<PAGE>
[LOGO] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
SEMIANNUAL REPORT
DECEMBER 31, 1995
MFS(R) INSTITUTIONAL EMERGING EQUITIES FUND
<PAGE>
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(diversified holding company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, MA 02116-3741
Vice Chairman, Capitol
Entertainment Management Company PORTFOLIO MANAGERS
(blockbuster Video Franchise) John W. Ballen*
Christian Felipe*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
SHAREHOLDER SERVICE CENTER
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-637-2262
CUSTODIAN
State Street Bank and Trust Company
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
An environment of declining interest rates and a favorable outlook for inflation
helped establish a pattern of positive performance in both fixed-income and
equity markets around the world during the past 12 months. A series of
reductions in short-term interest rates by the Federal Reserve Board, as well as
by some other central banks around the world, contributed to declining yields
and rising prices of many fixed-income securities throughout the year. At the
same time, lower interest rates and strong corporate earnings reports through
most of the year helped the prices of many stocks to rise over the period,
producing strong returns.
For the six months ended December 31, 1995, the Fund posted a total return
of +21.53% (including the reinvestment of distributions). This compares to a
+12.26% return for the Russell 2000 Total Return Index (an unmanaged index
comprised of 2,000 of the smallest U.S.-domiciled company common stocks traded
on the New York Stock Exchange, the American Stock Exchange, and NASDAQ). The
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock performance, had a return of +14.43% over the same period. A
discussion of these results may be found in the Portfolio Performance and
Strategy section of this letter.
Economic Outlook
Moderate but sustainable growth was the hallmark of the economic expansion's
fifth year, although some signs of sluggishness were evident late in the year.
Recent retail sales, for example, have been disappointing, in part because of
rising levels of consumer debt. Growth is not expected to get much help from the
manufacturing sector, either, as order flows from manufacturers have moderated.
Export activity, meanwhile, is also expected to remain modest as continued
weakness abroad limits demand for many U.S. goods. However, the Federal
Reserve's consistent and, so far, successful efforts to fight inflation seem to
be giving consumers and businesses enough longer term confidence to help
maintain modest growth in real (adjusted for inflation) gross domestic product
into 1996.
Stock Market
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results, there
was some weakness in the earnings of retail, financial services and even some
technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and
inflation is under control. While we see a deceleration of corporate earnings as
the inevitable consequence of traditional business cycles, we remain encouraged
by the high absolute level of profitability among U.S. companies. Also, many
companies' increasing emphasis on cost containment and growing use of technology
has helped keep them highly competitive and reasonably profitable. Looking
ahead, we believe that a stabilizing interest rate environment, coupled with
reasonable earnings reports, could justify current market valuations.
Portfolio Performance and Strategy
The Fund's superior performance resulted primarily from strong price
appreciation in the stock prices of many of its holdings in the technology
sector. Technology stocks responded in 1995 with very strong earnings growth for
semiconductor, hardware, software, networking, and processing companies. Adobe
Systems (electronic printing and publishing software), Cadence Design Systems
(electronic design automatic software), Informix (database software and tools),
and Oracle Systems (database software) reported very strong earnings and their
stock prices responded positively. Our holdings in Sybase (database software)
and BMC Software (systems software) became major positions for the Fund when we
added to them after they reported disappointing earnings which drove their stock
prices to levels we believed to be very depressed. Both stocks rebounded
strongly and contributed to the positive performance of the Fund. Other strong
performers included networking stocks such as Cabletron and Bay Networks. The
stocks of our semiconductor companies, such as LSI Logic and Linear Technology,
responded very positively to their very strong earnings reports. Autodesk
(computer-aided design) reported disappointing earnings and has been a
disappointing stock. We maintain a position in Autodesk because we believe its
stock price will rebound from its currently depressed level.
The performance of our leisure stocks was particularly enhanced by the large
weighting in HFS, the nation's largest franchiser of hotels and real estate
companies, which saw its stock price more than triple last year. Strong earnings
gains and acquisitions such as Century 21 assured investors of its future growth
prospects. We believe HFS has an astute management team and the position is the
Fund's largest.
