<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) DECEMBER 31, 1999
[graphic omitted]
MFS(R) INSTITUTIONAL
EMERGING EQUITIES FUND
<PAGE>
<TABLE>
MFS(R) INSTITUTIONAL EMERGING EQUITIES FUND
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman and Chief Executive Officer, 500 Boylston Street
MFS Investment Management(R) Boston, MA 02116-3741
Nelson J. Darling, Jr.+ DISTRIBUTOR
Private investor and trustee MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow+ Boston, MA 02116-3741
Private investor and real estate consultant;
Vice Chairman, Capitol Entertainment INVESTOR SERVICE
Management Company (video franchise) MFS Service Center, Inc.
P.O. Box 2281
CHAIRMAN AND PRESIDENT Boston, MA 02107-9906
Jeffrey L. Shames*
For additional information,
PORTFOLIO MANAGER contact your financial consultant.
Brian E. Stack*
CUSTODIAN
TREASURER State Street Bank and Trust Company
W. Thomas London*
WORLD WIDE WEB
ASSISTANT TREASURERS www.mfs.com
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that
this new communication medium is changing forever the way we work, play, and
shop. One might also argue that investing in this new technology represents
the investment opportunity of a lifetime. The question for any investor is
whether and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well-informed and to trade at bargain prices. But
we believe the facts argue that, for most of us, professionally managed
investment portfolios purchased through a financial consultant will continue
to be one of the best products for long-term investing in this new millennium.
Why do we believe managed portfolios plus professional advice will continue to
define the best course of action for many investors? Let's look at some of the
characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up markets and down. And for many
investors, working with a financial consultant may be the best way to develop
a plan. Although the Internet abounds with calculators for developing all
sorts of investment plans, none has your consultant's high level of
experience and an understanding of your unique situation. And no calculator
can counsel you during a down market, when you may be tempted to abandon your
goals and your plan.
o DIVERSIFICATION: Few individual investors can afford to own a large number of
holdings, so poor performance of one company can potentially drag down their
entire personal portfolio. This is especially true when investing in volatile
new areas such as the Internet. On the other hand, a diversified,
professionally managed investment portfolio that owns dozens or even hundreds
of holdings is better positioned to survive a disappointment in one or
several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few investment portfolios, of course, are going
to be up when the overall market is down. But we believe diversified,
professionally managed investment portfolios may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few managed portfolios even attempt. The downside is that the most
exciting investments are also likely to be the ones that give you sleepless
nights. The diversification and professional management of investment
portfolios helps make them inherently less risky than individual stock
picking, and managed portfolios are available in a wide range of risk
profiles.
We believe that now, more than ever, managed portfolios sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
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)
January 15, 2000
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
Mutual funds are designed for long-term retirement investing; please see your
financial consultant for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended December 31, 1999, the Fund provided a total return
of 37.84% (including the reinvestment of any distributions), which compares to
a 21.45% return for the average small-cap fund tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance. The
Fund's return also compares to a 10.95% return for the Russell 2000 Total
Return Index and to a 26.83% return for the Russell 2000 Growth Index. The
Russell 2000 Total Return Index is an unmanaged index comprised of 2,000 of
the smallest U.S.-domiciled company common stocks that are traded on the New
York Stock Exchange, the American Stock Exchange, and NASDAQ. The Russell 2000
Growth Index is comprised of securities within the Russell 2000 with a
greater-than-average growth orientation.
As a group, small-company stock performance began to come back strongly in the
fourth quarter of 1999, after a period in which small-cap performance was
overshadowed by that of larger caps, and in which the markets seemed to favor
a very narrow group of stocks within the large-cap group. Technology in all of
its forms, including semiconductors, software, and the Internet, spearheaded
the comeback of small-cap stocks, and the Fund's overweighting in technology
contributed strongly to its outperformance relative to the indices.
