<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) EMERGING
GROWTH FUND
SEMIANNUAL REPORT o MAY 31, 2000
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MUTUAL FUND GIFT KITS (see page 46)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 29
Notes to Financial Statements ............................................. 37
Trustees and Officers ..................................................... 49
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did very dramatically this past spring, there's a flurry of
information on "how to deal with market volatility" -- both in the popular
press and from those of us in the investment business. Our own thinking on
this is that, first, for long-term investors volatility is not necessarily
something to be feared; occasional volatility may in fact be healthy for the
markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high stock prices, relative to their earnings, or with business concepts
that looked great in the euphoria of a booming market but in the end appeared
to have no fundamental backing. It has always been our view that one of the
best protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good
times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- five, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and
have considerably outpaced inflation. Investing is the best way we know of to
make your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy, because
only in retrospect do we know when that right time really was. Periods of
volatility are probably the worst times to make an investment decision. Faced
with turmoil in the markets, many investors have opted to simply stay on the
sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and
into which portfolios -- in a calm, rational manner, working with your
investment professional. Second, with this approach you invest regularly
without agonizing over the decision each time you buy shares. And, third, if
you invest equal amounts of money at regular intervals, you'll be taking
advantage of a strategy called dollar-cost averaging: by investing a fixed
amount while the share cost fluctuates, you end up with an average share cost
to you that is lower than the average share price over your investment
period.(1) If all this sounds familiar, it's probably because you're already
taking advantage of dollar-cost averaging by investing regularly for
retirement through a 401(k) or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment -- small, mid, or large cap; growth or
value; United States or international; stocks or bonds. The problem with this
approach is that by the time a particular area is generally recognized as
"hot," you may have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in seven
out of 10 years.(2) For the decade, the MSCI EAFE's average annual performance
was 23%, compared to 18% for the S&P 500. Going into the 1990s, then, an
investor looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in seven out of 10 years,
with the S&P 500 returning an average of 18% annually for the
decade and the MSCI EAFE returning a 7% annual average. Looking ahead,
however, we are optimistic about international markets because we feel that
many of the same forces that propelled the current U.S. economic boom --
deregulation, restructuring, and increased adoption of technology -- have
taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We
would suggest that one way to potentially profit from swings in the market --
to potentially be invested in various asset classes before the market shifts
in their favor -- is with a diversified portfolio covering several asset
classes.
If you haven't already done so, we encourage you to discuss these thoughts
with your investment professional and factor them into your long-range
financial planning. Hopefully, the next time the markets appear to be going
wild, you'll feel confident enough in your plan to view periods of volatility
as a time of potential opportunity -- or perhaps just a time to sit back and
do nothing.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
June 15, 2000
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(1) For a more complete explanation of dollar-cost averaging and the math
involved, see "ABCs of Investing" in the Investor Education section of our
Web site (www.mfs.com).
(2) Source: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89,
'90s -- 12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the six months ended May 31, 2000, Class A shares of the fund provided a
total return of 14.78%, Class B shares 14.34%, Class C shares 14.34%, Class I
shares 14.91%, and Class J shares 14.48%. These returns, which include the
reinvestment of any distributions but exclude the effects of any sales charges,
compare to returns of 2.88% and 5.50% over the same period for the fund's
benchmarks, the Standard & Poor's 500 Composite Index (the S&P 500) and the
Russell 2000 Total Return Index (the Russell 2000), respectively. The S&P 500 is
a popular, unmanaged index of common stock total return performance. The Russell
2000 is an unmanaged index comprised of 2,000 small U.S.-domiciled company
common stocks that are traded on the New York Stock Exchange, the American Stock
Exchange, and NASDAQ. During the same period, the average multicap growth fund
tracked by Lipper Inc., an independent firm that reports mutual fund
performance, returned 13.01%.
Q. IN LAST NOVEMBER'S ANNUAL REPORT, YOU SAID, "FOR AN AGGRESSIVE-GROWTH
VEHICLE, THE FUND HAS TENDED TO DO COMPARATIVELY WELL IN DOWN PERIODS IN THE
MARKET." WAS THAT IN FACT THE CASE DURING THE VOLATILITY THAT BEGAN THIS
PAST MARCH?
A. Yes, we think outperforming our benchmarks and our Lipper peers is evidence
that we rode out a significant market correction rather well. Toward the end
of 1999 and into the beginning of this year, we had been concerned about
what we viewed as an exuberant market, with many stocks experiencing high
valuations (stock prices relative to corporate earnings). We strongly felt
there would be some sort of correction in 2000. To prepare for that, we had
been working to help reduce the risk in the portfolio by selling some of the
most expensive stocks and buying other stocks at what we believed were more
reasonable valuations.
However, we think the types of companies whose stocks we tend to own were an
even more important factor in riding out this volatility. Our strategy is to
focus on companies with strong earnings growth, companies whose stocks we
feel we can hold for five years or more, that have the potential to become
major players in their markets. Companies without current earnings or cash
flows -- the types of firms whose stocks we believe were hardest hit in
March and April -- tend not to be a large part of our portfolio.
Q. WAS THERE A POSITIVE SIDE TO THIS RECENT VOLATILITY?
A. We viewed it as a period of opportunity. In our opinion, the recent
correction was good for the markets in general because it returned stocks to
valuations that made sense. But in some cases the markets brought down what
we believed were both healthy and unhealthy companies simultaneously, and
that offered us the chance to buy healthy companies at what we felt were
more reasonable prices.
In addition, we have increased the aggressiveness of the portfolio by taking
more positions in companies that are somewhat highly valued, even after the
correction, but which our research indicates have strong prospects for high
earnings growth. We believe this increased aggressiveness may help position
us to outperform when the markets become more favorable.
This approach has consistently been part of our strategy for managing the
fund in periods of volatility. In general, when we have thought the market
was overly exuberant, we have tended to decrease our risk, and when we have
thought aggressive growth stocks were depressed, we tended to increase the
risk. Our experience has been that this has helped moderate the downside
during a drop in the market and has helped increase our upside potential
coming out of a down market.
Q. HOW HAVE YOU POSITIONED THE PORTFOLIO GOING FORWARD?
A. We're working to capitalize on four major ideas. First, we foresee the
markets broadening, both by industry and by market capitalization. The fact
that the Russell 2000 returned nearly twice the performance of the S&P 500
over the period offers some evidence of that. We believe good performance
has recently broadened beyond technology to include a larger number of
sectors. Holdings in the fund that have benefited from this trend include
Republic Services, a waste-management company, and Applebee's, a restaurant
chain.
Second, we think our software holdings such as BMC Software and Compuware
may be strong performers later this year. This is an area within technology
that did not do well recently because Year 2000 (Y2K) concerns, we believe,
caused companies to delay new software installations, even through the first
half of 2000. We expect this area to come back as expanding Internet
initiatives and other new technologies force companies to upgrade their
software in order to remain competitive.
Third, we believe that companies building the Internet's infrastructure,
such as Network Solutions, Oracle, and Cisco, will continue to prosper from
Internet growth. We expect that one of the biggest drivers of this growth
will be businesses seizing upon Internet applications to reduce costs and
increase productivity.
A fourth theme in the portfolio is business services companies such as First
Data and Affiliated Computer Services. We view these companies as playing a
key role in the current economic boom by providing services that make it
possible for larger firms to accomplish the outsourcing, downsizing, and
restructuring that are allowing them to increase their productivity and
earnings.
Q. DALE DUTILE WAS RECENTLY ADDED TO THE PORTFOLIO MANAGEMENT TEAM. WHAT IS HIS
ROLE?
A. Dale is focusing on the entire portfolio with the goal of new-idea
generation. He's been an MFS analyst for seven years, concentrating most
recently on telecommunications and business services stocks, and we've
worked together on this portfolio for some time. His new role is very much
in keeping with our culture, in that all of our equity portfolio managers
begin their careers here as analysts. We feel our commitment to growing
portfolio managers from within is a key factor in attracting what we believe
are the best and brightest analysts to MFS and keeping them here.
Q. THE PORTFOLIO'S TOP TWO HOLDINGS, ORACLE AND CISCO, HAVE GROWN INTO LARGE,
RATHER MATURE COMPANIES. CAN THIS STILL BE CONSIDERED AN EMERGING-GROWTH
PORTFOLIO?
A. We feel it's the growth rate of a company, rather than its size, that
classifies it as emerging growth; our definition of an emerging-growth
company is one that is growing earnings, on average, 20% or more per year.
According to our research, this compares to a historical average earnings
growth rate for the S&P 500 of about 8% over the past 60 years and a more
recent average of about 15% over the past five to seven extraordinary years.
We view Oracle and Cisco as the software and communications leaders of the
Internet, and the Internet as the biggest emerging-growth area in the
economy. So in spite of their size and maturity, we feel these are still
very much emerging-growth companies. And what is not readily apparent from
looking at the fund's top 10 holdings is the over 400 other companies whose
stocks we own, many of which we believe could be major contributors to the
portfolio in the future. A very important part of our process is finding
these new holdings that could potentially move up to top 10 positions.
That said, we should mention this is the first year we've sold off a portion
of our Oracle and Cisco holdings. This was simply because rising share
prices over an extended period increased our initial purchases to overly
large positions in the portfolio. These sales were purely for reasons of
diversification, and shareholders should not interpret them as diminished
enthusiasm on our part for either company.
