------------------------------------------------------------------------
Nalco Holding Co. (n) 1,000,000 $ 17,700,000
- ---------------------------------------------------------------------------------------------------
Computer Software - 6.1%
- ---------------------------------------------------------------------------------------------------
Check Point Software Technologies Ltd. (n) 300,000 $ 6,006,000
Compuware Corp. (n) 1,000,000 7,830,000
McAfee, Inc. (n) 900,000 21,897,000
TIBCO Software, Inc. (n) 1,500,000 12,540,000
------------
$ 48,273,000
- ---------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.3%
- ---------------------------------------------------------------------------------------------------
Sun Microsystems, Inc. (n) 2,000,000 $ 10,260,000
- ---------------------------------------------------------------------------------------------------
Construction - 2.9%
- ---------------------------------------------------------------------------------------------------
D.R. Horton, Inc. 400,000 $ 13,288,000
Pulte Homes, Inc. 250,000 9,605,000
------------
$ 22,893,000
- ---------------------------------------------------------------------------------------------------
Consumer Goods & Services - 2.5%
- ---------------------------------------------------------------------------------------------------
Estee Lauder Cos., Inc., "A" 385,000 $ 14,318,150
Scotts Miracle-Gro Co. 130,000 5,948,800
------------
$ 20,266,950
- ---------------------------------------------------------------------------------------------------
Containers - 3.7%
- ---------------------------------------------------------------------------------------------------
Owens-Illinois, Inc. (n) 999,850 $ 17,367,395
Smurfit-Stone Container Corp. (n) 900,000 12,213,000
------------
$ 29,580,395
- ---------------------------------------------------------------------------------------------------
Electrical Equipment - 0.9%
- ---------------------------------------------------------------------------------------------------
W.W. Grainger, Inc. 100,000 $ 7,535,000
- ---------------------------------------------------------------------------------------------------
Electronics - 2.2%
- ---------------------------------------------------------------------------------------------------
Diebold, Inc. 68,700 $ 2,823,570
Novellus Systems, Inc. (n) 200,000 4,800,000
SanDisk Corp. (n) 175,000 10,066,000
------------
$ 17,689,570
- ---------------------------------------------------------------------------------------------------
Energy - Independent - 3.6%
- ---------------------------------------------------------------------------------------------------
Newfield Exploration Co. (n) 180,000 $ 7,542,000
Noble Energy, Inc. 300,000 13,176,000
Riata Energy, Inc. (a)(n) 500,000 7,625,000
------------
$ 28,343,000
- ---------------------------------------------------------------------------------------------------
Energy - Integrated - 1.8%
- ---------------------------------------------------------------------------------------------------
Amerada Hess Corp. 100,000 $ 14,240,000
- ---------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.8%
- ---------------------------------------------------------------------------------------------------
Kroger Co. 300,000 $ 6,108,000
- ---------------------------------------------------------------------------------------------------
Forest & Paper Products - 2.0%
- ---------------------------------------------------------------------------------------------------
Bowater, Inc. 550,000 $ 16,269,000
- ---------------------------------------------------------------------------------------------------
Furniture & Appliances - 2.8%
- ---------------------------------------------------------------------------------------------------
Tempur-Pedic International, Inc. (n) 850,000 $ 12,027,500
Tupperware Brands Corp. 500,000 10,295,000
------------
$ 22,322,500
- ---------------------------------------------------------------------------------------------------
General Merchandise - 2.2%
- ---------------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 229,500 $ 6,104,700
Federated Department Stores, Inc. 160,400 11,709,200
------------
$ 17,813,900
- ---------------------------------------------------------------------------------------------------
Health Maintenance Organizations - 2.8%
- ---------------------------------------------------------------------------------------------------
CIGNA Corp. 100,000 $ 13,062,000
Health Net, Inc. (n) 175,000 8,893,500
------------
$ 21,955,500
- ---------------------------------------------------------------------------------------------------
Insurance - 6.6%
- ---------------------------------------------------------------------------------------------------
Endurance Specialty Holdings Ltd. 600,000 $ 19,530,000
Genworth Financial, Inc., "A" 355,220 11,875,005
MGIC Investment Corp. 175,000 11,660,250
PartnerRe Ltd. 150,000 9,313,500
------------
$ 52,378,755
- ---------------------------------------------------------------------------------------------------
Leisure & Toys - 0.9%
- ---------------------------------------------------------------------------------------------------
Hasbro, Inc. 350,000 $ 7,385,000