The performance of information technology services companies, particularly
those related to the deployment of Internet-based applications, also came back
strongly late in the year. Services companies had struggled for much of the
year, reflecting investor fears about possible earnings shortfalls caused by
the reallocation of corporate budgets toward remediation of the Year 2000
computing problem. The Fund is overweighted in these companies because we
believe that, by and large, they have well-constructed business models and
provide a good way to profit from the diffusion of technology throughout
society. Holdings in this sector that performed strongly over the past six
months include CBT Group, which provides Web-based training to information
technology professionals; Technology Solutions, which designs and implements
systems that help corporations to better manage their customer relations; and
RSA Security, a leading provider of software that enables secure transactions
over the Internet, as well as secure access to corporate computing networks.
One area that disappointed us during the period was health care. The Fund is
invested in several companies that provide new medical technologies and health
care cost containment. Ordinarily, we would expect these to be good
investments because our population is aging while health care has become more
technological and more costly. Unfortunately, reimbursement remained a
problematic issue in 1999, with Medicare, one of the biggest health care
payers, under pressure to cut costs. That negatively influenced the entire
health care sector. We remain optimistic that holdings like Caremark, a
relatively unknown company that provides prescription management to help
health care providers control drug costs, will benefit once investor sentiment
towards health care issues improves.
A company in the health care sector that performed very well this period,
however, was Cytyc. The company produces a new, more effective Pap test that
appears to be poised to dominate the U.S. market. Through our Original
Research(SM) process, we uncovered this company very early in its history. As
the company has overcome various hurdles, including FDA approval and
acceptance by insurers, we have seen the stock price rise accordingly; in the
second half of 1999, the price more than doubled on news of better-than-
expected acceptance in initial trials in the Northeast, as well as acceptance
for reimbursement by Aetna, a leading player in the health insurance industry.
Moving into 2000, we believe that small-cap stocks, as a group, present a
compelling combination. Having recently been out of favor, we feel small caps
are on average selling at lower valuations and possess greater growth
prospects than large-cap companies.
Our overall strategy for the Fund is to buy stock in young growth companies
that are classified as small cap, which in today's environment we define as
market caps beneath $1.5 billion. We buy shares in companies that we believe
have qualities that will enable them to someday grow into big companies,
namely: unique products and services; barriers to competition, to enable them
to defend themselves against new entrants; and fundamental attributes which
are the hallmarks of most good businesses, such as high profit margins, strong
cash flow, and good management. What distinguishes our approach, we believe,
is our heavy reliance on research, which hopefully enables us to take
positions early in a company's life cycle. We try to select companies about
which we have a high level of conviction, that we can own for several years
with the prospect of their growing into bigger enterprises -- at which point
we may sell them as they graduate to be mid cap or large cap.
A company which fits that description is PMC-Sierra. We began buying the stock
at a time when a lot of people didn't want to look at PMC, because some of its
historical, or legacy, businesses had matured and were experiencing
decelerating growth and declining margins. But what was perhaps less apparent
to someone taking a brief glance at PMC, and what our research pointed out,
was its embryonic business providing integrated circuits to the communications
environment -- to companies like Cisco that today are putting the Internet in
place. So we bought shares of this lesser-known company when its market
capitalization was about $400 million, and held shares for the better part of
five years. The stock has appreciated considerably, more than doubling in the
past six months alone, and PMC has grown into a $10 billion company. In fact,
PMC's market cap has grown so large that we sold it out of the Fund. So our
experience with PMC-Sierra is illustrative of what can happen when we do our
job right.
Respectfully,
/s/ Brian E. Stack
Brian E. Stack
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's 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.
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO MANAGERS' PROFILES
Brian E. Stack is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) New Discovery Fund and the New Discovery Series
offered through MFS(R)/Sun Life annuity products. He is also a portfolio
manager of MFS(R) Institutional Emerging Equities Fund and MFS(R) New
Discovery Series (part of MFS(R) Variable Insurance Trust(SM)).