/s/ John W. Ballen /s/ Dale A. Dutile
John W. Ballen Dale A. Dutile
Portfolio Manager Portfolio Manager
Note to shareholders: Effective February 1, 2000, Dale A. Dutile became a
portfolio manager of the fund.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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JOHN W. BALLEN IS PRESIDENT, CHIEF INVESTMENT OFFICER, AND A MEMBER OF
THE MANAGEMENT COMMITTEE AND BOARD OF DIRECTORS OF MFS INVESTMENT
MANAGEMENT(R). HE IS A PORTFOLIO MANAGER OF MFS(R) EMERGING GROWTH FUND,
MFS(R) EMERGING GROWTH SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST
(SM)), THE EMERGING GROWTH SERIES OFFERED THROUGH MFS(R)/SUN LIFE
ANNUITY PRODUCTS, MFS(R) GLOBAL GROWTH FUND, AND THE GLOBAL GROWTH
SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. IN ADDITION,
MR. BALLEN OVERSEES THE PORTFOLIO MANAGEMENT OF MFS(R) INSTITUTIONAL MID
CAP GROWTH FUND AND MFS(R) INSTITUTIONAL EMERGING EQUITIES FUND. HE
JOINED THE MFS RESEARCH DEPARTMENT IN 1984 AS A RESEARCH ANALYST. HE WAS
NAMED INVESTMENT OFFICER AND PORTFOLIO MANAGER IN 1986, VICE PRESIDENT
IN 1987, DIRECTOR OF RESEARCH IN 1988, SENIOR VICE PRESIDENT IN 1990,
DIRECTOR OF EQUITY PORTFOLIO MANAGEMENT IN 1993, CHIEF EQUITY OFFICER IN
1995, EXECUTIVE VICE PRESIDENT IN 1997, AND PRESIDENT, CHIEF INVESTMENT
OFFICER, AND A MEMBER OF THE BOARD IN 1998. MR. BALLEN IS A GRADUATE OF
HARVARD COLLEGE AND EARNED A MASTER OF COMMERCE DEGREE FROM THE
UNIVERSITY OF NEW SOUTH WALES IN AUSTRALIA AND AN M.B.A. DEGREE FROM
STANFORD UNIVERSITY.
DALE A. DUTILE IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND A
PORTFOLIO MANAGER OF MFS(R) EMERGING GROWTH FUND. HE JOINED MFS IN 1994
AS A RESEARCH ANALYST AND WAS NAMED INVESTMENT OFFICER IN 1996 AND VICE
PRESIDENT IN 1998. HE BECAME A PORTFOLIO MANAGER OF MFS(R) EMERGING
GROWTH FUND IN 2000. MR. DUTILE IS A GRADUATE OF BOSTON COLLEGE AND HAS
A MASTER'S DEGREE FROM THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY'S SLOAN
SCHOOL OF MANAGEMENT.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS LONG-TERM GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 13, 1993
CLASS B DECEMBER 29, 1986
CLASS C APRIL 1, 1996
CLASS I JANUARY 2, 1997
CLASS J SEPTEMBER 24, 1998
SIZE: $19.5 BILLION NET ASSETS AS OF MAY 31, 2000
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH MAY 31, 2000
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +14.78% +39.73% +95.51% +213.21% +679.47%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +39.73% +25.04% + 25.65% + 22.79%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +31.70% +22.60% + 24.17% + 22.07%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +14.34% +38.70% +91.13% +201.54% +644.75%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +38.70% +24.10% + 24.70% + 22.24%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +34.70% +23.45% + 24.53% + 22.24%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +14.34% +38.71% +91.12% +201.48% +644.61%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +38.71% +24.10% + 24.70% + 22.23%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +37.71% +24.10% + 24.70% + 22.23%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +14.91% +40.22% +97.13% +212.28% +671.29%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +40.22% +25.39% + 25.58% + 22.67%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS J
6 Months 1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +14.48% +39.05% +91.92% +202.77% +647.80%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +39.05% +24.27% + 24.80% + 22.29%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +34.88% +23.02% + 24.04% + 21.91%
-----------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Peformance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors. Class J Share Performance Including Sales Charge takes into account
the deduction of the maximum 3% sales charge. Class J shares are only available
to Japanese investors.
Class A, C, I, and J share performance include the performance of the fund's
Class B shares for periods prior to their inception (blended performance).
Class A and J blended performance has been adjusted to take into account the
initial sales charge applicable to Class A and J shares rather than the CDSC
applicable to Class B shares. Class C blended performance has been adjusted to
take into account the lower CDSC applicable to Class C shares.
Class I blended performance has been adjusted to account for the fact that
Class I shares have no sales charge. These blended performance figures have
not been adjusted to take into account differences in class-specific operating
expenses. Because operating expenses for Class A, I, and J shares are lower
than those of Class B shares, the blended Class A, I, and J share performance
is lower than it would have been had Class A, I, and J shares been offered for
the entire period. Because operating expenses of Class B and C shares are
approximately the same, the blended Class C performance is approximately the
same as it would have been had Class C shares been offered for the entire
period.
All performance results reflect any applicable expense subsidies and
waivers, without which the results would have been less favorable. Subsidies
and waivers may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more established companies. Those risks may
increase share price volatility. See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MAY 31, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 62.1%
SPECIAL PRODUCTS & SERVICES 11.0%
LEISURE 9.8%
UTILITIES & COMMUNICATIONS 6.1%
HEALTH CARE 5.7%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
ORACLE CORP. 22.6% UNITEDHEALTH GROUP, INC. 2.7%
Database software developer and manufacturer Health maintenance organization
CISCO SYSTEMS, INC. 12.9% MICROSOFT CORP. 2.7%
Computer network developer Computer software and systems
company
TYCO INTERNATIONAL LTD. 5.1%
Fire protection, packaging, and electronic- WORLDCOM, INC. 2.6%
equipment conglomerate Telecommunications company
COMPUTER ASSOCIATES INTERNATIONAL, INC. 3.3% ALTERA CORP. 2.5%
Computer software company Manufacturer of semiconductors
and associated development
BMC SOFTWARE, INC. 2.8% tools
Computer software company
CENDANT CORP. 2.5%
Hotel, real estate, and
consumer services company
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- May 31, 2000
Stocks - 99.1%
<CAPTION>
------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 96.3%
Advertising - 0.3%
Avenue A, Inc.* 20,000 $ 207,500
Lamar Advertising Co., "A"* 132,500 5,316,562
Leapnet, Inc.* 222,642 713,150
Snyder Communications, Inc.* 292,200 6,611,025
Ventiv Health, Inc.* 97,400 858,338
Young & Rubicam, Inc. 782,100 37,345,275
---------------
$ 51,051,850
------------------------------------------------------------------------------------------------------
Airlines
Airnet Systems, Inc.* 31,000 $ 135,625
Atlas Air, Inc.* 124,750 4,038,781
---------------
$ 4,174,406
------------------------------------------------------------------------------------------------------
Automotive - 0.5%
AutoNation, Inc.* 3,350,000 $ 26,381,250
AutoNation, Inc.*+ 6,505,000 51,226,875
Harley-Davidson, Inc. 345,400 12,866,150
National Equipment Services, Inc.* 195,800 1,113,613
---------------
$ 91,587,888
------------------------------------------------------------------------------------------------------
Biotechnology - 0.6%
Genentech, Inc.* 165,400 $ 17,759,825
Guidant Corp.* 362,400 18,346,500
Pharmacia Corp. 305,596 15,871,892
Waters Corp.* 715,000 67,567,500
---------------
$ 119,545,717
------------------------------------------------------------------------------------------------------
Broadcasting - 0.1%
Hispanic Broadcasting Corp.* 192,020 $ 14,545,515
Radio One, Inc.* 84,500 6,041,750
Regent Communications, Inc.* 76,800 436,800
Spanish Broadcasting Systems, Inc.* 64,025 1,088,425