- ---------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 3.0%
- ---------------------------------------------------------------------------------------------------
HealthSouth Corp. (n) 1,900,000 $ 9,481,000
Tenet Healthcare Corp. (n) 2,000,000 14,760,000
------------
$ 24,241,000
- ---------------------------------------------------------------------------------------------------
Medical Equipment - 1.3%
- ---------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (n) 225,000 $ 10,494,000
- ---------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.7%
- ---------------------------------------------------------------------------------------------------
Energen Corp. 150,000 $ 5,250,000
- ---------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 2.1%
- ---------------------------------------------------------------------------------------------------
Williams Cos., Inc. 800,000 $ 17,112,000
- ---------------------------------------------------------------------------------------------------
Network & Telecom - 2.7%
- ---------------------------------------------------------------------------------------------------
Nortel Networks Corp. (n) 7,000,000 $ 21,350,000
- ---------------------------------------------------------------------------------------------------
Oil Services- 6.1%
- ---------------------------------------------------------------------------------------------------
BJ Services Co. 250,000 $ 8,650,000
GlobalSantaFe Corp. 400,000 24,300,000
Pride International, Inc. (n) 250,000 7,795,000
Smith International, Inc. 200,000 7,792,000
------------
$ 48,537,000
- ---------------------------------------------------------------------------------------------------
Printing & Publishing - 4.3%
- ---------------------------------------------------------------------------------------------------
ADVO, Inc. 275,000 $ 8,800,000
Lee Enterprises, Inc. 300,000 9,987,000
New York Times Co., "A" 300,000 7,593,000
Washington Post Co., "B" 10,000 7,767,500
------------
$ 34,147,500
- ---------------------------------------------------------------------------------------------------
Railroad & Shipping - 2.1%
- ---------------------------------------------------------------------------------------------------
Norfolk Southern Corp. 200,000 $ 10,814,000
Overseas Shipholding Group, Inc. 125,000 5,991,250
------------
$ 16,805,250
- ---------------------------------------------------------------------------------------------------
Real Estate - 1.5%
- ---------------------------------------------------------------------------------------------------
DiamondRock Hospitality Co. 484,050 $ 6,684,730
Mills Corp. 190,000 5,320,000
------------
$ 12,004,730
- ---------------------------------------------------------------------------------------------------
Specialty Stores - 3.8%
- ---------------------------------------------------------------------------------------------------
Aeropostale, Inc. (n) 350,000 $ 10,556,000
PETsMART, Inc. 700,000 19,698,000
------------
$ 30,254,000
- ---------------------------------------------------------------------------------------------------
Telephone Services - 1.2%
- ---------------------------------------------------------------------------------------------------
CenturyTel, Inc. 150,000 $ 5,868,000
IDT Corp., "B" (n) 365,000 4,040,550
------------
$ 9,908,550
- ---------------------------------------------------------------------------------------------------
Trucking - 1.9%
- ---------------------------------------------------------------------------------------------------
CNF, Inc. 300,000 $ 14,982,000
- ---------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.1%
- ---------------------------------------------------------------------------------------------------
AES Corp. (n) 407,100 $ 6,945,126
CMS Energy Corp. (n) 278,000 3,600,100
Constellation Energy Group, Inc. 75,000 4,103,250
FPL Group, Inc. 118,200 4,744,548
Northeast Utilities 410,000 8,007,300
NRG Energy, Inc. (n) 300,000 13,566,000
------------
$ 40,966,324
- ---------------------------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $739,110,404) $789,201,604
- ---------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.5%
- ---------------------------------------------------------------------------------------------------
Abbey National North America LLC, 4.84%, due 4/03/06, at
Amortized Cost (y) $11,847,000 $ 11,843,814
- ---------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $750,954,218) (k) $801,045,418
- ---------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.5)% (4,305,452)
- ---------------------------------------------------------------------------------------------------
Net Assets - 100.0% $796,739,966
- ---------------------------------------------------------------------------------------------------
(a) SEC Rule 144A restriction.
(k) As of March 31, 2006, the fund had one security that was fair valued, aggregating $7,625,000
and 1.0% of net assets in accordance with the policies adopted by the Board of Trustees.
(n) Non-income producing security.
(y) The rate shown represents an annualized yield at time of purchase.
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 the fund.