Mr. Stack joined MFS in 1993 as a research analyst following the chemical,
hospital management, health maintenance organizations, medical services, and
business services industries. He was named portfolio manager in 1996 and
Senior Vice President in 1999. Prior to joining MFS, he had worked as an
equity analyst since 1987. He is a graduate of Boston College and has an
M.B.A. degree from the University of Virginia.
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 the portfolio manager of MFS(R) Emerging Growth Fund and a portfolio
manager of 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.
Mr. Ballen 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.
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.
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 financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
FUND FACTS
Objective: Seeks to provide long-term growth of capital.
Commencement of investment operations: June 16, 1993
Size: $635.9 million net assets as of December 31, 1999
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. The minimum
investment is generally $3 million. Shares of the Fund are purchased at net
asset value. (See Notes to Performance Summary.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH DECEMBER 31, 1999
<CAPTION>
6 Months 1 Year 3 Years 5 Years Life*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +37.84% +47.05% +105.55% +253.21% +410.95%
- --------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +47.05% + 27.15% + 28.71% + 28.31%
- --------------------------------------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, June 16, 1993, through
December 31, 1999.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
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. 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.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more-established companies. These risks may
increase share price volatility. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - December 31, 1999
Stocks - 97.6%
<CAPTION>
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 95.1%
Airlines - 0.7%
Atlas Air, Inc.* 96,850 $ 2,657,322
Skywest, Inc. 72,600 2,032,800
------------
$ 4,690,122
- -----------------------------------------------------------------------------------------------------
Broadcasting - 0.4%
Radio One, Inc.* 5,700 $ 524,400
Spanish Broadcasting Systems, Inc.* 51,500 2,072,875
------------
$ 2,597,275
- -----------------------------------------------------------------------------------------------------
Business Machines - 1.4%
Affiliated Computer Services, Inc., "A"* 150,861 $ 6,939,606
Kulicke & Soffa Industries, Inc.* 51,500 2,191,969
------------
$ 9,131,575
- -----------------------------------------------------------------------------------------------------
Business Services - 18.4%
Adelphia Business Solutions* 84,400 $ 4,051,200
Airnet Commerce Corp.* 38,220 1,390,253
BISYS Group, Inc.* 132,500 8,645,625
Bright Horizons Family Solutions, Inc.* 57,700 1,081,875
Catalina Marketing Corp.* 20,310 2,350,883
Ceridian Corp.* 137,400 2,962,687
Complete Business Solutions, Inc.* 244,800 6,150,600
Computer Horizons Corp.* 110,400 1,787,100
Dendrite International, Inc.* 117,814 3,990,949
Diamond Technology Partners, Inc., "A"* 7,000 601,563
DST Systems, Inc.* 44,176 3,371,181
Dycom Industries, Inc.* 62,200 2,740,688
Fiserv, Inc.* 34,925 1,338,064
Gartner Group, Inc.* 3,815 52,695
Gartner Group, Inc., "A"* 69,000 1,052,250
IMRglobal Corp.* 502,200 6,308,887
infoUSA, Inc.* 238,400 3,322,700
Interim Services, Inc.* 163,804 4,054,149
Learning Tree International, Inc.* 223,500 6,258,000
Luminant Worldwide Corp.* 66,000 3,003,000
Meta Group, Inc.* 102,700 1,951,300
Mettler Toledo International, Inc.* 54,300 2,073,581
Modis Professional Services, Inc.* 445,108 6,342,789
National Data Corp. 226,800 7,697,025
National Processing, Inc.* 140,800 1,249,600
NOVA Corp.* 401,823 12,682,538
Probusiness Services, Inc.* 106,600 3,837,600
Professional Detailing, Inc.* 35,600 1,065,775