---------------
$ 22,112,490
------------------------------------------------------------------------------------------------------
Business Machines - 0.4%
Aztec Consulting, Inc.* 874,703 $ 2,022,751
Seagate Technology, Inc.* 1,010,300 58,597,400
Sun Microsystems, Inc.* 297,700 22,811,262
Texas Instruments, Inc. 31,602 2,283,245
Therma-Wave, Inc.* 42,870 814,530
---------------
$ 86,529,188
------------------------------------------------------------------------------------------------------
Business Services - 3.9%
A Consulting Team, Inc.* 15,000 $ 99,375
Adelphia Business Solutions* 83,000 1,846,750
Affiliated Computer Services, Inc., "A"* 1,234,500 42,050,156
Airnet Commerce Corp.* 31,980 471,705
Bea Systems, Inc.* 183,600 6,632,550
BISYS Group, Inc.* 451,000 29,653,250
Ceridian Corp.* 1,477,470 35,643,964
Command Systems, Inc.* 17,900 33,003
Complete Business Solutions, Inc.* 489,980 11,024,550
Computer Sciences Corp.* 624,800 59,941,750
Concord EFS, Inc.* 1,890,300 45,839,775
Cornell Corrections, Inc.* 107,200 777,200
Cotelligent Group, Inc.* 589,800 2,690,962
Digimarc Corp.* 17,400 458,925
DST Systems, Inc.* 636,300 47,762,269
eBenX, Inc.* 7,920 128,205
eLoyalty Corp.* 129,000 1,935,000
Encompass Services Corp.* 1,071,405 6,294,504
F.Y.I., Inc.* 333,400 10,877,175
Finisar Corp.* 114,600 2,557,012
First Data Corp. 2,712,804 152,086,574
Fiserv, Inc.* 774,971 36,229,894
Gartner Group, Inc., "A"* 47,900 637,669
Hagler Bailly, Inc.* 72,000 135,000
ICT Group, Inc.* 82,200 575,400
Ikon Office Solutions, Inc. 2,500,000 12,500,000
IMRglobal Corp.* 1,063,300 17,544,450
Insight Enterprises, Inc.* 309,575 14,046,966
Interim Services, Inc.* 1,231,600 24,785,950
kforce.com, Inc.* 516,200 6,613,812
Labor Ready, Inc.* 41,250 386,719
Learning Tree International, Inc.* 86,850 4,570,481
Luminant Worldwide Corp.* 54,500 347,438
Meta Group, Inc.* 18,750 467,578
Metamor Worldwide, Inc.* 1,274,200 28,988,050
Modis Professional Services, Inc.*++ 8,343,050 85,516,262
National Data Corp. 87,273 1,925,461
National Processing, Inc.* 215,900 2,523,331
Nextel Partners, Inc. 70,200 1,193,400
NOVA Corp.* 378,400 11,115,500
Personnel Group of America, Inc.* 393,700 1,574,800
Predictive Systems, Inc.* 4,875 141,680
PRT Group, Inc.* 354,400 332,250
Quintiles Transnational Corp.* 70,000 1,032,500
Radiant Systems, Inc.* 77,250 1,207,031
RCM Technologies, Inc.* 472,300 3,719,362
RemedyTemp, Inc., "A"* 44,000 811,250
Renaissance Worldwide, Inc.* 2,138,100 4,810,725
Sitel Corp.* 123,400 717,263
Staffmark, Inc.* 841,900 4,209,500
Syntel, Inc.* 127,500 1,545,938
Tanning Technology Corp.* 36,300 512,738
Technology Solutions Co.* 129,000 632,906
Teletech Holdings, Inc.* 200,000 6,550,000
The Management Network Group, Inc.* 12,400 282,100
Turnstone Systems, Inc.* 8,900 782,783
UBICS, Inc.* 54,000 135,000
United Parcel Service, Inc. 155,290 9,297,989
Vestcom International, Inc.* 142,100 532,875
Virginia Linux Systems, Inc.* 17,010 677,476
Waterlink, Inc.* 176,000 484,000
Wireless Facilities, Inc.* 12,830 605,416
---------------
$ 749,503,597
------------------------------------------------------------------------------------------------------
Cellular Telephones - 0.8%
AirGate PCS, Inc.* 37,925 $ 1,144,861
Alamosa PCS Holdings, Inc.* 48,350 725,250
Motorola, Inc. 382,460 35,855,625
Sprint Corp. (PCS Group)* 2,060,500 114,357,750
TeleCorp PCS, Inc.* 133,940 4,068,428
Triton PCS Holdings, Inc.* 137,950 5,621,462
---------------
$ 161,773,376
------------------------------------------------------------------------------------------------------
Chemicals
Polymer Group, Inc. 144,700 $ 1,058,119
------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.1%
Dell Computer Corp.* 648,200 $ 27,953,625
------------------------------------------------------------------------------------------------------
Computer Services
Inforte Corp.* 5,840 $ 175,565
------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.9%
Autodesk, Inc. 677,837 $ 25,207,064
Mercury Interactive Corp.* 135,700 11,500,575
Microsoft Corp.* 8,348,100 522,278,006
---------------
$ 558,985,645
------------------------------------------------------------------------------------------------------
Computer Software - Services - 0.3%
Broadbase Software, Inc.* 35,100 $ 737,100
BSQUARE Corp.* 10,300 140,981
Caldera Systems, Inc.* 5,850 46,800
Caminus Corp. 26,390 316,680
Digitas, Inc.* 21,490 261,909
EMC Corp.* 306,000 35,591,625
Ingram Micro, Inc.* 57,900 977,063
Intertrust Technologies Corp.* 40,400 717,100
Kana Communications, Inc.* 28,200 1,263,712
Lightspan, Inc.* 28,810 239,483
Metasolv Software, Inc.* 15,810 624,495
OTG Software, Inc.* 7,520 145,230
Portal Software, Inc.* 177,200 7,132,300
Quintus Corp.* 22,260 159,994
RSA Security, Inc.* 105,800 6,090,112
SonicWall, Inc.* 11,230 676,608
TIBCO Software, Inc.* 121,200 6,741,750
Tier Technologies, Inc.* 32,400 164,025
---------------
$ 62,026,967
------------------------------------------------------------------------------------------------------
Computer Software - Systems - 33.2%
Active Software, Inc.* 102,025 $ 3,660,147
Agile Software Corp.* 67,850 2,841,219
Alteon Websystems, Inc.* 16,300 828,244
Ariba, Inc.* 107,600 5,608,650
Aspen Technology, Inc.* 167,600 3,456,750
Blaze Software, Inc.* 4,650 39,525
Bluestone Software, Inc.* 17,550 333,450
BMC Software, Inc.* 12,397,657 545,496,908
Cadence Design Systems, Inc.*++ 13,710,570 219,369,120
Cambridge Technology Partners, Inc.* 1,934,100 15,593,681
Citrix Systems, Inc.* 4,362 229,550
Computer Associates International, Inc. 12,374,400 637,281,600
Compuware Corp.*++ 24,741,990 252,059,023
Comverse Technology, Inc.* 139,600 12,755,950
Crossroads Systems, Inc.* 33,775 1,346,778
Cysive, Inc.* 138,550 3,498,388
Digex, Inc.* 75,025 3,169,806
Digital Islands, Inc.* 180,000 3,301,875
E.piphany, Inc.* 8,800 687,500
eOn Communications Corp.* 45,580 227,900
Foundry Networks, Inc.* 39,100 2,465,744
Gadzoox Networks, Inc.* 17,050 453,956
I2 Technologies, Inc.* 198,800 21,147,350
Interliant, Inc.* 237,100 3,838,056
JNI Corp.* 16,750 435,500
Keane, Inc.* 400,000 10,725,000
Liberate Technologies* 194,300 4,529,619
NetIQ Corp.* 15,850 536,919
NetSolve, Inc.* 12,125 303,883
Network Associates, Inc.* 554,600 12,131,875
Open TV Corp.* 8,380 379,195
Oracle Corp.*### 61,030,650 4,386,577,969
Packeteer, Inc.* 16,050 207,647
Peoplesoft, Inc.* 224,400 3,099,525
Prime Response, Inc.* 4,860 24,756
Quest Software, Inc.* 265,160 10,606,400
Rational Software Corp.* 399,000 29,251,687
Redback Networks, Inc.* 28,000 2,348,500
Siebel Systems, Inc.* 866,362 101,364,354
Silverstream Software, Inc.* 46,225 1,522,536
SunGard Data Systems, Inc.* 558,925 18,968,517
Sycamore Networks, Inc.* 79,875 6,679,547
Synopsys, Inc.* 2,979,594 140,972,041
Transaction System Architects, Inc., "A"* 222,800 2,701,450
VERITAS Software Corp.* 58,969 6,869,888
Vitria Technology, Inc.* 83,000 2,905,000
Vixel Corp.* 8,850 62,503
---------------
$ 6,482,895,481
------------------------------------------------------------------------------------------------------
Conglomerates - 5.1%
Tyco International Ltd. 21,044,396 $ 990,401,887
------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.2%
Blyth Industries, Inc.* 260,000 $ 7,052,500
Carson, Inc., "A"* 50,800 206,375
Cintas Corp. 312,650 13,756,600
Galileo International, Inc. 262,793 5,912,842
United Rentals, Inc.* 132,562 2,154,133
---------------
$ 29,082,450
------------------------------------------------------------------------------------------------------
Containers
Silgan Holdings, Inc.* 72,200 $ 676,875
------------------------------------------------------------------------------------------------------
Electrical Equipment
Barnett, Inc.* 100,000 $ 943,750
JPM Co.* 150,000 778,125
Micrel, Inc.* 79,200 5,049,000
---------------
$ 6,770,875
------------------------------------------------------------------------------------------------------