AT 3/31/06
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $750,954,218) $801,045,418
Cash 404,215
Foreign currency, at value (identified cost, $22) 22
Receivable for investments sold 6,855,649
Receivable for fund shares sold 1,703,201
Dividends receivable 693,413
Receivable from investment adviser 68,389
- ------------------------------------------------------------------------------------------------------
Total assets $810,770,307
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $12,956,177
Payable for fund shares reacquired 854,800
Payable to affiliates
Management fee 16,457
Shareholder servicing costs 66,825
Distribution and service fees 6,607
Administrative services fee 246
Program manager fees 14
Retirement plan administration and services fees 36
Payable for independent trustees' compensation 1,886
Accrued expenses and other liabilities 127,293
- ------------------------------------------------------------------------------------------------------
Total liabilities $14,030,341
- ------------------------------------------------------------------------------------------------------
Net assets $796,739,966
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $705,736,992
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 50,091,200
Accumulated net realized gain (loss) on investments and foreign
currency transactions 40,368,333
Undistributed net investment income 543,441
- ------------------------------------------------------------------------------------------------------
Net assets $796,739,966
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 57,765,852
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $161,411,749
Shares outstanding 11,741,605
- ------------------------------------------------------------------------------------------------------
Net asset value per share $13.75
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per
share) $14.59
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $108,082,866
Shares outstanding 8,114,247
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.32
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $44,869,095
Shares outstanding 3,366,768
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.33
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $468,562,065
Shares outstanding 33,526,029
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.98
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $7,386,648
Shares outstanding 539,970
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.68
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $535,361
Shares outstanding 40,231
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.31
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,599,680
Shares outstanding 119,771
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.36
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,147,621
Shares outstanding 158,135
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.58
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $186,175
Shares outstanding 13,547
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.74
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $57,964
Shares outstanding 4,203
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.79
- ------------------------------------------------------------------------------------------------------
Class 529A shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,259,278
Shares outstanding 92,710
- ------------------------------------------------------------------------------------------------------
Net asset value per share $13.58
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per
share) $14.41
- ------------------------------------------------------------------------------------------------------
Class 529B shares
- ------------------------------------------------------------------------------------------------------
Net assets $230,615
Shares outstanding 17,511
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.17
- ------------------------------------------------------------------------------------------------------
Class 529C shares
- ------------------------------------------------------------------------------------------------------
Net assets $410,849
Shares outstanding 31,125
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $13.20
- ------------------------------------------------------------------------------------------------------
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.
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (unaudited)
This statement describes how much your fund earned in investment income and
accrued in expenses. It also describes any gains and/or losses generated by
fund operations.
SIX MONTHS ENDED 3/31/06
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $5,093,739
Interest 183,621
Foreign taxes withheld (3,750)
- ------------------------------------------------------------------------------------------------------
Total investment income $5,273,610
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $2,781,841
Distribution and service fees 1,077,618
Program manager fees 2,144
Shareholder servicing costs 539,866
Administrative services fee 38,362
Retirement plan administration and services fees 4,352
Independent trustees' compensation 10,018
Custodian fee 87,180
Shareholder communications 66,055
Auditing fees 14,090
Legal fees 8,169
Miscellaneous 147,165
- ------------------------------------------------------------------------------------------------------
Total expenses $4,776,860
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (42,772)
Reduction of expenses by investment adviser (3,919)
- ------------------------------------------------------------------------------------------------------
Net expenses $4,730,169
- ------------------------------------------------------------------------------------------------------
Net investment income $543,441
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $41,114,818
Foreign currency transactions (4,256)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $41,110,562
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $7,390,944