Renaissance Worldwide, Inc.* 216,200 1,594,475
Technology Solutions Co.* 422,787 13,846,274
------------
$116,855,306
- -----------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.1%
HNC Software, Inc.* 80,200 $ 8,481,150
Verity, Inc.* 120,700 5,137,294
------------
$ 13,618,444
- -----------------------------------------------------------------------------------------------------
Computer Software - Services - 6.4%
Hyperion Solutions Corp.* 208,910 $ 9,087,585
Mastech Corp.* 105,400 2,608,650
RSA Security, Inc.* 377,800 29,279,500
------------
$ 40,975,735
- -----------------------------------------------------------------------------------------------------
Computer Software - Systems - 18.1%
Acxiom Corp.* 117,680 $ 2,824,320
Apex, Inc.* 143,100 4,614,975
Aspen Technology, Inc.* 321,500 8,499,656
Black Box Corp.* 38,900 2,606,300
Cadence Design Systems, Inc.* 211,900 5,085,600
Cambridge Technology Partners, Inc.* 127,200 3,339,000
Checkfree Holdings Corp.* 58,100 6,071,450
Clarify, Inc.* 35,900 4,523,400
Computer Network Technology Corp.* 301,100 6,906,481
Crossroads Systems, Inc.* 32,575 2,752,588
CSG Systems International, Inc.* 81,700 3,257,788
Cysive, Inc.* 31,350 2,259,159
Etec Systems, Inc.* 167,800 7,530,025
Harbinger Corp.* 336,950 10,719,222
JDA Software Group, Inc.* 116,500 1,907,688
Liberate Technologies* 6,750 1,734,750
MMC Networks, Inc.* 270,200 9,288,125
Paradyne Networks, Inc.* 61,600 1,678,600
Peoplesoft, Inc.* 144,375 3,076,992
Silverstream Software, Inc.* 9,450 1,124,550
Sterling Software, Inc.* 105,300 3,316,950
SunGard Data Systems, Inc.* 416,120 9,882,850
Synopsys, Inc.* 20,356 1,358,763
Transaction System Architects, Inc., "A"* 225,700 6,319,600
Wind River Systems, Inc.* 125,900 4,611,087
------------
$115,289,919
- -----------------------------------------------------------------------------------------------------
Conglomerates - 0.3%
Sodexho Marriott Services, Inc. 125,500 $ 1,631,500
- -----------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.6%
Alternative Resources Corp.* 96,000 $ 528,000
Blyth Industries, Inc.* 51,800 1,272,338
Sportsline USA, Inc.* 168,000 8,421,000
------------
$ 10,221,338
- -----------------------------------------------------------------------------------------------------
Containers - 0.4%
Ivex Packaging Corp.* 244,600 $ 2,446,000
- -----------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2%
Belden, Inc. 71,800 $ 1,507,800
- -----------------------------------------------------------------------------------------------------
Electronics - 8.1%
Burr-Brown Corp.* 189,712 $ 6,853,346
Cable Design Technologies Corp.* 135,750 3,122,250
Credence Systems Corp.* 67,800 5,864,700
DuPont Photomasks, Inc.* 125,900 6,074,675
Lattice Semiconductor Corp.* 94,000 4,429,750
Microchip Technology, Inc.* 25,650 1,755,422
MKS Instruments, Inc.* 60,400 2,181,950
Photronics, Inc.* 183,200 5,244,100
PMC-Sierra, Inc.* 12,600 2,019,938
Sawtek, Inc.* 29,500 1,963,594
SIPEX Corp.* 167,400 4,111,762
Triquint Semiconductor, Inc.* 64,000 7,120,000
Virata Corp.* 18,470 551,791
------------
$ 51,293,278
- -----------------------------------------------------------------------------------------------------
Entertainment - 0.9%
Emmis Broadcasting Corp., "A"* 3,100 $ 386,386
Hearst-Argyle Television, Inc.* 23,300 620,363
Macromedia, Inc.* 30,100 2,201,062
Young Broadcasting, Inc., "A"* 53,500 2,728,500
------------
$ 5,936,311
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 1.3%
Federated Investors, Inc., "A" 118,200 $ 2,371,388
Student Loan Corp. 52,600 2,623,425
Waddell & Reed Financial, Inc., "A" 124,100 3,366,212
------------
$ 8,361,025
- -----------------------------------------------------------------------------------------------------
Financial Services - 0.7%
S1 Corp. 57,040 $ 4,456,250
- -----------------------------------------------------------------------------------------------------
Food and Beverage Products - 1.0%
Del Monte Foods Co.* 348,900 $ 4,295,831
Tootsie Roll Industries, Inc. 56,453 1,859,421