Electronics - 8.3%
Aether Systems, Inc.* 33,950 $ 4,666,003
Altera Corp.* 5,744,900 493,343,287
Analog Devices, Inc.* 3,392,000 261,184,000
Atmel Corp.* 802,700 30,653,106
Burr-Brown Corp.* 1,352,512 77,008,652
Cable Design Technologies Corp.* 527,500 14,605,156
Caliper Technologies Corp.* 12,260 503,426
Conexant Systems, Inc.* 147,200 5,538,400
Credence Systems Corp.* 135,800 7,426,563
Flextronics International Ltd.* 180,000 9,798,750
inSilicon Inc.* 3,900 25,350
Intel Corp. 1,015,100 126,570,281
Intersil Holding Corp.* 38,400 1,502,400
Lam Research Corp.* 228,300 7,334,138
Lattice Semiconductor Corp.* 391,600 23,226,775
Lexmark International Group, Inc. 161,300 11,250,675
Linear Technology Corp. 1,031,600 60,928,875
LSI Logic Corp.* 100,000 5,268,750
Mattson Technology, Inc.* 217,800 6,697,350
Maxim Integrated Products, Inc.* 523,600 33,215,875
Metalink Ltd.* 16,530 413,250
Micro Linear Corp.* 193,000 1,013,250
Micron Technology, Inc.* 343,800 24,044,513
Novellus Systems, Inc.* 477,410 23,005,194
Peak International Ltd.* 150,000 1,087,500
Quantum Effect Devices, Inc.* 22,980 929,254
Rudolph Technologies, Inc.* 7,150 162,663
Sage, Inc.* 7,860 79,091
SCG Holding Corp.* 646,500 12,485,531
Silicon Image, Inc.* 12,350 445,372
Silicon Laboratories, Inc.* 5,760 265,320
Solectron Corp.* 429,700 14,206,956
Tektronix, Inc.* 215,000 11,502,500
Teradyne, Inc.* 91,400 7,860,400
Virata Corp.* 23,040 950,400
Vitesse Semiconductor Corp. 266,900 13,511,813
Xilinx, Inc.* 4,360,728 331,960,419
---------------
$ 1,624,671,238
------------------------------------------------------------------------------------------------------
Entertainment - 5.1%
AMFM, Inc.* 293,300 $ 19,871,075
Citadel Communications Corp.* 270,900 10,852,931
Clear Channel Communications, Inc.* 3,767,500 282,091,562
Cox Radio, Inc., "A"* 1,141,500 32,532,750
Emmis Broadcasting Corp., "A"* 142,000 4,845,750
Entercom Communications Corp.* 246,400 11,211,200
Gametech International, Inc.* 515,000 3,315,313
Gemstar International Group Ltd.* 24,000 1,018,500
Harrah's Entertainment, Inc.* 1,615,400 31,904,150
Hearst-Argyle Television, Inc.* 440,000 8,332,500
Infinity Broadcasting Corp., "A"* 2,376,027 75,141,854
Premier Parks, Inc.* 1,564,400 37,252,275
Radio Unica Communications Co.* 31,500 196,875
Silverleaf Resorts, Inc.* 54,000 192,375
Time Warner, Inc. 3,088,000 243,759,000
Univision Communications, Inc., "A"* 1,415,400 145,786,200
Viacom, Inc., "B"* 1,299,545 80,571,790
---------------
$ 988,876,100
------------------------------------------------------------------------------------------------------
Financial Institutions - 0.9%
Associates First Capital Corp., "A" 1,962,140 $ 53,836,216
CIT Group, Inc., "A" 274,100 5,019,456
Donaldson, Lufkin & Jenrette, Inc. 190,000 7,421,875
Federal Home Loan Mortgage Corp. 313,000 13,928,500
Federated Investors, Inc., "A" 166,500 5,047,031
Franklin Resources, Inc. 1,429,400 42,882,000
Goldman Sachs Group, Inc. 76,400 5,620,175
Heller Financial, Inc., "A" 180,531 3,407,523
Merrill Lynch & Co., Inc. 116,600 11,499,675
Morgan Stanley Dean Witter & Co. 153,600 11,049,600
Schwab (Charles) Corp. 165,000 4,743,750
State Street Corp. 141,800 15,810,700
WMF Group Ltd.* 56,000 490,000
---------------
$ 180,756,501
------------------------------------------------------------------------------------------------------
Insurance - 0.1%
Conseco, Inc. 262,844 $ 1,642,775
Hartford Life, Inc., "A" 90,500 4,541,969
Nationwide Financial Services, Inc., "A" 108,400 3,075,850
---------------
$ 9,260,594
------------------------------------------------------------------------------------------------------
Internet - 0.7%
Agency.com, Inc.* 9,800 $ 127,400
Akamai Technologies, Inc.* 26,625 1,777,219
Apropos Technology, Inc.* 8,760 94,170
Art Technology Group, Inc.* 12,100 710,119
C Bridge Internet Solutions, Inc.* 11,380 190,615
CacheFlow, Inc.* 22,870 1,257,850
Calico Commerce, Inc.* 5,825 71,356
Centra Software, Inc.* 13,380 83,625
Chordiant Software, Inc.* 15,950 107,663
Circle.com Co.* 73,050 260,241
Cobalt Networks, Inc.* 11,940 319,395
Data Return Corp.* 32,600 476,775
Deltathree.com, Inc.* 14,250 95,297
Digital Impact, Inc.* 19,000 213,750
Digital Insight Corp.* 26,525 1,017,897
DigitalThink, Inc.* 17,340 364,140
Engage Technologies, Inc.* 30,000 480,000
Eprise Corp.* 7,650 77,456
eSPEED, Inc.* 38,600 998,775
FairMarket, Inc.* 7,410 46,776
FirePond, Inc.* 10,610 180,370
FirstWorld Communications, Inc.* 13,960 139,600
FreeMarkets, Inc.* 6,540 283,264
Getthere.com, Inc. 6,240 74,490
GRIC Communications, Inc.* 7,510 81,202
iManage, Inc.* 3,340 24,841
Integrated Information Systems, Inc.* 5,100 24,863
Internap Network Services Corp.* 104,900 3,002,762
Interwoven, Inc.* 165,450 10,092,450
ITXC Corp.* 98,350 3,294,725
Keynote Systems, Inc.* 18,375 639,680
Lante Corp.* 25,640 516,005
Lifeminders.com, Inc.* 12,730 428,842
Loudeye Technologies, Inc.* 5,440 76,160
MatrixOne, Inc.* 20,610 457,284
Mediaplex, Inc.* 15,580 238,569
MedicaLogic, Inc.* 22,230 175,061
NaviSite, Inc.* 13,350 579,056
Neoforma.com, Inc.* 47,480 308,620
net.Genesis Corp.* 4,580 88,165
NextCard, Inc.* 896,600 8,685,812
Niku Corp.* 29,670 482,601
OnDisplay, Inc.* 4,260 195,960
Onvia.com, Inc.* 10,620 55,091
Organic, Inc.* 7,360 74,520
PC - Tel, Inc.* 37,525 1,003,794
Priceline.com, Inc.* 492,000 18,757,500
Proxicom, Inc.* 470,900 21,602,537
Saba Software, Inc.* 16,790 246,603
SciQuest.com, Inc.* 15,680 125,440
Selectica, Inc.* 10,660 473,704
SkillSoft Corp.* 43,410 396,116
Switchboard, Inc.* 47,590 392,618
Talk.com, Inc.*++ 6,025,055 41,610,536
USinternetworking, Inc.* 65,475 1,174,458
Ventro Corp.* 42,075 757,350
VeriSign, Inc.* 128,200 17,355,075
Versata, Inc.* 13,960 329,805
VIA NET.WORKS, Inc. 6,530 92,236
Vicinity Corp.* 65,000 991,250
webMethods, Inc.* 10,880 909,840
Websense, Inc.* 11,590 246,106
---------------
$ 145,435,480
------------------------------------------------------------------------------------------------------
Machinery
ITEQ, Inc.* 300,000 $ 159,375
------------------------------------------------------------------------------------------------------
Media
YouthStream Media Networks Inc.* 43,300 $ 240,856
------------------------------------------------------------------------------------------------------
Medical and Health Products - 0.5%
Bausch & Lomb, Inc. 257,700 $ 17,910,150
Boston Scientific Corp.* 1,443,100 36,979,437
Bristol-Myers Squibb Co. 321,800 17,719,113
Coast Dental Services, Inc.* 64,600 131,219
Matria Healthcare, Inc.* 186,500 641,094
Orthofix International N.V.* 473,827 8,706,571
PSS World Medical, Inc.* 519,500 4,383,281
Sequenom, Inc.* 47,560 974,980
Warner-Lambert Co. 150,000 18,318,750
---------------
$ 105,764,595
------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.4%
Aspect Medical Systems, Inc.* 26,360 $ 751,260
Biogen, Inc.* 150,200 8,185,900
Cardinal Health, Inc. 153,235 9,941,121
Foundation Health Systems, Inc.* 1,000,409 12,004,908
HEALTHSOUTH Corp.* 3,668,898 23,618,531
Henry Schein, Inc.* 14,350 252,919
McKesson HBOC, Inc. 955,499 15,706,015
Medimmune, Inc. 38,000 5,904,250
Medtronic, Inc. 135,933 7,017,541
Mid Atlantic Medical Services, Inc.*++ 2,526,988 31,271,476
Orthodontic Centers of America, Inc.*++ 2,383,400 54,669,237
Oxford Health Plans, Inc.* 450,000 9,562,500
PacifiCare Health Systems, Inc., "A"* 993,646 64,400,681
Total Renal Care Holdings, Inc.* 2,165,528 8,526,766
UnitedHealth Group, Inc. 7,068,154 527,019,233
VISX, Inc.* 1,991,070 39,199,191
Wellpoint Health Networks, Inc.* 581,600 42,238,700
---------------
$ 860,270,229
------------------------------------------------------------------------------------------------------
Oil Services - 0.3%
Baker Hughes, Inc. 400,000 $ 14,500,000
Global Marine, Inc.* 480,000 13,590,000
Halliburton Co. 206,200 10,516,200
Noble Drilling Corp.* 155,600 6,749,150