Translation of assets and liabilities in foreign currencies (6)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $7,390,938
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $48,501,500
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $49,044,941
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
3/31/06 9/30/05
(UNAUDITED)
CHANGE IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) $543,441 $(197,326)
Net realized gain (loss) on investments and foreign
currency transactions 41,110,562 89,510,428
Net unrealized gain (loss) on investments and foreign
currency translation 7,390,938 14,338,757
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $49,044,941 $103,651,859
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions
Class A $(16,161,417) $(8,797,219)
Class B (12,599,704) (8,915,181)
Class C (4,886,027) (2,709,307)
Class I (44,424,812) (24,365,961)
Class R (1,281,416) (230,955)
Class R1 (50,206) --
Class R2 (41,349) --
Class R3 (184,488) (21,100)
Class R4 (7,303) --
Class R5 (5,977) --
Class 529A (122,985) (65,333)
Class 529B (23,073) (13,148)
Class 529C (40,872) (16,670)
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(79,829,629) $(45,134,874)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $127,483,094 $191,836,506
- -------------------------------------------------------------------------------------------------------
Redemption fees $-- $9
- -------------------------------------------------------------------------------------------------------
Total change in net assets $96,698,406 $250,353,500
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period $700,041,560 $449,688,060
At end of period (including undistributed net investment
income of $543,441 and $0, respectively) $796,739,966 $700,041,560
- -------------------------------------------------------------------------------------------------------
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 life of a particular share class, if shorter). 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 share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 9/30
ENDED -----------------------------------------------------------------------
CLASS A 3/31/06 2005 2004 2003 2002 2001(c)
(UNAUDITED)
Net asset value, beginning of period $14.45 $13.13 $10.72 $8.56 $8.74 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $(0.01) $(0.02) $0.01 $0.02 $0.02
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.88 2.56 2.43 2.15 (0.20) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.89 $2.55 $2.41 $2.16 $(0.18) $(1.26)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $-- $-- $-- $-- $(0.00)(w) $--
From net realized gain on
investments and foreign currency
transactions (1.59) (1.23) -- -- (0.00)(w) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.59) $(1.23) $-- $-- $(0.00)(w) $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.75 $14.45 $13.13 $10.72 $8.56 $8.74
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.58(n) 20.11 22.48 25.23 (2.03) (12.60)(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.34(a) 1.36 1.36 1.50 1.83 120.50(a)
Expenses after expense
reductions (f) 1.34(a) 1.35 1.34 1.34 1.37 1.00(a)
Net investment income (loss) 0.09(a) (0.07) (0.17) 0.10 0.22 2.24(a)
Portfolio turnover 55 126 128 158 113 66
Net assets at end of period
(000 Omitted) $164,412 $142,972 $83,631 $47,603 $26,013 $262
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED --------------------------------------------------------------
CLASS B 3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $14.10 $12.91 $10.61 $8.53 $9.24
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.10) $(0.10) $(0.05) $(0.04)
Net realized and unrealized gain (loss)
on investments and foreign currency 0.85 2.52 2.40 2.13 (0.67)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.81 $2.42 $2.30 $2.08 $(0.71)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.32 $14.10 $12.91 $10.61 $8.53
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.16(n) 19.40 21.68 24.38 (7.67)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.99(a) 2.01 2.01 2.14 2.48(a)
Expenses after expense reductions (f) 1.99(a) 2.00 1.99 1.99 2.02(a)
Net investment loss (0.56)(a) (0.73) (0.82) (0.54) (0.44)(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $108,083 $113,672 $88,348 $65,799 $44,390
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 9/30
ENDED -------------------------------------------------------------
CLASS C 3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $14.10 $12.92 $10.61 $8.53 $9.24
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.10) $(0.10) $(0.05) $(0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.86 2.51 2.41 2.13 (0.67)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.82 $2.41 $2.31 $2.08 $(0.71)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.33 $14.10 $12.92 $10.61 $8.53
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.23(n) 19.30 21.77 24.38 (7.67)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.99(a) 2.01 2.01 2.14 2.48(a)
Expenses after expense reductions (f) 1.99(a) 2.00 1.99 1.99 2.02(a)
Net investment loss (0.56)(a) (0.72) (0.82) (0.54) (0.46)(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $44,869 $42,162 $25,482 $16,369 $11,348
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED ---------------------------------------------------------------
CLASS I 3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $14.65 $13.25 $10.80 $8.59 $9.24
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.03 $0.04 $0.02 $0.04 $0.06
Net realized and unrealized gain (loss)
on investments and foreign currency 0.89 2.59 2.45 2.17 (0.71)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.92 $2.63 $2.47 $2.21 $(0.65)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income $-- $-- $-- $-- $(0.00)(w)
From net realized gain on investments
and foreign currency transactions (1.59) (1.23) (0.02) -- (0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.59) $(1.23) $(0.02) $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.98 $14.65 $13.25 $10.80 $8.59
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.71(n) 20.56 22.93 25.58 (6.89)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.99(a) 1.01 1.01 1.16 1.48(a)