------------
$ 6,155,252
- -----------------------------------------------------------------------------------------------------
Healthcare - 1.9%
Caremark Rx, Inc.* 2,402,500 $ 12,162,656
- -----------------------------------------------------------------------------------------------------
Insurance - 0.1%
Inspire Insurance Solutions, Inc.* 159,200 $ 731,325
- -----------------------------------------------------------------------------------------------------
Internet - 2.4%
Digital Insight Corp.* 44,825 $ 1,630,509
Exactis Common, Inc.* 49,190 1,195,932
Jupiter Communications, Inc.* 400 12,100
Netopia, Inc.* 31,000 1,683,688
Proxicom, Inc.* 20,600 2,560,837
Retek, Inc.* 490 36,873
Ticketmaster Online-Citysearch, Inc.* 61,400 2,360,062
VeriSign, Inc.* 16,100 3,074,094
VerticalNet, Inc.* 17,700 2,902,800
------------
$ 15,456,895
- -----------------------------------------------------------------------------------------------------
Medical and Health Products - 0.7%
AmeriSource Health Corp., "A"* 37,400 $ 568,012
Haemonetics Corp.* 120,130 2,860,596
PSS World Medical, Inc.* 139,300 1,314,644
------------
$ 4,743,252
- -----------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 8.3%
Cyberonics, Inc.* 183,400 $ 2,922,937
Cytyc Corp.* 129,700 7,919,806
Henry Schein, Inc.* 98,000 1,304,625
IDEXX Laboratories, Inc.* 487,200 7,856,100
IDX Systems Corp.* 151,200 4,725,000
Impath, Inc.* 94,200 2,396,212
LifePoint Hospitals, Inc.* 158,900 1,877,006
Mid Atlantic Medical Services, Inc.* 206,200 1,714,038
Orthodontic Centers of America, Inc.* 182,200 2,175,012
Osteotech, Inc.* 212,000 2,835,500
Parexel International Corp.* 268,000 3,165,750
Quorum Health Group, Inc.* 157,750 1,469,047
Steris Corp.* 268,400 2,767,875
Summit Technology, Inc.* 144,900 1,693,519
Superior Consultant Holdings Corp.* 112,900 1,608,825
Total Renal Care Holdings, Inc.* 628,843 4,205,388
V. I. Technologies, Inc.* 124,700 857,313
Ventana Medical Systems, Inc.* 42,000 1,044,750
------------
$ 52,538,703
- -----------------------------------------------------------------------------------------------------
Oil Services - 3.5%
Cooper Cameron Corp.* 46,600 $ 2,280,487
Dril-Quip, Inc.* 45,900 1,394,213
Global Industries, Inc.* 611,400 5,273,325
Input/Output, Inc.* 196,500 994,781
National Oilwell, Inc.* 81,900 1,284,806
Noble Drilling Corp.* 245,100 8,027,025
Weatherford International, Inc.* 67,970 2,714,552
------------
$ 21,969,189
- -----------------------------------------------------------------------------------------------------
Oils - 0.6%
Newfield Exploration Co.* 140,000 $ 3,745,000
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1%
Boron, LePore & Associates, Inc.* 123,500 $ 802,750
- -----------------------------------------------------------------------------------------------------
Printing and Publishing - 1.4%
Scholastic Corp.* 143,900 $ 8,948,781
- -----------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.4%
Kilroy Realty Corp. 43,900 $ 965,800
MeriStar Hospitality Corp. 79,150 1,266,400
------------
$ 2,232,200
- -----------------------------------------------------------------------------------------------------
Restaurants and Lodging - 2.3%
Applebee's International, Inc. 82,000 $ 2,419,000
Buffets, Inc.* 217,286 2,172,860
Four Seasons Hotels, Inc. 38,700 2,060,775
Landry's Seafood Restaurants, Inc.* 90,200 783,613
Papa John's International, Inc.* 159,300 4,151,756
Sonic Corp.* 104,000 2,964,000
------------
$ 14,552,004
- -----------------------------------------------------------------------------------------------------
Stores - 1.7%
CSK Auto Corp.* 132,000 $ 2,310,000
Gymboree Corp.* 171,800 966,375
Office Depot, Inc.* 148,350 1,622,578
Petco Animal Supplies, Inc.* 209,900 3,122,262
Regis Corp. 138,450 2,613,244
------------
$ 10,634,459
- -----------------------------------------------------------------------------------------------------
Technology - 0.4%
Varian, Inc.* 115,700 $ 2,603,250
- -----------------------------------------------------------------------------------------------------