Health care stocks had mixed performance over the past year due to investor
confusion concerning the effect of lower Medicare reimbursement levels. Even
though Medicare reimbursement has been cut for many companies, we believe
well-managed companies will adjust their costs accordingly. Health maintenance
organizations (HMO's) such as Pacificare Health Systems, and hospital management
companies such as Health Management Associates and Community Health Systems,
could provide many of the solutions to the high level of the nation's health
care costs.
This year, the stock market and the Fund's investments rose as companies
reported better-than-expected earnings. This environment was very favorable for
many of our companies, which reported strong earnings. We believe this trend of
investors favoring companies with strong earnings will continue in 1996, driving
share prices of these companies higher. Our largest sector concentration
continues to be technology. While earnings gains may not be as strong in 1996 as
they were in 1995, we believe this sector should still have the strongest
earnings gains of any group in 1996. We are also positive on the health care
service and consumer sectors. Both groups performed poorly in 1995, and we
believe their stock prices are depressed. We believe that the health care
cost-containment companies will ultimately benefit from the cost- reduction
initiatives in Washington. The consumer sector is poised to respond very
positively to only a small positive change in consumer spending.
Looking ahead, we believe 1996 could be the fifth consecutive year of
above-average earnings gains for the S&P 500. U.S. companies are realizing
record returns on their investments as they use technology and outsourcing to
reduce their costs and increase productivity. We are living through an
unprecedented era of productivity gains for the service sector. The downsizing
of corporate America would be detrimental to the U.S. economy if not for the
ability of the smaller companies in the United States to absorb and retain those
workers. We believe these productivity gains are responsible for what has been
one of the best stock market periods on record.
We believe the companies in the portfolio are particularly well suited to
benefit from this technology-driven productivity. Obviously, our technology
companies are providing the tools to the rest of the economy. Our other
companies are using technology to increase their productivity and lower their
costs. We remain optimistic that the progress for our portfolio companies will
be rewarded by investors in 1996.
Respectfully,
/s/ A. Keith Brodkin /s/ John W. Ballen /s/ Christian Felipe
- ----------------------- -------------------- ------------------------
A. Keith Brodkin John W. Ballen Christian Felipe
Chairman and President Portfolio Manager Portfolio Manager
January 12, 1996
<PAGE>
PORTFOLIO MANAGER PROFILES
John Ballen began his career at MFS as an industry specialist in 1984 and was
promoted to Investment Officer in 1986, Vice President - Investments in 1987,
Director of Research in 1988 and Senior Vice President in 1990. In 1993, he
became Director of Equity Portfolio Management. He has been the Portfolio
Manager of MFS Institutional Emerging Equities Fund since 1993.
Christian Felipe joined the MFS Research Department in 1986. A graduate of
U.C.L.A. and the University of Pennsylvania's Wharton School of Finance and
Commerce, he was named Investment Officer in 1987, Assistant Vice President
Investments in 1988, Vice President - Investments in 1989 and Senior Vice
President in 1996. Mr. Felipe has served as Portfolio Manager of MFS
Institutional Emerging Equities Fund since 1993.
PERFORMANCE SUMMARY
Because mutual funds like MFS Institutional Emerging Equities Fund 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. The minimum
initial investment is generally $3 million. Shares of the Fund are purchased at
net asset value.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
(net asset value change including reinvested distributions)
6/16/93+-
6 Months 1 Year 12/31/95
- ------------------------------------------------------------------------------
Cumulative Total Return +21.53% +43.77% +107.97%
- ------------------------------------------------------------------------------
Average Annual Total Return -- +43.77% + 33.38%
- ------------------------------------------------------------------------------
+Commencement of offering of shares.