Expenses after expense reductions (f) 0.99(a) 1.00 0.99 1.00 1.02(a)
Net investment income 0.44(a) 0.28 0.18 0.43 0.99(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $468,562 $386,860 $249,118 $93,944 $4,655
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED --------------------------------------------
CLASS R 3/31/06 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $14.40 $13.11 $10.72 $9.11
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment (loss) (d) $(0.00)(w) $(0.02) $(0.04) $(0.00)(w)
Net realized and unrealized gain (loss) on investments and
foreign currency 0.87 2.54 2.44 1.61(g)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.87 $2.52 $2.40 $1.61
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $(0.01) $--
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.68 $14.40 $13.11 $10.72
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.46(n) 19.90 22.43 17.67(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.49(a) 1.52 1.52 1.65(a)
Expenses after expense reductions (f) 1.49(a) 1.51 1.50 1.49(a)
Net investment loss (0.05)(a) (0.18) (0.30) (0.06)(a)
Portfolio turnover 55 126 128 158
Net assets at end of period (000 Omitted) $7,387 $10,761 $1,941 $260
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
CLASS R1 3/31/06 9/30/05(i)
(UNAUDITED)
Net asset value, beginning of period $14.09 $13.03
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.05) $(0.06)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.86 1.12(g)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.81 $1.06
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.59) $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.31 $14.09
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.16(n) 8.14(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.19(a) 2.21(a)
Expenses after expense reductions (f) 2.09(a) 2.20(a)
Net investment loss (0.68)(a) (0.83)(a)
Portfolio turnover 55 126
Net assets at end of period (000 Omitted) $535 $313
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEAR
ENDED ENDED
CLASS R2 3/31/06 9/30/05(i)
(UNAUDITED)
Net asset value, beginning of period $14.11 $13.03
- ------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.03)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.86 1.11(g)
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.84 $1.08
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.59) $--
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.36 $14.11
- ------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.37(n) 8.29(n)
- ------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.89(a) 1.90(a)
Expenses after expense reductions (f) 1.74(a) 1.89(a)
Net investment loss (0.40)(a) (0.42)(a)
Portfolio turnover 55 126
Net assets at end of period (000 Omitted) $1,600 $410
- ------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 9/30
ENDED -------------------------------
CLASS R3 3/31/06 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $14.31 $13.06 $11.39
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.06) $(0.06)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.88 2.54 1.74(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.86 $2.48 $1.68
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions $(1.59) $(1.23) $(0.01)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.58 $14.31 $13.06
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.43(n) 19.66 14.79(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.74(a) 1.76 1.78(a)
Expenses after expense reductions (f) 1.64(a) 1.75 1.76(a)
Net investment loss (0.23)(a) (0.45) (0.62)(a)
Portfolio turnover 55 126 128
Net assets at end of period (000 Omitted) $2,148 $1,218 $212
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEAR
ENDED ENDED
CLASS R4 3/31/06 9/30/05(i)
(UNAUDITED)
Net asset value, beginning of period $14.45 $13.32
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.01) $(0.00)(w)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.89 1.13(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $0.88 $1.13
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.59) $--
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.74 $14.45
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.50(n) 8.48(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.39(a) 1.41(a)
Expenses after expense reductions (f) 1.39(a) 1.40(a)
Net investment loss (0.08)(a) (0.06)(a)
Portfolio turnover 55 126
Net assets at end of period (000 Omitted) $186 $54
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
CLASS R5 3/31/06 9/30/05(i)
(UNAUDITED)
Net asset value, beginning of period $14.48 $13.32
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.02
Net realized and unrealized gain (loss) on investments
and foreign currency 0.88 1.14(g)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations $0.90 $1.16
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.59) $--
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.79 $14.48
- --------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 6.64(n) 8.71(n)
- --------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.09(a) 1.11(a)
Expenses after expense reductions (f) 1.09(a) 1.10(a)
Net investment income 0.34(a) 0.24(a)
Portfolio turnover 55 126
Net assets at end of period (000 Omitted) $58 $54
- --------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED -------------------------------------------------------------
CLASS 529A3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $14.32 $13.05 $10.68 $8.55 $9.24
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.01) $(0.04) $(0.05) $(0.02) $0.01
Net realized and unrealized gain (loss) on
investments and foreign currency 0.86 2.54 2.42 2.15 (0.70)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.85 $2.50 $2.37 $2.13 $(0.69)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.58 $14.32 $13.05 $10.68 $8.55
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.35(n) 19.83 22.19 24.91 (7.47)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.59(a) 1.61 1.62 1.75 2.08(a)
Expenses after expense reductions (f) 1.59(a) 1.60 1.60 1.59 1.62(a)
Net investment income (loss) (0.16)(a) (0.32) (0.42) (0.18) 0.50(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $1,259 $1,038 $643 $262 $7