Telecommunications - 9.3%
Advanced Fibre Communications, Inc.* 135,300 $ 6,046,219
Allegiance Telecom, Inc.* 24,100 2,223,225
Amdocs Ltd.* 64,759 2,234,186
American Tower Corp., "A"* 69,350 2,119,509
ANTEC Corp.* 99,900 3,646,350
Intermedia Communications, Inc.* 211,100 8,193,319
Natural Microsystems Corp.* 70,900 3,319,006
Network Solutions, Inc.* 27,100 5,895,944
Nextlink Communications, Inc., "A"* 45,000 3,737,812
Pinnacle Holdings, Inc.* 167,400 7,093,575
Proxim, Inc.* 54,500 5,995,000
PSINet, Inc.* 59,094 3,826,336
RF Micro Devices, Inc.* 28,800 1,971,000
VDI Media* 29,400 404,250
Tekelec Co.* 97,300 2,189,250
------------
$ 58,894,981
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $605,182,575
- -----------------------------------------------------------------------------------------------------
Foreign Stocks - 2.5%
United Kingdom - 2.5%
CBT Group PLC, ADR (Computer Software - Personal
Computers)* 473,100 $ 15,848,850
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $422,737,655) $621,031,425
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.1%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00,
at Amortized Cost $ 19,600 $ 19,598,367
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $442,336,022) $640,629,792
Other Assets, Less Liabilities - (0.7)% (4,653,796)
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $635,975,996
- -----------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $442,336,022) $ 640,629,792
Cash 55,832
Receivable for Fund shares sold 1,315,609
Receivable for investments sold 1,873,962
Interest and dividends receivable 75,412
Other assets 5,786
-------------
Total assets $ 643,956,393
-------------
Liabilities:
Distribution payable $ 3,048,494
Payable for investments purchased 2,077,477
Payable for Fund shares reacquired 2,790,027
Payable to affiliates -
Management fee 12,698
Shareholder servicing agent fee 127
Accrued expenses and other liabilities 51,574
-------------
Total liabilities $ 7,980,397
-------------
Net assets $ 635,975,996
=============
Net assets consist of:
Paid-in capital $ 405,899,138
Unrealized appreciation on investments 198,293,770
Accumulated undistributed net realized gain on investments 32,741,495
Accumulated net investment loss (958,407)
-------------
Total $ 635,975,996
=============
Shares of beneficial interest outstanding 22,641,150
==========
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $28.09
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
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SIX MONTHS ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest income $ 530,313
Dividend income 385,932
Foreign taxes withheld (220)
------------
Total income $ 916,025
------------
Expenses -
Management fee $ 1,744,689
Trustees' compensation 3,100
Shareholder servicing agent fee 17,447
Administrative fee 23,161
Custodian fee 77,803
Printing fee 8,864
Auditing fees 13,275
Legal fees 2,434
Miscellaneous 5,625
------------
Total expenses $ 1,896,398
Fees paid indirectly (21,966)
------------
Net expenses $ 1,874,432
------------
Net investment loss $ (958,407)
------------
Realized and unrealized gain on investments:
Realized gain on investment transactions (identified cost
basis) $ 67,969,699
Change in unrealized appreciation on investments 108,102,606
------------
Net realized and unrealized gain on investments $176,072,305
------------
Increase in net assets from operations $175,113,898
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
(UNAUDITED)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (958,407) $ (1,865,328)
Net realized gain on investments 67,969,699 23,042,038
Net unrealized gain on investments 108,102,606 5,979,427
------------ ------------
Increase in net assets from operations $175,113,898 $ 27,156,137
------------ ------------
Distributions declared to shareholders from net realized
gain on investments $(51,221,170) $(39,674,237)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $ 67,261,147 $(45,053,113)
