<PAGE>
[logo] MFS(SM) ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
JUNE 30, 1995
MFS(R) WORLDWIDE FIXED INCOME FUND
[Graphic omitted: art work: Silhouette of two men talking in front of a large
window.]
<PAGE>
MFS(R) WORLDWIDE FIXED
INCOME FUND
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, Massachusetts 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(Diversified Holding Company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, Massachusetts 02116-3741
Executive Vice President,
Capital Entertainment PORTFOLIO MANAGER
Management Company Leslie J. Nanberg*
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
AUDITORS
Deloitte & Touche LLP
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
World bond markets have performed well over the past 12 months. The rally in the
bond markets reflects a lowering of growth expectations on a worldwide basis and
a recognition by investors that last year's bond market selloff was the result
of overestimated growth prospects and a misjudgment of the inflationary risk
posed by this growth.
For the 12 months ended June 30, 1995, the Fund provided a total return of
+15.10% (including the reinvestment of distributions). This compares to a return
of +18.79% for the Salomon Brothers World Government Bond Index, an unmanaged,
market-value-weighted index which includes straight-issue bonds from the
complete universes of 14 government sectors with remaining maturities of at
least one year. The Fund's relative performance was negatively impacted by its
shorter durations during the first half of 1995, particularly in the U.S., where
we underestimated the degree of the slowdown in economic growth. Although we did
benefit from an overweighting in both Australia and Japan, this did not fully
offset the generally defensive positions we had maintained for most of the first
half of the year in other markets.
The Japanese bond market posted the best returns during the past 12 months
(14.4% in local currency terms and almost 33% in U.S. dollar terms). The
economic situation in Japan is bleak, as the sharp appreciation of the yen has
hurt export earnings and has helped push Japanese unemployment to a record 3.2%.
It is estimated that bad debt held by Japanese banks exceeds $450 billion,
suggesting that the banking crisis there exceeds that of the U.S. at its worst.
Prospects for the near term do not look very promising. The strong yen is
forcing exporters to move production capacity outside of Japan, while weak
political leadership has eliminated any prospect of effective policy solutions.
In fact, the backlog of government spending programs is already so long that any
new initiatives are unlikely to impact growth.
From the portfolio's perspective, we have benefited from an overweighted
position in Japanese bonds and our exposure to the yen. Despite the fact that
10-year Japanese government bonds yield only 3%, we still feel they offer good
investment potential because of our expectation that Japanese consumer prices
will continue to decline to about -2% this year.
In Europe, we see divergent trends between the core and non-core countries.
In the core German economy, the consumer sector continues to be very weak, and
the strong deutsche mark is beginning to pressure exporters' current earnings
and future expansion plans. Inflation has been trending lower and the reduced
pace of money supply growth should allow for a Bundesbank easing in interest
rates later this year. A similar pattern can be seen in other core European
economies. The traditional non-core high-yield markets, however, are in a very
different position. While each of these countries faces certain specific
problems, the primary policy focus in all of them relates to currency
devaluations which provide strong stimulus to export growth. Lower currency
values, however, have led to upward inflationary pressures, forcing central
banks into the unpopular position of raising interest rates, even as
unemployment remains high. These countries all have large amounts of debt
outstanding and rate increases have only added to the cost of government debt
service. During the year, we underweighted the high-yield markets in favor of
the core. Exposure to the United Kingdom was recently eliminated because of
political uncertainty, and French exposure was reduced for much the same reason.
Over the past 12 months, performance in local currency terms did not differ
dramatically between the core and non-core markets. For example, German bonds
returned 7.85%, the Netherlands 8.8%, Spain 7.3%, and Sweden 7.3%. The return
pattern was very different, however, with the core markets doing better early in
the period and the non-core markets rebounding during the past quarter.
In U.S. dollar terms, returns were very different. Taking into account
currency fluctuations, German bonds returned 24%, the Netherlands 25.3%, Spain
16.6%, and Sweden 13.2%. In general, the portfolio benefited from having the
bulk of its European bond exposure hedged into deutsche marks. As mentioned
above, however, we did underperform the market by having a somewhat shorter
duration and by not moving quickly enough back into the high-yield markets
during the past quarter.
The slowing in the dollar-bloc countries has been most apparent in the U.S.
and Canada. In the U.S., last year's strong growth led to a quick buildup in
inventories. Now, though, consumer retrenchment in response to higher interest
rates is resulting in an inventory correction which could lead to negative
second-quarter growth. While we view this slowdown as temporary, it was
troubling enough that the Federal Reserve Board lowered the federal funds rate
in early July.
Canada depends on exports for a large portion of gross domestic product
growth and the bulk of these exports go to the U.S. As a result, Canada's
slowdown has been exacerbated by U.S. consumers' behavior. With the slowdown in
Canada and the widening yield differential between Canada and the U.S., we
believe this market will begin to outperform the U.S. in coming months and,
thus, we have added Canadian bonds to the portfolio. Although in the past the
Bank of Canada has used periods of currency strength as opportunities to lower
short-term interest rates, we would expect generally stable monetary policies in
the dollar-bloc countries for the next several months.