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 9/30
ENDED -------------------------------------------------------------
CLASS 529B3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $13.97 $12.84 $10.58 $8.52 $9.22
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.05) $(0.13) $(0.13) $(0.08) $(0.00)(w)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.84 2.49 2.39 2.14 (0.70)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.79 $2.36 $2.26 $2.06 $(0.70)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.17 $13.97 $12.84 $10.58 $8.52
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.06(n) 19.01 21.36 24.18 (7.59)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.24(a) 2.26 2.26 2.40 2.73(a)
Expenses after expense reductions (f) 2.24(a) 2.25 2.24 2.24 2.27(a)
Net investment loss (0.82)(a) (0.97) (1.07) (0.82) (0.20)(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $231 $174 $135 $59 $5
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 9/30
ENDED -------------------------------------------------------------
CLASS 529C3/31/06 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period 14.00 $12.86 $10.59 $8.52 $9.22
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.05) $(0.13) $(0.13) $(0.08) $(0.00)(w)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.84 2.50 2.40 2.15 (0.70)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.79 $2.37 $2.27 $2.07 $(0.70)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.59) $(1.23) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.20 $14.00 $12.86 $10.59 $8.52
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 6.04(n) 19.06 21.44 24.30 (7.59)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.24(a) 2.26 2.26 2.40 2.73(a)
Expenses after expense reductions (f) 2.24(a) 2.25 2.24 2.24 2.27(a)
Net investment loss (0.81)(a) (0.95) (1.06) (0.85) (0.20)(a)
Portfolio turnover 55 126 128 158 113
Net assets at end of period (000 Omitted) $411 $353 $178 $44 $5
- -----------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
(a) Annualized.
(c) For the period from the commencement of the fund's investment operations, August 31, 2001, through September 30, 2001.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) 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.
(i) For the period from the class' inception, November 1, 2001 (Classes B, C, and I), December 31, 2002 (Class R), July 31,
2002 (Classes 529A, 529B, and 529C), October 31, 2003 (Class R3) and April 1, 2005 (Classes R1, R2, R4, and R5) through
the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Mid Cap Value Fund (the fund) is a 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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales during
the day, equity securities are generally valued at the last quoted bid price
as reported by an independent pricing service on the market or exchange on
which they are primarily traded. Short-term instruments with a maturity at
issuance of 365 days or less are generally valued at amortized cost, which
approximates market value. Securities and other assets generally valued on the
basis of information from an independent pricing service may also be valued on
the basis of information from brokers and dealers. The values of foreign
securities and other assets and liabilities expressed in foreign currencies
are converted to U.S. dollars based upon exchange rates provided by an
independent source. 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, in valuing securities
that trade principally on foreign markets, events reasonably determined to be
significant (such as certain movements 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 fund's
valuation time 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 prices of foreign equity
securities to reflect what it believes to be the fair value of the securities
as of the fund's valuation time. Fair valuation of foreign equity securities
may occur frequently based on an assessment that events which occur on a
fairly regular basis (such as U.S. market movements) are significant.
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 charged a 2% redemption fee (which was 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 no longer charges 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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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, 2006, the fund's custodian
fees were reduced by $22,937 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, 2006, the fund's custodian expenses
were reduced by $19,835 under this agreement. These amounts are shown as a
reduction of total expenses on the Statement of Operations. Effective January
1, 2006, the commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the fund
in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share.
Temporary differences which arise from recognizing certain items of income,
expense, gain or loss in different periods for financial statement and tax
purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income for financial statement and tax purposes. Book/tax
differences primarily relate to net operating losses, real estate investment
trusts, wash sale loss deferrals, foreign currency transactions, and treating
a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
Ordinary income (including
any short-term capital
gains) $31,196,044 $269,551
Long-term capital gain 13,938,830 --
--------------------------------------------------------------------
Total distributions $45,134,874 $269,551
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF MARCH 31, 2006
Cost of investments $751,678,923
----------------------------------------------------------
Gross appreciation $78,706,997
Gross depreciation (29,340,502)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $49,366,495
AS OF SEPTEMBER 30, 2005
Undistributed ordinary income $45,505,900
Undistributed long-term capital gain 34,316,152
Other temporary differences (9,941)
Net unrealized appreciation (depreciation) 41,975,551
The aggregate cost above includes prior fiscal year end tax adjustments.