Schlumberger Ltd. 120,000 8,827,500
Weatherford International, Inc.* 200,000 8,612,500
---------------
$ 62,795,350
------------------------------------------------------------------------------------------------------
Oils - 0.1%
Grant Pride Co., Inc.* 200,000 $ 4,650,000
Transocean Sedco Forex, Inc. 255,600 12,572,325
---------------
$ 17,222,325
------------------------------------------------------------------------------------------------------
Pollution Control - 0.6%
Allied Waste Industries, Inc.* 290,300 $ 2,957,431
Republic Services, Inc.* 6,023,100 99,381,150
Waste Management, Inc. 1,035,462 21,097,538
---------------
$ 123,436,119
------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.1%
Applied Graphics Technologies, Inc.* 133,000 $ 457,187
Mail-Well, Inc.* 1,640,000 15,375,000
Workflow Management, Inc.* 195,801 2,361,850
---------------
$ 18,194,037
------------------------------------------------------------------------------------------------------
Railroads - 0.4%
Kansas City Southern Industries, Inc. 1,256,900 $ 84,526,525
------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 3.8%
Amerihost Properties, Inc.*++ 527,000 $ 1,712,750
Applebee's International, Inc.++ 3,040,978 97,501,357
Avado Brands, Inc. 370,000 543,438
Buffets, Inc.*++ 2,989,750 34,755,844
Candlewood Hotel Co., Inc.* 183,000 377,438
CEC Entertainment, Inc.*++ 1,583,100 36,411,300
Cendant Corp.*++ 37,110,185 491,709,951
Extended Stay America, Inc.* 386,904 3,482,136
Extended Stay America, Inc.*+(+) 1,000,000 9,000,000
Four Seasons Hotels, Inc. 152,400 9,096,375
Friendly Ice Cream Corp.* 315,000 1,496,250
Hammons (John Q) Hotels, Inc., "A"* 129,000 532,125
Hilton Hotels Corp. 1,918,730 16,309,205
IHOP Corp.* 679,000 11,967,375
Meristar Hotels and Resorts, Inc.* 884,000 2,541,500
Mortons Restaurant Group, Inc.*++ 412,000 7,570,500
Papa John's International, Inc.* 24,200 606,512
Schlotzskys, Inc.* 270,700 1,641,119
Sonic Corp.* 715,000 19,796,562
Star Buffet, Inc.* 35,000 98,438
U.S. Franchise Systems, Inc., "A"* 489,900 2,663,831
---------------
$ 749,814,006
------------------------------------------------------------------------------------------------------
Retail - 1.6%
Rite Aid Corp.* 6,757,100 $ 46,877,381
Consolidated Stores Corp.* 1,193,125 15,510,625
CVS Corp. 330,300 14,368,050
Friedmans, Inc., "A"* 130,000 780,000
Gymboree Corp.* 131,200 369,000
Home Depot, Inc. 1,851,450 90,373,903
Mothers Work, Inc.*++ 192,000 1,944,000
Movie Gallery, Inc.* 338,000 1,119,625
MSC Industrial Direct, Inc., "A"* 196,600 4,534,087
Office Depot, Inc.* 15,362,650 108,498,716
OfficeMax, Inc.* 808,000 4,393,500
Rental-A-Center, Inc.* 226,000 4,548,250
Tandy Corp. 249,700 10,596,644
U.S. Office Products Co.* 1,041,203 1,041,203
Wal-Mart Stores, Inc. 197,800 11,398,225
---------------
$ 316,353,209
------------------------------------------------------------------------------------------------------
Special Products and Services - 0.1%
Backweb Technologies Ltd.* 20,675 $ 315,294
Central Parking Corp. 218,900 5,759,806
Flanders Corp.* 80,000 290,000
Lennox International, Inc. 107,200 1,259,600
Stewart Enterprises, Inc., "A" 900,000 3,600,000
Stratesec, Inc.* 22,000 55,000
Wackenhut Corp. 184,000 1,518,000
---------------
$ 12,797,700
------------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
Kroger Co.* 1,886,500 $ 37,494,187
Safeway, Inc.* 257,300 11,867,963
---------------
$ 49,362,150
------------------------------------------------------------------------------------------------------
Telecommunications - 20.5%
ADC Telecommunications, Inc.* 164,100 $ 11,025,469
Allegiance Telecom, Inc.* 208,400 11,019,150
Alltel Corp. 200,000 13,087,500
Amdocs Ltd.* 223,170 13,822,592
American Tower Corp., "A"* 260,979 9,688,845
APAC Teleservices, Inc.* 268,000 2,378,500
Arrowpoint Communications, Inc.* 13,880 1,665,600
AT&T Corp. 3,103,460 88,642,576
AT&T Corp., "A" 250,000 11,078,125
Avanex Corp.* 28,760 1,955,680
Bell Atlantic Corp. 267,900 14,165,212
BreezeCom Ltd.* 7,370 181,947
BroadWing, Inc.* 333,068 7,931,182
Carrier Access Corp.* 86,600 3,205,553
Cisco Systems, Inc.* 43,856,148 2,497,059,427
Copper Mountain Networks, Inc.* 135,000 11,280,938
Corning, Inc. 152,300 29,460,531
Crown Castle International Corp.* 452,300 11,844,606
EchoStar Communications Corp.* 399,914 15,971,565
Efficient Networks, Inc.* 7,400 358,900
Eloquent, Inc.* 11,410 80,583
Glenayre Technologies, Inc.* 1,140,000 9,333,750
Global TeleSystems Group, Inc.* 214,028 2,381,062
Hypercom Corp.* 35,200 440,000
i3 Mobile, Inc.* 18,270 143,876
iBasis, Inc.* 163,280 2,296,125
Illuminet Holdings, Inc.* 26,850 1,023,656
Insight Communications, Inc.* 165,200 2,343,775
Intermedia Communications, Inc.* 136,900 3,422,500
JDS Uniphase Corp.* 471,100 41,456,800
Level 3 Communications, Inc.* 271,000 20,680,687
Lucent Technologies, Inc. 960,750 55,123,031
Metromedia Fiber Network, Inc., "A"* 1,463,400 45,273,937
MGC Communications, Inc.* 492,900 20,208,900
Net2000 Communication, Inc.* 23,290 278,024
Network Solutions, Inc.* 1,905,600 281,671,500
Next Level Communications, Inc.* 15,380 786,303
NEXTEL Communications, Inc.* 169,575 15,706,884
Nextlink Communications, Inc., "A"* 316,000 22,139,750
NTL, Inc.* 222,500 13,141,406
Pegasus Communications Corp.* 280,000 11,480,000
Pinnacle Holdings, Inc.* 120,000 5,880,000
Powerwave Technologies, Inc.* 75,000 4,064,063
PSINet, Inc.* 230,548 6,008,657
Qwest Communications International, Inc.* 928,076 39,269,216
RF Micro Devices, Inc.* 65,100 6,835,500
RMH Teleservices, Inc.* 109,000 654,000
SCC Communications Corp.* 217,300 1,195,150
Scientific-Atlanta, Inc. 40,000 2,255,000
Sonus Networks, Inc.* 16,130 1,176,482
Spectrasite Holdings, Inc.* 1,127,500 19,097,031
Sprint Corp.* 256,700 15,530,350
Telaxis Communications Corp.* 20,460 524,288
Tellabs, Inc.* 436,000 28,312,750
Time Warner Telecom, Inc.* 268,000 15,008,000
Tritel, Inc.* 22,870 524,581
Ulticom, Inc.* 7,250 186,688
UnitedGlobalCom, Inc.* 278,100 13,348,800
Universal Access, Inc.* 17,090 298,007
UTStarcom, Inc.* 38,850 1,486,013
VDI Media* 84,700 561,138
Viasystems Group, Inc.* 330,400 3,345,300
Vignette Corp.* 171,100 4,715,944
Vyyo, Inc.* 27,790 409,903
Williams Communications Group, Inc.* 214,592 7,872,844
Wink Communications, Inc.* 10,575 228,684
Winstar Communications, Inc.* 271,400 7,700,975
Witness Systems, Inc.* 8,500 60,031
WorldCom, Inc.* 13,459,484 506,413,085
Tekelec Co.* 222,800 7,352,400
---------------
$ 4,005,551,327
------------------------------------------------------------------------------------------------------
Telecommunications and Cable - 0.1%
Comcast Corp., "A"* 615,800 $ 23,323,425
------------------------------------------------------------------------------------------------------
Transportation
Budget Group, Inc., "A"* 267,700 $ 1,020,606
Carey International, Inc.* 75,700 700,225
Dispatch Management Services Corp.* 215,600 269,500
---------------
$ 1,990,331
------------------------------------------------------------------------------------------------------
Utilities - Electric
Calpine Corp.* 40,375 $ 4,277,227
------------------------------------------------------------------------------------------------------
Venture Capital
Copley Partners 1*+(+) 3,000,000 $ 258,120
Copley Partners 2*+(+) 3,000,000 940,680
Highland Capital Partners*+(+) 7,500,000 618,225
---------------
$ 1,817,025
------------------------------------------------------------------------------------------------------
Total U.S. Stocks $18,833,201,725
------------------------------------------------------------------------------------------------------
Foreign Stocks - 2.8%
Bermuda - 0.3%
Ace Ltd. (Insurance) 686,100 $ 18,396,056
FLAG Telecom Holdings Ltd. (Telecommunications)* 10,450 148,259
Global Crossing Ltd. (Telecommunications)* 1,225,300 30,709,081
InterWAVE Communications International Ltd.