All results represent past performance
and are not an indication of future results. Investment return and principal
value will fluctuate, and shares, when redeemed, may be worth more or less than
their original cost. All Fund results reflect the applicable expense subsidy
which is explained in the Notes to Financial Statements. Had the subsidy not
been in effect, the results would have been less favorable.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - December 31, 1995
Common Stocks - 95.9%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Advertising - 0.1%
CKS Group, Inc.* 500 $ 19,500
- -----------------------------------------------------------------------------
Apparel and Textiles - 1.0%
Fila Holdings, SPA, ADR 15,000 $ 682,500
Nine West Group, Inc.* 26,200 982,500
-------------
$ 1,665,000
- -----------------------------------------------------------------------------
Automotive - 0.3%
Superior Industries International, Inc. 21,700 $ 572,337
- -----------------------------------------------------------------------------
Biotechnology - 0.1%
Myriad Genetics, Inc.* 1,300 $ 42,413
- -----------------------------------------------------------------------------
Business Machines - 1.5%
Affiliated Computer Services Inc., "A"* 48,100 $ 1,803,750
Sun Microsystems, Inc.* 15,000 684,375
-------------
$ 2,488,125
- -----------------------------------------------------------------------------
Business Services - 8.5%
BISYS Group, Inc.* 45,200 $ 1,389,900
CUC International, Inc.* 50,000 1,706,250
Ceridian Corp.* 30,900 1,274,625
Computer Sciences Corp.* 20,000 1,405,000
DST Systems, Inc. 3,900 111,150
FIserv, Inc.* 40,000 1,200,000
Franklin Quest Co.* 70,000 1,365,000
Global Directmail Corp.* 15,900 437,250
Interim Services, Inc.* 60,000 2,085,000
Learning Tree International, Inc.* 2,300 35,938
SPS Transaction Services, Inc.* 80,000 2,370,000
Technology Solutions Co.* 18,400 358,800
Transaction Systems Architects, Inc. "A"* 5,500 185,625
-------------
$ 13,924,538
- -----------------------------------------------------------------------------
Cellular Phones - 0.8%
Cellular Communications of Puerto Rico, Inc.* 50,000 $ 1,387,500
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 2.6%
Acclaim Entertainment, Inc.* 25,000 $ 309,375
Autodesk, Inc. 62,900 2,154,325
Smith Micron Software, Inc.* 1,500 10,125
Symantec Corp.* 74,100 1,722,825
-------------
$ 4,196,650
- -----------------------------------------------------------------------------
Computer Software - Systems - 21.7%
Adobe Systems, Inc. 53,100 $ 3,292,200
BDM International, Inc.* 5,800 168,200
BMC Software, Inc.* 113,500 4,852,125
Cadence Design Systems, Inc.* 175,000 7,350,000
Cognos, Inc.* 25,000 1,115,625
Computer Associates International, Inc. 40,000 2,275,000
Compuware Corp.* 50,000 925,000
Informix Corp.* 30,000 900,000
Network Appliance, Inc.* 1,200 48,150
Objective Systems Integrators, Inc.* 1,900 104,025
Oracle Corp.* 160,000 6,780,000
Softquad International, Inc.* 55,000 292,232
Sybase, Inc.* 122,000 4,392,000
System Software Associates, Inc. 144,300 3,138,525
-------------
$ 35,633,082
- -----------------------------------------------------------------------------
Consumer Goods and Services - 0.3%
Blyth Industries, Inc. 17,800 $ 525,100
META Group, Inc.* 600 18,375
-------------
$ 543,475
- -----------------------------------------------------------------------------
Electronics - 5.9%
Burr-Brown Corp.* 33,100 $ 844,050
Linear Technology, Corp. 30,000 1,177,500
LSI Logic Corp.* 165,000 5,403,750
Oak Technology, Inc.* 4,300 181,675
Ross Technology, Inc.* 1,000 9,750
Tower Semiconductor Ltd.* 40,000 885,000
Xilinx, Inc.* 40,100 1,223,050
-------------
$ 9,724,775
- -----------------------------------------------------------------------------
Entertainment - 5.0%
American Radio Systems Corp.* 9,600 $ 268,800
Argyle Television Inc., "A"* 32,200 563,500
Casino America, Inc.* 3,700 22,663
Clear Channel Communications* 6,400 282,400
Grand Casinos, Inc.* 30,000 697,500
GT Bicycles, Inc.* 4,400 40,700
Harrahs Entertainment, Inc.* 45,600 1,105,800
Heritage Media Corp., "A"* 40,000 1,025,000
Infinity Broadcasting Corp., "A"* 50,000 1,862,500
Lin Television Corp.* 1,200 35,700