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 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. The investment adviser has
contractually agreed to reduce it's management fee to 0.70% of average daily
net assets in excess of $1 billion. For the six months ended March 31, 2006,
the fund's average daily net assets did not exceed $1 billion and therefore,
the management fee was not reduced.
The management fee incurred for the six months ended March 31, 2006, was
equivalent to an annual effective rate of 0.75% of the fund's average daily
net assets.
The investment adviser has contractually agreed to pay a portion of the fund's
operating expenses, exclusive of management, distribution and service,
retirement plan administration and services, program manager, and certain
other fees and expenses, such that operating expenses do not exceed 0.25%
annually of the fund's average daily net assets. This contractual fee
arrangement will continue until February 1, 2007. For the six months ended
March 31, 2006, the fund's actual operating expenses did not exceed the limit
and therefore, the investment adviser did not pay any portion of the
fund's expenses.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $44,296 and $1,061 for the six months ended
March 31, 2006, as its portion of the initial sales charge on sales of Class A
and Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) FEE
Class A 0.10% 0.25% 0.35% 0.35% $265,040
Class B 0.75% 0.25% 1.00% 1.00% 558,531
Class C 0.75% 0.25% 1.00% 1.00% 217,955
Class R 0.25% 0.25% 0.50% 0.50% 23,708
Class R1 0.50% 0.25% 0.75% 0.75% 1,654
Class R2 0.25% 0.25% 0.50% 0.50% 1,338
Class R3 0.25% 0.25% 0.50% 0.50% 4,404
Class R4 -- 0.25% 0.25% 0.25% 108
Class 529A 0.25% 0.25% 0.50% 0.35% 1,989
Class 529B 0.75% 0.25% 1.00% 1.00% 1,022
Class 529C 0.75% 0.25% 1.00% 1.00% 1,869
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $1,077,618
(1) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up
to these annual percentage rates of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended
March 31, 2006 based on each class' average daily net assets. 0.10% of the Class 529A distribution fee is
currently being paid by the fund. Payment of the remaining 0.15% of the Class 529A distribution fee is not yet
implemented and will commence on such date as the fund's Board of Trustees 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 12
months of purchase. Class B and Class 529B shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within six
years of purchase. All contingent deferred sales charges are paid to MFD and
during the six months ended March 31, 2006, were as follows:
AMOUNT
Class A $1,037
Class B 72,617
Class C 2,945
Class 529B 31
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which 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. The fee may only be increased with the approval
of the Board of Trustees who 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. Program manager fees for the six months ended March 31, 2006,
were as follows:
AMOUNT
Class 529A $1,421
Class 529B 256
Class 529C 467
--------------------------------------------------
Total Program Manager Fees $2,144
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the six months ended March 31, 2006, the fee was $356,706, which equated
to 0.0962% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the six months ended March 31, 2006, these
costs amounted to $125,918.
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, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000.
The administrative services fee incurred for the six months ended
March 31, 2006 was equivalent to an annual effective rate of 0.0103% of the
fund's average daily net assets.
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 certain 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. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the six months ended March
31, 2006, the fund paid MFS an annual retirement plan administration and
services fee up to the following annual percentage rates of each class'
average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(1) AMOUNT
Class R1 0.45% 0.35% $984
Class R2 0.40% 0.25% 1,069
Class R3 0.25% 0.15% 2,206
Class R4 0.15% 0.15% 65
Class R5 0.10% 0.10% 28
- ------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $4,352
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and services fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
This agreement will continue until at least September 30, 2007. For the
six months ended March 31, 2006, this waiver amounted to $1,489 and is
reflected as a reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to 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, MFD, and MFSC.
OTHER - 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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended March 31, 2006, the fee paid to Tarantino
LLC was $2,998. MFS has agreed to reimburse the fund for a portion of the
payments made by the funds to Tarantino LLC in the amount of $2,430, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office
space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$464,873,261 and $406,577,551, respectively.