As we began 1995, we had a fairly constructive view of the U.S. dollar. The
Federal Reserve had raised rates aggressively early in the year, ensuring its
credibility as an inflation fighter. What became apparent, however, was that the
U.S. dollar was not responding in a traditional fashion to this tighter monetary
policy. Instead, the dollar was impacted by the repatriation of capital by
Japanese exporters and investors as well as portfolio rebalancing by Asian and
European central banks, all of whom were selling dollars. As a result, we
reduced our exposure to the U.S. currency in favor of the deutsche mark and the
yen. This was helpful for portfolio performance early in 1995; however, some of
this incremental return was reversed during periods of central bank intervention
in the second quarter.
Currently, we are neutrally weighted in European currencies and somewhat
underweighted in terms of the yen. While our longer-term view is that a
continued overhang of dollars will lead to further weakness for the U.S.
currency, the depreciation to date suggests a near-term rebound is possible. Our
European currency exposure has been concentrated in deutsche marks and Dutch
guilders, given the uncertainties associated with the other European currencies.
In the dollar bloc, we have maintained an overweighted exposure to the New
Zealand dollar, which has performed well over the past year.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/A. Keith Brodkin /s/Leslie J. Nanberg
A. Keith Brodkin Leslie J. Nanberg
Chairman and President Portfolio Manager
July 18, 1995
PORTFOLIO MANAGER PROFILE
Leslie Nanberg joined MFS in 1980 as a member of the Fixed Income Department. A
graduate of the University of Illinois, Northwestern University and the
Northwestern University Graduate School of Management, he was named Assistant
Vice President - Investments in 1981, Vice President - Investments in 1983 and
Senior Vice President in 1986. Mr. Nanberg has senior responsibilty for all
fixed-income assets under MFS management. He has served as Portfolio Manager for
MFS Worldwide Fixed Income Fund since its inception in 1992.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995. The
Fund designates $1,947,873 as capital gain distributions.
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Worldwide
Fixed Income Fund in comparison to various market indicators. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. You cannot
invest in an index. All results reflect the reinvestment of all dividends and
capital gains.
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the Period from September 30, 1992* to June 30, 1995)
Line graph representing the growth of a $5,000,000 investment for the period
from September 30, 1992 to June 30, 1995. The graph is scaled from $4,500,000 to
$7,000,000 in $500,000 segments. The years are marked from 1993 to 1995. There
are four lines drawn to scale. One is a solid line representing MFS Worldwide
Fixed Income Fund, a second line of short dashes represents the Salomon Brothers
World Government Bond Index, a third line of medium dashes represents the J.P.
Morgan Global Government Bond Index, and a fourth line of long dashes represents
the Consumer Price Index.
MFS Worldwide Fixed Income Fund $6,008,194
Salomon Brothers World Government Bond Index $6,523,300
J.P. Morgan Global Government Bond Index $6,350,300
Consumer Price Index $5,396,500
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
9/30/92<F1> -
1 Year 6/30/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Worldwide Fixed Income Fund +15.10% + 6.91%
- -----------------------------------------------------------------------------------------------------------
J.P. Morgan Global Government Bond Index +17.44% + 9.08%
- -----------------------------------------------------------------------------------------------------------
Salomon Brothers World Government Bond Index +18.79% +10.15%
- -----------------------------------------------------------------------------------------------------------
Consumer Price Index<F2> + 3.04% + 2.81%
- -----------------------------------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future results. The principal value and income return of an
investment in a mutual fund will vary with changes in market conditions, and shares, when redeemed, may be worth more or less than
their original cost. 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. The subsidy may be rescinded by MFS at any time.
<FN>
<F1> Commencement of offering of shares.