Mirage Resorts, Inc.* 40,000 1,380,000
National Gaming Corp.* 11,700 138,937
Rio Hotel & Casino, Inc.* 13,300 157,937
Sinclair Broadcasting Group, "A"* 14,300 246,675
Young Broadcasting Corp., "A"* 10,900 307,925
-------------
$ 8,136,037
- -----------------------------------------------------------------------------
Financial Institutions - 4.5%
Advanta Corp., "B" 13,600 $ 494,700
Donaldson, Luftkin & Jenrette, Inc.* 2,200 68,750
Franklin Resources, Inc. 100,000 5,037,500
Student Loan Corp. 55,000 1,870,000
-------------
$ 7,470,950
- -----------------------------------------------------------------------------
Insurance - 1.6%
Amerin Corp.* 5,000 $ 133,750
Equitable of Iowa Cos. 79,300 2,547,513
-------------
$ 2,681,263
- -----------------------------------------------------------------------------
Medical and Health Products - 0.1%
Medisense, Inc.* 4,300 $ 135,988
Neuromedical Systems, Inc.* 2,000 40,250
-------------
$ 176,238
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 12.2%
Community Health Systems, Inc.* 63,100 $ 2,247,938
Genesis Health Ventures, Inc.* 25,100 916,150
Health Management Assoc., Inc., "A"* 90,000 2,351,250
IDX Systems Corp.* 1,100 38,225
Integrated Health Services, Inc. 25,000 625,000
Lincare Holdings, Inc.* 16,000 400,000
Living Centers Of America, Inc.* 20,000 700,000
Manor Care, Inc. 18,000 630,000
Mariner Health Group, Inc.* 8,200 137,350
Mid-Atlantic Medical Services, Inc.* 94,700 2,296,475
Owen Healthcare, Inc.* 8,800 243,100
Pacificare Health Systems, Inc., "A"* 15,000 1,305,000
Pacificare Health Systems, Inc., "B"* 40,000 3,480,000
Sterling Healthcare Group* 5,800 61,625
Surgical Care Affiliates, Inc. 134,700 4,579,800
Total Renal Care Holdings, Inc.* 1,600 47,200
-------------
$ 20,059,113
- -----------------------------------------------------------------------------
Pollution Control - 0.8%
Sanifill, Inc.* 40,000 $ 1,335,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.0%
Pulitzer Publishing Co. 36,100 $ 1,723,775
- -----------------------------------------------------------------------------
Restaurants and Lodging - 7.9%
Apple South, Inc. 25,000 $ 537,500
Applebee's International, Inc. 49,900 1,135,225
Brinker International, Inc.* 10,000 151,250
Bristol Hotel Co.* 2,300 56,063
Buffets, Inc.* 57,900 796,125
Extended Stay America, Inc.* 1,200 33,000
HFS, Inc.* 80,500 6,580,875
Promus Hotel Corp.* 80,550 1,792,237
Renaissance Hotel Group N.V.* 12,500 318,750
ShoLodge, Inc.* 54,565 518,367
Sonic Corp.* 50,000 950,000
Taco Cabana, Inc., "A"* 35,900 179,500
-------------
$ 13,048,892
- -----------------------------------------------------------------------------
Special Products and Services - 0.2%
Central Packaging Corp.* 9,700 $ 278,875
- -----------------------------------------------------------------------------
Stores - 8.0%
BT Office Products International, Inc.* 8,600 $ 137,600
Consolidated Stores Corp.* 90,100 1,959,675
Discount Auto Parts, Inc.* 25,700 799,913
Duty Free International, Inc. 7,500 120,000
General Nutrition Cos., Inc.* 21,800 501,400
Gymboree Corp.* 60,000 1,237,500
MSC Industrial Direct Co., "A"* 1,500 41,250
Micro Warehouse, Inc.* 93,100 4,026,575
Mothers Work, Inc.* 20,000 295,000
Office Depot, Inc.* 110,000 2,172,500
Officemax, Inc.* 80,000 1,790,000
-------------
$ 13,081,413
- -----------------------------------------------------------------------------
Telecommunications - 9.9%
Bay Networks, Inc.* 40,500 $ 1,665,563
Cabletron Systems, Inc.* 103,700 8,399,700
Digital Link Corp.* 6,100 86,163
Equalnet Holdings Corp.* 5,600 40,600
Glenayre Technologies, Inc. 17,600 1,095,600
LCI International, Inc.* 30,000 615,000
Midcom Communications, Inc.* 6,900 125,925
Paging Network, Inc.* 19,700 480,187
Pairgain Technologies, Inc.* 3,600 197,100
Rogers Cantel Mobile Communications, "B"* 30,000 795,000
Tel-Save Holdings, Inc.* 10,000 138,750
Tellabs, Inc.* 24,800 917,600
US Robotics Corp.* 11,400 1,000,350
Westell Technologies, Inc.* 1,600 40,200
WorldCom, Inc.* 19,674 693,508
-------------
$ 16,291,246
- -----------------------------------------------------------------------------
Utilities - Telephone - 1.9%
Frontier Corp. 104,100 $ 3,123,000
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $133,440,092) $157,603,197