(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 3/31/06 YEAR ENDED 9/30/05 (i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 2,619,373 $35,982,042 5,699,142 $78,002,281
Class B 860,651 11,484,868 3,117,703 41,801,180
Class C 594,178 7,935,698 1,408,379 18,976,385
Class I 3,969,344 55,046,088 6,198,850 84,368,344
Class R 157,953 2,193,923 722,135 9,775,292
Class R1 22,223 299,591 22,181 309,138
Class R2 98,744 1,307,821 30,662 429,112
Class R3 150,465 2,039,430 105,858 1,449,676
Class R4 9,252 125,528 3,754 50,000
Class R5 -- -- 3,754 50,000
Class 529A 13,004 176,133 20,445 276,947
Class 529B 3,472 46,640 2,040 26,452
Class 529C 3,399 44,759 12,566 166,218
- ------------------------------------------------------------------------------------------------------
8,502,058 $116,682,521 17,347,469 $235,681,025
Shares issued to shareholders in reinvestment of distributions
Class A 1,144,048 $15,170,079 615,526 $8,278,823
Class B 896,992 11,544,280 616,204 8,121,567
Class C 330,579 4,257,848 181,132 2,389,128
Class I 3,288,670 44,298,382 1,792,931 24,365,935
Class R 92,102 1,215,766 16,137 216,586
Class R1 3,918 50,372 -- --
Class R2 3,205 41,349 -- --
Class R3 14,048 184,015 1,580 21,100
Class R4 551 7,303 -- --
Class R5 449 5,977 -- --
Class 529A 9,381 122,986 4,894 65,333
Class 529B 1,811 23,073 1,004 13,148
Class 529C 3,200 40,872 1,271 16,670
- ------------------------------------------------------------------------------------------------------
5,788,954 $76,962,302 3,230,679 $43,488,290
Shares reacquired
Class A (1,913,169) $(26,222,910) (2,792,389) $(38,204,297)
Class B (1,707,183) (22,723,160) (2,512,515) (33,579,685)
Class C (547,758) (7,318,835) (572,502) (7,658,854)
Class I (147,500) (2,132,069) (382,208) (5,349,897)
Class R (457,395) (6,240,582) (139,070) (1,918,314)
Class R1 (8,091) (108,572) -- --
Class R2 (11,210) (149,076) (1,630) (23,153)
Class R3 (91,510) (1,224,099) (38,551) (521,295)
Class R4 (10) (140) -- --
Class 529A (2,177) (29,167) (2,127) (29,483)
Class 529B (254) (3,429) (1,112) (14,807)
Class 529C (687) (9,690) (2,429) (33,024)
- ------------------------------------------------------------------------------------------------------
(4,886,944) $(66,161,729) (6,444,533) $(87,332,809)
Net change
Class A 1,850,252 $24,929,211 3,522,279 $48,076,807
Class B 50,460 305,988 1,221,392 16,343,062
Class C 376,999 4,874,711 1,017,009 13,706,659
Class I 7,110,514 97,212,401 7,609,573 103,384,382
Class R (207,340) (2,830,893) 599,202 8,073,564
Class R1 18,050 241,391 22,181 309,138
Class R2 90,739 1,200,094 29,032 405,959
Class R3 73,003 999,346 68,887 949,481
Class R4 9,793 132,691 3,754 50,000
Class R5 449 5,977 3,754 50,000
Class 529A 20,208 269,952 23,212 312,797
Class 529B 5,029 66,284 1,932 24,793
Class 529C 5,912 75,941 11,408 149,864
- ------------------------------------------------------------------------------------------------------
9,404,068 $127,483,094 14,133,615 $191,836,506
(i) For the period from the class' inception, April 1, 2005 (Classes R1, R2, R4, and R5) through the
stated period end.
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-of-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%, 27%,
and 19%, respectively, of the value of outstanding voting shares. In addition,
the MFS Lifetime 2020 Fund, MFS Lifetime 2030 Fund and the MFS Lifetime 2040
Fund were each the owners of record of less than 1% of the value of
outstanding voting shares.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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, 2006 was $2,305, and
is included in miscellaneous expense on the Statement of Operations. The fund
had no significant borrowings during the six months ended March 31, 2006.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
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 Proxy Voting 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 trust 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 trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE
Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site 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)
MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MDV-SEM-5/06 36M
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph
(b) of Item 2 of this Form N-CSR.
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 effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (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 of the period covered by the report that have
materially affected, or are 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.
(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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
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
------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: May 23, 2006
------------
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: May 23, 2006
------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: May 23, 2006
------------
* Print name and title of each signing officer under his or her signature.