(Telecommunications)* 50,380 472,313
---------------
$ 49,725,709
------------------------------------------------------------------------------------------------------
Canada - 0.3%
Biovail Corp.* (Medical and Health Technology and
Services) 210,600 $ 9,950,850
Delano Technology Corp. (Computer Software -
Services)* 8,730 96,030
GT Group Telecom, Inc. (Telecommunications)* 30,600 413,100
Nortel Networks Corp. (Telecommunications) 676,400 36,736,975
---------------
$ 47,196,955
------------------------------------------------------------------------------------------------------
Finland
Nokia Corp., ADR (Telecommunications) 21,200 $ 1,102,400
------------------------------------------------------------------------------------------------------
France
Thomson Multimedia (Electronics)* 9,350 $ 972,363
------------------------------------------------------------------------------------------------------
Germany - 1.4%
Infineon Technologies AG (Electronics)* 75,320 $ 4,924,593
SAP AG (Computer Software - Systems) 174,300 72,343,484
SAP AG, ADR (Computer Software - Systems) 1,088,283 46,660,134
SAP AG, Preferred (Computer Software - Systems) 305,625 157,636,225
---------------
$ 281,564,436
------------------------------------------------------------------------------------------------------
Ireland - 0.3%
Elan Corp. PLC, ADR (Health Products)* 222,200 $ 8,846,337
SmartForce PLC* (Internet) 990,700 41,671,319
Trintech Group PLC, ADR (Computer Software -
Products)* 361,100 7,357,413
---------------
$ 57,875,069
------------------------------------------------------------------------------------------------------
Israel
Radware Ltd. (Internet)* 19,525 $ 339,247
------------------------------------------------------------------------------------------------------
Italy
Gucci Group N.V. (Apparel and Textiles) 56,000 $ 4,795,000
------------------------------------------------------------------------------------------------------
Japan
Nippon Telegraph & Telephone Co. (Utilities -
Telephone) 130 $ 1,545,319
------------------------------------------------------------------------------------------------------
Netherlands - 0.1%
ASM International N.V. (Electronics)* 109,150 $ 2,824,256
Completel Europe N.V. (Telecommunications)* 23,520 274,214
KPNQwest N.V. (Internet)* 25,930 899,679
STMicroelectronics N.V. (Electronics) 228,825 13,637,864
---------------
$ 17,636,013
------------------------------------------------------------------------------------------------------
Sweden - 0.1%
Ericsson LM, ADR (Telecommunications) 427,200 $ 8,757,600
Skandia Forsakrings AB (Insurance) 200,000 5,123,065
Tele1 Europe Holdings AB (Telecommunications)* 17,000 205,424
---------------
$ 14,086,089
------------------------------------------------------------------------------------------------------
United Kingdom - 0.3%
Danka Business Systems, ADR (Business Services)*++ 4,094,000 $ 19,958,250
Vodafone AirTouch PLC (Telecommunications)* 10,081,790 46,013,458
---------------
$ 65,971,708
------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 542,810,308
------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $9,053,109,819) $19,376,012,033
------------------------------------------------------------------------------------------------------
Convertible Preferred Stock
------------------------------------------------------------------------------------------------------
Restaurants and Lodging
Avado Financing, "A", 7s*## (Identified Cost, $5,000,000) 100,000 $ 1,600,000
------------------------------------------------------------------------------------------------------
Convertible Bond
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------------------------------
Restaurants and Lodging
ShoLodge, Inc., 7.5s, 2004 (Identified Cost, $2,000,000) $ 2,000 $ 1,222,500
------------------------------------------------------------------------------------------------------
Short-Term Obligations - 2.8%
------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., due 6/01/00 $ 607 $ 607,000
UBS Finance, Inc., due 6/01/00 550,000 550,000,000
------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 550,607,000
------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $9,610,716,819) $19,929,441,533
------------------------------------------------------------------------------------------------------
Call Options Written - (0.1)%
------------------------------------------------------------------------------------------------------
ISSUER/EXPIRATION MONTH/STRIKE PRICE CONTRACTS VALUE
------------------------------------------------------------------------------------------------------
Cisco Systems, Inc./July/80 5,000 $ (125,000)
Oracle Corp.:
June/65 2,500 (2,437,500)
June/67.5 1,350 (1,215,000)
June/70 8,800 (5,280,000)
June/72.5 3,500 (1,750,000)
June/75 7,100 (2,307,500)
June/80 2,500 (500,000)
June/85 1,500 (93,750)
June/95 800 (20,000)
June/100 1,700 (21,250)
June/115 4,400 (7,810,000)
Oracle Corp.:
September/80 1,800 (1,485,000)
September/85 1,200 (810,000)
September/90 3,191 (1,595,500)
September/95 1,700 (722,500)
September/100 3,100 (891,250)
Oracle Corp.:
December/80 400 (510,000)
December/85 400 (430,000)
December/90 400 (440,000)
December/95 400 (350,000)
December/100 400 (275,000)
------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Paid, $36,370,955) 52,141 $ (29,069,250)
------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.8)% (358,274,929)
------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $19,542,097,354
------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
### Security or a portion of the security was pledged to cover collateral requirements for written
options. At the period end, the value of securities pledged amounted to $5,204,100.
+ Restricted security.
++ Affiliated issuers are those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting shares of the issuer.
(+) Security valued by or at the direction of the Trustees.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
------------------------------------------------------------------------------------------------------------------
MAY 31, 2000
------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $7,996,724,590) $18,062,554,255
Affiliated issuers (identified cost, $1,613,992,229) 1,866,887,278
---------------
Total investments, at value (identified cost, $9,610,716,819) $19,929,441,533
Investments of cash collateral for securities loaned, at identified cost and value 112,006,109
Cash 1,140,446
Foreign currency, at value (identified cost, $770) 763
Receivable for Fund shares sold 63,233,124
Receivable for investments sold 13,743,681
Interest and dividends receivable 1,254,208
Other assets 367,224
---------------
Total assets $20,121,227,086
---------------
Liabilities:
Payable for investments purchased $ 15,904,995
Payable for Fund shares reacquired 420,879,793
Collateral for securities loaned, at value 112,006,109
Written options outstanding, at value (premiums received, $36,370,955) 29,069,250
Payable to affiliates -
Management fee 362,041
Shareholder servicing agent fee 54,231
Distribution and service fee 362,828
Administrative fee 1,868
Accrued expenses and other liabilities 448,619
---------------
Total liabilities $ 579,129,732
---------------
Net assets $19,542,097,354
===============
Net assets consist of:
Paid-in capital $ 8,918,669,593
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currencies 10,326,045,958
Accumulated undistributed net realized gain on investments and foreign currency transactions 430,360,122
Accumulated net investment loss (132,978,319)
---------------
Total $19,542,097,354
===============
Shares of beneficial interest outstanding 316,971,484
===========
Class A shares:
Net asset value per share
(net assets of $8,345,607,220 / 132,615,735 shares of beneficial interest outstanding) $62.93
======
Offering price per share (100 / 94.25 of net asset value per share) $66.77
======
Class B shares:
Net asset value and offering price per share
(net assets of $9,755,146,212 / 160,636,106 shares
of beneficial interest outstanding) $60.73
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,245,722,722 / 20,622,761 shares of
beneficial interest outstanding) $60.41
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $178,370,134 / 2,813 984 shares of beneficial interest outstanding) $63.39
======
Class J shares:
Net asset value and redemption price per share
(net assets of $17,251,066 / 282,898 shares of beneficial interest outstanding) $60.98
======
Offering price per share (100 / 97 of net asset value per share) $62.87
======
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.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations (Unaudited)
-----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED MAY 31, 2000
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Net investment income (loss):
Income -
Interest $ 9,328,685
Dividends (including $313,950 received from affiliated issuers) 5,969,724
Income on securities loaned 979,309
Foreign taxes withheld (124,293)
--------------
Total investment income $ 16,153,425
--------------
Expenses -
Management fee $ 66,305,562
Trustees' compensation 27,305
Shareholder servicing agent fee 9,932,585
Distribution and service fee (Class A) 10,499,154
Distribution and service fee (Class B) 50,407,738
Distribution and service fee (Class C) 6,054,501
Distribution and service fee (Class J) 55,815
Administrative fee 207,310
Custodian fee 1,701,580
Printing 151,630
Postage 665,267
Auditing fees 20,417
Legal fees 23,025
Miscellaneous 3,763,279
--------------
Total expenses $ 149,815,168
Fees paid indirectly (797,350)
--------------
Net expenses $ 149,017,818
--------------
Net investment loss $ (132,864,393)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions (including $17,249,968 net loss from
transactions with affiliated issuers) $ 439,306,025
Written option transactions 5,487,180
Foreign currency transactions (192,305)
--------------
Net realized gain on investments and foreign currency transactions $ 444,600,900
--------------
Change in unrealized appreciation (depreciation) -
Investments $2,030,957,137
Written options 7,301,705
Translation of assets and liabilities in foreign currencies 19,526
--------------
Net unrealized gain on investments and foreign currency
translation $2,038,278,368
--------------
Net realized and unrealized gain on investments and foreign
currency $2,482,879,268
--------------
Increase in net assets from operations $2,350,014,875
==============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30, 1999
(UNAUDITED)
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (132,864,393) $ (184,901,150)
Net realized gain on investments and foreign
currency transactions 444,600,900 246,875,650
Net unrealized gain on investments and foreign
currency translation 2,038,278,368 4,203,676,697
--------------- ---------------
Increase in net assets from operations $ 2,350,014,875 $ 4,265,651,197
--------------- ---------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (39,112,323) $ (47,160,924)
From net realized gain on investments and foreign
currency transactions (Class B) (49,401,173) (63,514,966)
From net realized gain on investments and foreign
currency transactions (Class C) (5,588,285) (5,989,031)
From net realized gain on investments and foreign
currency transactions (Class I) (600,026) (509,880)
From net realized gain on investments and foreign
currency transactions (Class J) (64,162) (1,520)
--------------- ---------------
Total distributions declared to shareholders $ (94,765,969) $ (117,176,321)
--------------- ---------------
Net increase in net assets from Fund share
transactions $ 1,303,988,341 $ 314,846,659
--------------- ---------------
Total increase in net assets $ 3,559,237,247 $ 4,463,321,535
Net assets:
At beginning of period 15,982,860,107 11,519,538,572
--------------- ---------------
At end of period (including accumulated net
investment loss of $132,978,319 and $113,926,
respectively) $19,542,097,354 $15,982,860,107
=============== ===============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED ---------------------------------------------------------
MAY 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $55.11 $40.65 $37.54 $32.01 $26.79 $18.73
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.30) $(0.43) $(0.34) $(0.34) $(0.29) $(0.23)
Net realized and unrealized gain
on investments and foreign
currency 8.43 15.30 3.79 6.24 5.51 8.68
------ ------ ------ ------ ------ ------
Total from investment operations $ 8.13 $14.87 $ 3.45 $ 5.90 $ 5.22 $ 8.45
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on
investments and foreign currency
transactions $(0.31) $(0.41) $(0.34) $(0.37) $ -- $(0.38)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.00)*
From paid-in capital -- -- -- -- -- (0.01)
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.31) $(0.41) $(0.34) $(0.37) $ -- $(0.39)
------ ------ ------ ------ ------ ------
Net asset value - end of period $62.93 $55.11 $40.65 $37.54 $32.01 $26.79
====== ====== ====== ====== ====== ======
Total return(+) 14.78%++ 36.91% 9.36% 18.66% 19.52% 45.98%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08%+ 1.13% 1.16% 1.21% 1.20% 1.28%
Net investment loss (0.91)%+ (0.92)% (0.87)% (0.99)% (1.01)% (1.04)%
Portfolio turnover 9% 16% 15% 21% 22% 20%
Net assets at end of period
(000,000 Omitted) $8,346 $6,570 $4,713 $3,875 $2,524 $1,312
+ Annualized.