------------ ------------
Total increase (decrease) in net assets $191,153,875 $(57,571,213)
Net assets:
At beginning of period 444,822,121 502,393,334
------------ ------------
At end of period (including accumulated net investment
loss of $958,407 and $0, respectively) $635,975,996 $444,822,121
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
SIX MONTHS ENDED --------------------------------------------------------------
DECEMBER 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $22.20 $22.95 $21.45 $21.17 $16.42 $11.75
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.05) $(0.08) $(0.08) $(0.04) $(0.04) $(0.03)
Net realized and unrealized
gain on investments and
foreign currency 8.39 0.98 4.54 3.42 6.55 5.04
------ ------ ------ ------ ------ ------
Total from investment
operations $ 8.34 $ 0.90 $ 4.46 $ 3.38 $ 6.51 $ 5.01
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net
realized gain on investments
and foreign currency
transactions $(2.45) $(1.65) $(2.96) $(3.10) $(1.76) $(0.34)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $28.09 $22.20 $22.95 $21.45 $21.17 $16.42
====== ====== ====== ====== ====== ======
Total return 37.84%++ 4.69% 23.51% 18.49% 41.37% 43.21%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.81%+ 0.79% 0.76% 0.75% 0.75% 0.75%
Net investment loss (0.41)%+ (0.41)% (0.36)% (0.22)% (0.22)% (0.19)%
Portfolio turnover 58% 78% 80% 96% 97% 86%
Net assets at end of period
(000 Omitted) $635,976 $444,822 $502,393 $383,637 $259,362 $107,019
(S) Through December 31, 1998, the investment adviser voluntarily agreed to
maintain the expenses of the Fund at not more than 0.75% of the average
daily net assets. To the extent actual expenses were over these limitations,
the net investment loss per share and the ratios would have been:
Net investment loss $(0.09) $(0.10) $(0.06) $(0.06) $(0.07)
Ratios (to average net assets):
Expenses## 0.83% 0.83% 0.84% 0.87% 0.98%
Net investment loss (0.45)% (0.44)% (0.31)% (0.34)% (0.42)%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Institutional Emerging Equities Fund (the 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 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.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued in good faith, at
fair value, by the Trustees.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The 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 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 income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the Fund's average daily net assets.
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 and MFS Service Center,
Inc. (MFSC).
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 pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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
0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $268,430,781 and $260,927,487, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $442,336,022
============
Gross unrealized appreciation $224,156,492
Gross unrealized depreciation (25,862,722)
------------
Net unrealized appreciation $198,293,770
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 YEAR ENDED JUNE 30, 1998
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,684,059 $105,253,824 7,351,432 $141,926,040
Shares issued to shareholders
in reinvestment of
distributions 1,760,698 48,172,676 1,908,450 38,207,163
Shares reacquired (3,839,491) (86,165,353) (11,114,474) (225,186,316)
---------- ------------ ----------- ------------
Net increase (decrease) 2,605,266 $ 67,261,147 (1,854,592) $(45,053,113)
========== ============ =========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Fund shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated
to the Fund for the six months ended December 31, 1999, was $1,630.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS fund shareholders, retirement plan
participants, or institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
(C) 2000 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
IEE-3 02/00 300