- -----------------------------------------------------------------------------
Short-Term Obligation - 4.3%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Ford Motor Credit Corp., due 1/02/96 at
Amortized Cost $7,000 $ 6,998,840
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $140,438,932) $164,602,037
Other Assets, Less Liabilities - (0.2%) (263,824)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $164,338,213
- -----------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $140,438,932) $164,602,037
Cash 74,827
Receivable for Fund shares sold 288,051
Receivable for investments sold 4,746,467
Dividends receivable 23,407
Receivable from investment adviser 79,968
Other assets 4,967
------------
Total assets $169,819,724
------------
Liabilities:
Payable for investments purchased $ 5,425,630
Payable to affiliates for management fee 10,049
Accrued expenses and other liabilities 45,832
------------
Total liabilities $ 5,481,511
------------
Net assets $164,338,213
============
Net assets consist of:
Paid-in capital $130,812,490
Unrealized appreciation on investments 24,163,105
Accumulated undistributed net realized gain on investments 9,564,089
Accumulated net investment loss (201,471)
------------
Total $164,338,213
============
Shares of beneficial interest outstanding 9,034,201
============
Net asset value, redemption price and offering price per
share (net assets of $164,338,213 / 9,034,201 shares of
beneficial interest outstanding) $18.19
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended December 31, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 215,978
Dividends 125,036
-----------
Total investment income $ 341,014
-----------
Expenses -
Management fee $ 542,485
Trustees' compensation 2,733
Shareholder servicing agent fee 5,347
Custodian fee 34,205
Printing 7,491
Auditing fees 4,300
Legal fees 2,895
Miscellaneous 27,511
-----------
Total expenses $ 626,967
Fees paid indirectly (4,514)
Preliminary reduction of expenses by investment adviser (79,968)
-----------
Net expenses $ 542,485
-----------
Net investment loss $ (201,471)
-----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $17,603,737
Change in unrealized appreciation 8,327,668
-----------
Net realized and unrealized gain on investments $25,931,405
-----------
Increase in net assets from operations $25,729,934
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Six Months Ended
December 31, 1995 Year Ended
(Unaudited) June 30, 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (201,471) $ (137,307)
Net realized gain on investments 17,603,737 7,226,805
Net unrealized gain on investments 8,327,668 17,594,663
------------ ------------
Increase in net assets from operations $ 25,729,934 $ 24,684,161
------------ ------------
Distributions declared to shareholders
from net realized gain on investments $(14,424,189) $ (1,742,406)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 34,704,630 $ 60,983,226
Net asset value of shares issued to
shareholders in reinvestment of
distributions 14,196,197 1,687,224
Cost of shares reacquired (2,887,642) (6,152,083)
------------ ------------
Increase in net assets from Fund share
transactions $ 46,013,185 $ 56,518,367
------------ ------------
Total increase in net assets $ 57,318,930 $ 79,460,122
Net assets:
At beginning of period 107,019,283 27,559,161
------------ ------------
At end of period (including accumulated
net investment loss of $201,471 and $0,
respectively) $164,338,213 $107,019,283
============ ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Six Months Ended Year Ended June 30,
December 31, 1995 -----------------------------
(Unaudited) 1995 1994 1993*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $16.42 $11.75 $10.17 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.04) $(0.03) $(0.03) $ 0.01
Net realized and unrealized
gain on investments 3.56 5.04 1.82### 0.16
------ ------ ------ ------
Total from investment
operations $ 3.52 $ 5.01 $ 1.79 $ 0.17
------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $ --** $ --
From net realized gain on
investments (1.75) (0.34) (0.21) --
------ ------ ------ ------
Total distributions declared
to shareholders $(1.75) $(0.34) $(0.21) $ --