++ Not annualized.
* The per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED ---------------------------------------------------------
MAY 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $53.39 $39.69 $36.85 $31.48 $26.56 $18.57
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.52) $(0.76) $(0.62) $(0.59) $(0.52) $(0.41)
Net realized and unrealized gain
on investments and foreign
currency 8.17 14.87 3.72 6.14 5.44 8.65
------ ------ ------ ------ ------ ------
Total from investment
operations $ 7.65 $14.11 $ 3.10 $ 5.55 $ 4.92 $ 8.24
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on
investments and foreign currency
transactions $(0.31) $(0.41) $(0.26) $(0.18) $ -- $(0.24)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.00)*
From paid-in capital -- -- -- -- -- (0.01)
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.31) $(0.41) $(0.26) $(0.18) $ -- $(0.25)
------ ------ ------ ------ ------ ------
Net asset value - end of period $60.73 $53.39 $39.69 $36.85 $31.48 $26.56
====== ====== ====== ====== ====== ======
Total return 14.34%++ 35.91% 8.55% 17.78% 18.52% 44.89%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.83%+ 1.88% 1.91% 1.97% 2.00% 2.08%
Net investment loss (1.65)%+ (1.67)% (1.62)% (1.75)% (1.80)% (1.83)%
Portfolio turnover 9% 16% 15% 21% 22% 20%
Net assets at end of period
(000,000 Omitted) $9,755 $8,390 $6,190 $5,144 $3,659 $2,001
+ Annualized.
++ Not annualized.
* The per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
YEAR ENDED
NOVEMBER 30, PERIOD ENDED
SIX MONTHS ENDED ---------------------------------- NOVEMBER 30,
MAY 31, 2000 1999 1998 1997 1996*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------
CLASS C
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $53.11 $39.49 $36.66 $31.48 $28.37
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.52) $(0.76) $(0.61) $(0.59) $(0.38)
Net realized and unrealized gain on
investments and foreign currency 8.13 14.79 3.70 6.12 3.49
------ ------ ------ ------ ------
Total from investment operations $ 7.61 $14.03 $ 3.09 $ 5.53 $ 3.11
------ ------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(0.31) $(0.41) $(0.26) $(0.35) $ --
------ ------ ------ ------ ------
Net asset value - end of period $60.41 $53.11 $39.49 $36.66 $31.48
====== ====== ====== ====== ======
Total return 14.34%++ 35.89% 8.54% 17.81% 10.96%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.83%+ 1.88% 1.91% 1.97% 1.35%+
Net investment loss (1.66)%+ (1.67)% (1.62)% (1.75)% (1.25)%+
Portfolio turnover 9% 16% 15% 21% 22%
Net assets at end of period
(000,000 Omitted) $1,246 $910 $564 $344 $119
* For the period from the inception of Class C, April 1, 1996, through November 30, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED
NOVEMBER 30, PERIOD ENDED
SIX MONTHS ENDED ---------------------- NOVEMBER 30,
MAY 31, 2000 1999 1998 1997*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------
CLASS I
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $55.45 $40.76 $37.62 $29.98
------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.22) $(0.32) $(0.24) $(0.23)
Net realized and unrealized gain on investments
and foreign currency 8.47 15.42 3.80 7.87
------ ------ ------ ------
Total from investment operations $ 8.25 $15.10 $ 3.56 $ 7.64
------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(0.31) $(0.41) $(0.42) $ --
------ ------ ------ ------
Net asset value - end of period $63.39 $55.45 $40.76 $37.62
====== ====== ====== ======
Total return 14.91%++ 37.38% 9.67% 25.48%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83%+ 0.88% 0.91% 0.97%+
Net investment loss (0.66)%+ (0.68)% (0.62)% (0.74)%+
Portfolio turnover 9% 16% 15% 21%
Net assets at end of period (000 Omitted) $178,370 $102,188 $51,537 $47,240
* For the period from the inception of Class I, January 2, 1997, through November 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-----------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SIX MONTHS ENDED NOVEMBER 30, NOVEMBER 30,
MAY 31, 2000 1999 1998*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------
CLASS J
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $53.55 $39.71 $35.31
------ ------ ------
Income from investment operations# -
Net investment loss $(0.44) $(0.63) $(0.09)
Net realized and unrealized gain on investments and
foreign currency 8.18 14.88 4.49
------ ------ ------
Total from investment operations $ 7.74 $14.25 $ 4.40
------ ------ ------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency $(0.31) $(0.41) $ --
------ ------ ------
Net asset value - end of period $60.98 $53.55 $39.71
====== ====== ======
Total return(+) 14.48%++ 36.22% 12.46%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.58%+ 1.63% 1.66%+
Net investment loss (1.41)%+ (1.44)% (1.50)%+
Portfolio turnover 9% 16% 15%
Net assets at end of period (000 Omitted) $17,251 $10,753 $88
* For the period from the inception of Class J, September 24, 1998, through November 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
(+) Total returns for Class J shares do not include the applicable sales charge. If the charge had been included,
the results would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Emerging Growth Fund (the Fund) is a diversified series of MFS Series
Trust II (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Fund
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there
are no such quotations or valuations are valued in good faith, at fair value,
by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred
Compensation Plan (the Plan) independent Trustees may elect to defer receipt
of all or a portion of their annual compensation. Deferred amounts are treated
as though equivalent dollar amounts had been invested in shares of the Fund or
other MFS funds selected by the Trustee. Deferred amounts represent an
unsecured obligation of the Fund until distributed in accordance with the
Plan.
Security Loans - State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, may loan the securities of
the Fund to certain qualified institutions (the "Borrowers") approved by the
Fund. The loans are collateralized at all times by U.S. Treasury securities in
an amount at least equal to the market value of the securities loaned. State
Street and Chase provide the Fund with indemnification against Borrower
default.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the Fund and the lending agents. The
dividend and interest income earned on the securities loaned is accounted for
in the same manner as other dividend and interest income.
At May 31, 2000, the value of securities loaned was $234,485,763. These loans
were collateralized by U.S. Treasury securities of $128,439,992 and cash of
$112,006,109, which was invested in the following short-term obligations:
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED COST
AMOUNT AND VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bayerische und Vereinsbank, 6.26%, due 7/20/00 $ 4,000,000 $ 3,997,849
Deutsche Bank AG, 6.48%, due 1/12/01 1,500,000 1,499,560
Old Line Funding Corp., 6.29%, due 6/01/00 5,000,000 5,000,000
Salomon Smith Barney Inc., 6.55%, due 6/01/00 26,508,700 26,508,700
Salomon Smith Barney Inc., 6.57%, due 6/01/00 75,000,000 75,000,000
------------ ------------
Total investments of cash collateral for securities loaned $112,008,700 $112,006,109
============ ============
</TABLE>
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend 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.
Fees Paid Indirectly - The Fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of total expenses on the
Statement of Operations. During the period, the Fund's custodian fees were
reduced by $749,572 under this arrangement. The Fund has entered into a
directed brokerage agreement, under which the broker will credit the Fund a
portion of the commissions generated, to offset certain expenses of the Fund.