------ ------ ------ ------
Net asset value - end of period $18.19 $16.42 $11.75 $10.17
====== ====== ====== ======
Total return 21.53%++ 43.21% 17.50% 1.70%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.76%+ 0.75% 0.78% 0.90%+
Net investment income (loss) (0.28)%+ (0.19)% (0.27)% 2.24%+
Portfolio turnover 51% 86% 94% --
Net assets at end of period
(000 omitted) $164,338 $107,019 $27,559 $3,052
*For the period from commencement of investment operations, June 16,
1993 to June 30, 1993.
**The per share distribution from net investment income was $0.00175.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to June 30, 1993 is based
on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses
are calculated without reduction for fees paid indirectly.
###The per share data is not in accord with the net realized and
unrealized gain (loss) for the period because of the timing of sales
of Fund shares and the amount of per share realized and unrealized
gains and losses at such time.
(S)The investment adviser did not impose a portion of its management fee
for the periods indicated. If this fee had been incurred by the Fund,
the net investment income per share and the ratios would have been:
Net investment loss $ (0.06) $ (0.07) $ (0.11) $ --
Ratios (to average net assets):
Expenses## 0.88%+ 0.98% 1.54% 2.50%+
Net investment income (0.39)+ (0.42)% (1.02)% 0.64%
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Institutional Emerging Equities Fund (the Fund), formerly known
as the MFS Emerging Equities Fund, is a diversified series of MFS Institutional
Trust (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
PoliciesInvestment Valuations - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Short-term obligations, which
mature in 60 days or less, are valued at amortized cost, which approximates
market value.
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 Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return, and consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
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 accumulated net realized
gains.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.75% of average daily net assets. The investment adviser did not impose a
portion of its fee, which is reflected as a preliminary reduction of expenses in
the Statement of Operations.
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 of the officers and Trustees of
the Fund are officers or directors of MFS and MFS Service Center, Inc. (MFSC).
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 average daily net assets at an effective annual rate of
0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than
short-term obligations, aggregated $97,803,006 and $68,860,506, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $140,438,932
------------
Gross unrealized appreciation $ 29,360,397
Gross unrealized depreciation (5,197,292)
------------
Net unrealized appreciation $ 24,163,105
------------
(5) Shares of Beneficial InterestThe Fund's Declaration of Trust permits the
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest (without par value). Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1995 June 30, 1995
------------------------------- -----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,888,202 $34,704,630 4,471,790 $60,983,226
Shares issued to shareholders
in reinvestment of distributions 784,320 14,196,197 123,788 1,687,224
Shares reacquired (155,090) (2,887,642) (384,807) (6,152,083)
--------- ----------- --------- ------------
Net increase 2,517,432 $46,013,185 4,210,771 $56,518,367
========= =========== ========= ===========
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to
participate with other funds managed by MFS in an unsecured line of credit with
a bank that permits borrowings up to $350 million, collectively. Borrowings may
be made to temporarily finance the repurchase of Fund shares. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. The commitment fee allocated to the Fund for the six months
ended December 31, 1995 was $1,321.
---------------------------------------------
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.
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