For the period, the Fund's custodian fees were reduced by $47,778 under this
agreement. These amounts are shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
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 the following annual
rates:
First $2.5 billion of average net assets 0.750%
Next $4.5 billion of average net assets 0.700%
Next $8 billion of average net assets 0.650%
Average net assets in excess of $15 billion 0.625%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $9,947
for the six months ended May 31, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund incurs an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,588,705 for the six months ended May 31, 2000, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, Class C, and
Class J shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $381,071
for the six months ended May 31, 2000. Payment of the 0.10% per annum Class A
distribution fee will commence on such date as the Trustees of the Trust may
determine. Fees incurred under the distribution plan during the six months
ended May 31, 2000, were 0.25% of average daily net assets attributable to
Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $170,063 and $15,318 for Class B and Class C shares, respectively,
for the six months ended May 31, 2000. Fees incurred under the distribution plan
during the six months ended May 31, 2000, were 1.00% of average daily net assets
attributable to Class B and Class C shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of up to 0.50% per annum, and a service fee of up to 0.25%
per annum, of the Fund's average daily net assets attributable to Class J
shares. Class J shares are available for distribution through Merrill Lynch
Japan Securities Co. ("MLJ") and its network of financial intermediaries. MLJ
also serves as the Fund's Agent Securities Company in Japan, and in that
capacity represents the Fund before Japanese regulatory authorities. MFD will
pay to MLJ all of the service fee and all of the distribution fee attributable
to Class J shares. A portion of the distribution fee equal to 0.10% per annum
of the Fund's average daily net assets attributable to Class J shares is paid
to MLJ to cover its services as the Fund's Agent Securities Company. Fees
incurred under the distribution plan during the six months ended May 31, 2000,
were 0.75% of average net assets attributable to Class J shares on an
annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended May 31,
2000, were $201,247, $5,040,954, and $95,096 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------------------------------------------------------------------
<S> <C>
U.S. government securities $ 15,307,780 --
-------------- --------------
Investments (non-U.S. government securities) $2,533,990,500 $1,700,136,533
-------------- --------------
</TABLE>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $ 9,610,716,819
---------------
Gross unrealized appreciation $11,721,359,242
Gross unrealized depreciation (1,402,634,528)
---------------
Net unrealized appreciation $10,318,724,714
===============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 254,025,026 $ 16,605,056,600 455,312,210 $ 21,378,736,699
Shares issued to
shareholders in
reinvestment of
distributions 577,935 35,185,808 1,050,363 44,113,129
Shares reacquired (241,214,120) (15,845,359,647) (453,076,386) (21,320,862,046)
------------ ---------------- ------------ ----------------
Net increase 13,388,841 $ 794,882,761 3,286,187 $ 101,987,782
============ ================ ============ ================
<CAPTION>
Class B Shares
SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 35,496,904 $ 2,245,700,991 75,802,531 $ 3,432,408,496
Shares issued to
shareholders in
reinvestment of
distributions 662,123 38,592,802 1,244,617 49,917,727
Shares reacquired (32,649,155) (2,062,364,519) (75,879,435) (3,432,109,745)
------------ ---------------- ------------ ----------------
Net increase 3,509,872 $ 221,929,274 1,167,713 $ 50,216,478
============ ================ ============ ================
<CAPTION>
Class C Shares
SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 18,316,434 $ 1,151,940,960 40,184,179 $ 1,810,714,904
Shares issued to
shareholders in
reinvestment of
distributions 61,962 3,592,552 92,240 3,679,900
Shares reacquired (14,883,413) (939,225,369) (37,434,750) (1,690,564,944)
------------ ---------------- ------------ ----------------
Net increase 3,494,983 $ 216,308,143 2,841,669 $ 123,829,860
============ ================ ============ ================
<CAPTION>
Class I Shares
SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,941,687 $ 134,007,928 800,542 $ 39,590,011
Shares issued to
shareholders in
reinvestment of
distributions 9,758 591,122 12,017 494,873
Shares reacquired (980,399) (69,184,387) (233,924) (10,875,702)
------------ ---------------- ------------ ----------------
Net increase 971,046 $ 65,414,663 578,635 $ 29,209,182
============ ================ ============ ================
<CAPTION>
Class J Shares
SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 215,054 $ 13,694,097 232,665 $ 11,295,508
Shares reacquired (132,963) (8,240,597) (34,080) (1,692,151)
------------ ---------------- ------------ ----------------
Net increase 82,091 $ 5,453,500 198,585 $ 9,603,357
============ ================ ============ ================
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. Interest is charged to
each fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the six months ended May
31, 2000, was $86,848. There were no significant borrowings during the period.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, swap agreements, and futures contracts. The notional or contractual
amounts of these instruments represent the investment the Fund has in particular
classes of financial instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered.
<TABLE>
Written Option Transactions
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
---------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of period -- $ --
Options written 79,841 56,484,617
Options exercised (14,300) (14,626,482)
Options expired (13,400) (5,487,180)
------ ------------
Outstanding, end of period 52,141 $ 36,370,955
====== ============
</TABLE>
At May 31, 2000, the Fund had sufficient cash and/or securities at least equal
to the value of the written options.
(8) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the six months ended
May 31, 2000, is set forth below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
BEGINNING ------------------------------ -------------------------------
AFFILIATE SHARES SHARES COST SHARES COST
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amerihost Properties, Inc. 527,000 -- $ -- -- --
Applebees International, Inc. 3,139,500 -- -- 98,522 2,502,917
BMC Software, Inc. 11,660,757 736,900 32,966,958 -- --
Buffets, Inc. 2,989,750 -- -- -- --
Cadence Design Systems, Inc. 13,451,270 513,000 9,326,291 254,000 4,254,574
CEC Entertainment, Inc. 1,573,100 10,000 250,600 -- --
Cendant Corp. 36,763,885 346,300 5,791,168 -- --
Compuware Corp. 23,589,390 1,216,500 37,223,660 63,900 1,562,000
Danka Business
Systems ADR 4,117,000 -- -- 23,000 290,078
Micro Warehouse, Inc. 2,857,100 -- -- 2,857,100 53,561,201
Midatlantic Medical Services 2,526,988 -- -- -- --
Modis Professional
Services, Inc. 8,343,050 -- -- -- --
Mortons Restaurant
Group, Inc. 426,000 -- -- 14,000 264,549
Mothers Work, Inc. 192,000 -- -- -- --
Talk.com, Inc. 6,456,100 253,555 4,310,435 684,600 12,307,728
----------- -----------
$89,869,112 $74,743,047
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
ENDING REALIZED DIVIDEND ENDING IDENTIFIED
AFFILIATE SHARES GAIN (LOSS) INCOME VALUE COST
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amerihost Properties, Inc. 527,000 $ -- $ -- $1,712,750 $ 2,868,505
Applebees International,
Inc 3,040,978 (144,022) 313,950 97,501,357 37,675,992
BMC Software, Inc. 12,397,657 -- -- 545,496,908 262,559,419
Buffets, Inc. 2,989,750 -- -- 34,755,844 36,540,272
Cadence Design Systems,
Inc 13,710,570 (3,587,959) -- 219,369,120 131,086,007
CEC Entertainment, Inc. 1,583,100 -- -- 36,411,300 13,661,955
Cendant Corp. 37,110,185 -- -- 491,709,951 421,062,589
Compuware Corp. 24,741,990 (797,076) -- 252,059,023 368,869,310
Danka Business
Systems ADR 4,094,000 (255,879) -- 19,958,250 103,669,739
Micro Warehouse, Inc. -- (13,860,296) -- -- --
Midatlantic Medical
Services 2,526,988 -- -- 31,271,477 15,475,556
Modis Professional
Services, Inc. 8,343,050 -- -- 85,516,262 156,113,728
Mortons Restaurant
Group, Inc. 412,000 52,080 -- 7,570,500 4,359,906
Mothers Work, Inc. 192,000 -- -- 1,944,000 2,724,636
Talk.com, Inc. 6,025,055 1,343,184 -- 41,610,536 57,324,615
------------ ----------- -------------- --------------
$(17,249,968) $ 313,950 $1,866,887,278 $1,613,992,229
============ =========== ============== ==============
</TABLE>
(9) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At May 31, 2000,
the Fund owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 0.32% of net assets which may not be
publicly sold without registration under the Securities Act of 1933. The Fund
does not have the right to demand that such securities be registered. The
value of these securities is determined by valuations furnished by dealers or
by a pricing service, or if not available, in good faith, at fair value, by
the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATE OF ACQUISITION SHARES COST VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AutoNation, Inc. 11/12/96 - 01/20/97 6,505,000 $227,897,500 $51,226,875
Copley Partners 1 L.P. 12/06/86 3,000,000 336,043 258,120
Copley Partners 2 L.P. 12/02/86 - 08/09/91 3,000,000 1,235,812 940,680
Extended Stay America, Inc. 02/05/97 1,000,000 17,625,000 9,000,000
Highland Capital Partners L.P. 06/28/88 - 06/28/93 7,500,000 534,615 618,225
-----------
$62,043,900
===========
</TABLE>
<PAGE>
<TABLE>
MFS(R) EMERGING GROWTH FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey - Private Investor; Mark E. Bradley*
Former Chairman and Director (until 1991), Ellen Moynihan*
MFS Investment Management(R) James O. Yost*
Marshall N. Cohan - Private Investor SECRETARY
Stephen E. Cavan*
Lawrence H. Cohn, M.D. - Chief of Cardiac
Surgery, Brigham and Women's Hospital; ASSISTANT SECRETARY
Professor of Surgery, Harvard Medical School James R. Bordewick, Jr.*
The Hon. Sir J. David Gibbons, KBE - Chief CUSTODIAN
Executive Officer, Edmund Gibbons Ltd.; State Street Bank and Trust Company
Chairman, Colonial Insurance Company, Ltd.
INVESTOR INFORMATION
Abby M. O'Neill - Private Investor For information on MFS mutual funds, call your
investment professional or, for an information
Walter E. Robb, III - President and Treasurer, kit, call toll free: 1-800-637-2929 any
Benchmark Advisors, Inc. (corporate financial business day from 9 a.m. to 5 p.m. Eastern time
consultants); President, Benchmark Consulting (or leave a message anytime).
Group, Inc. (office services)
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and Chief For general information, call toll free:
Executive Officer, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight
Resources, Inc. (acquisition planning For service to speech- or hearing-impaired,
specialists) call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
Ward Smith - Former Chairman (until 1994), NACCO this service, your phone must be equipped with
Industries (holding company) a Telecommunications Device for the Deaf.)
INVESTMENT ADVISER For share prices, account balances, exchanges,
Massachusetts Financial Services Company or stock and bond outlooks, call toll free:
500 Boylston Street 1-800-MFS-TALK (1-800-637-8255) anytime from a
Boston, MA 02116-3741 touch-tone telephone.
DISTRIBUTOR World Wide Web
MFS Fund Distributors, Inc. www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGERS
John W. Ballen*
Dale A. Dutile*
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) EMERGING GROWTH FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MEG 7/00 07/207/307/707/807