<F2> The Consumer Price Index is a popular measure of change in prices.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1995
<TABLE>
<CAPTION>
Bonds - 68.7%
- --------------------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations - 20.2%
U.S. Treasury Notes, 6.875s, 1997 $ 6,385 $ 6,488,756
U.S. Treasury Notes, 7.75s, 1999 3,460 3,690,298
U.S. Treasury Notes, 6.75s, 2000 650 669,702
U.S. Treasury Notes, 7.125s, 2000 690 720,726
U.S. Treasury Notes, 7.25s, 2004 1,945 2,078,408
Stripped Principal Payments, 0s, 2019 8,700 1,715,031
- --------------------------------------------------------------------------------------------------------
Total U.S. Treasury Obligations (Identified Cost, $14,860,753) $ 15,362,921
- --------------------------------------------------------------------------------------------------------
Foreign Denominated - 48.5%
Australia - 6.3%
Commonwealth of Australia, 6.25s, 1999 AUD 2,970 $ 1,968,525
Commonwealth of Australia, 12s, 2001 3,500 2,859,359
-----------
$ 4,827,884
- --------------------------------------------------------------------------------------------------------
Canada - 3.0%
Government of Canada, 9.75s, 2001 CAD 2,800 $ 2,246,322
- --------------------------------------------------------------------------------------------------------
Denmark - 4.5%
Danish Government Bullet, 6s, 1999 DKK 13,200 $ 2,284,606
Kingdom of Denmark, 9s, 1998 3,400 651,882
Kingdom of Denmark, 9s, 2000 2,430 466,535
-----------
$ 3,403,023
- --------------------------------------------------------------------------------------------------------
France - 5.5%
Government of France, 8s, 1998 FRF 2,900 $ 615,659
Government of France, 7s, 1999 5,030 1,033,604
Government of France, 7.75s, 2000 11,930 2,516,696
-----------
$ 4,165,959
- --------------------------------------------------------------------------------------------------------
Germany - 10.1%
German Unity Fund, 8.5s, 2001 DEM 4,330 $ 3,404,157
Republic of Germany, 8.5s, 2000 3,090 2,430,412
Republic of Germany, 7.25s, 2002 775 571,156
Republic of Germany, 6.5s, 2003 120 84,096
Treuhandanstalt Obligationen, 6.375s, 1999 1,600 1,171,056
-----------
$ 7,660,877
- --------------------------------------------------------------------------------------------------------
Ireland - 2.1%
Republic of Ireland, 9.75s, 1998 IEP 150 $ 255,102
Republic of Ireland, 9s, 2001 140 234,192
Republic of Ireland, 9.25s, 2003 650 1,096,381
-----------
$ 1,585,675
- --------------------------------------------------------------------------------------------------------
Italy - 4.6%
Republic of Italy, 8.5s, 1999 ITL 2,830,000 $ 1,564,278
Republic of Italy, 9.5s, 1999 1,450,000 808,590
Republic of Italy, 8.5s, 2004 1,605,000 784,929
Republic of Italy, 9.5s, 2005 725,000 375,655
-----------
$ 3,533,452
- --------------------------------------------------------------------------------------------------------
Netherlands - 7.6%
Dutch State Loan, 6.25s, 1998 NLG 240 $ 157,330
Dutch State Loan, 7s, 1999 740 494,147
Dutch State Loan, 7.5s, 1999 920 626,542
Netherlands Government, 7.75s, 2000 3,300 2,262,321
Netherlands Government, 7.75s, 2005 3,340 2,264,901
-----------
$ 5,805,241
- --------------------------------------------------------------------------------------------------------
New Zealand Dollars - 1.5%
Government of New Zealand, 8s, 1995 NZD 1,740 $ 1,157,497
- --------------------------------------------------------------------------------------------------------
United Kingdom - 3.3%
United Kingdom Treasury, 7s, 2001 GBP 1,700 $ 2,527,897
- --------------------------------------------------------------------------------------------------------
Total Foreign Denominated (Identified Cost, $36,535,400) $ 36,913,827
- --------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $51,396,153) $ 52,276,748
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 29.8%
- --------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated - 27.2%
Federal Home Loan Mortgage Corp., due 7/05/95 $ 5,225 $ 5,221,607
Federal Home Loan Mortgage Corp., due 7/06/95 2,980 2,977,562
Federal Home Loan Mortgage Corp., due 7/07/95 2,275 2,272,778
Federal Home Loan Mortgage Corp., due 7/20/95 900 897,198
Federal Home Loan Mortgage Corp., due 8/04/95 4,200 4,176,755
Federal National Mortgage Assn., due 7/31/95 235 233,849
Ford Motor Credit Corp., due 7/03/95 2,800 2,799,036
Kellogg Co., due 7/13/95 2,100 2,095,863
-----------
Total U.S. Dollar Denominated $ 20,674,648
Foreign Denominated - 2.6%
New Zealand Dollars
New Zealand Treasury Bills, due 12/20/95 NZD 2,250 $ 1,440,024
New Zealand Treasury Bills, due 3/20/96 1,011 631,151
-----------
Total Foreign Denominated $ 2,071,175
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations (Identified Cost, $22,745,823) $ 22,745,823
- --------------------------------------------------------------------------------------------------------
Call Options Purchased - 1.4%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Canadian Dollars
August/1.34 CAD 2,765 $ 1,425
Deutsche Marks
July/1.385 DEM 11,401 68,579
Italian Lire/Deutsche Marks
September/1143.9 ITL 1,830,240 7,321
Japanese Bonds
July/110.164 JPY 288,000 151,200
July/112.844 590,000 129,800
August/109.274 387,000 207,432
August/113.763 387,000 41,796
September/108.284023 397,000 161,976
September/108.577 232,000 134,560
September/111.15 456,000 145,008
- --------------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $493,267) $ 1,049,097
- --------------------------------------------------------------------------------------------------------
Put Options Purchased - 0.2%
- --------------------------------------------------------------------------------------------------------
British Pounds
September/1.5305 GBP 2,627 $ 15,217
Deutsche Marks
July/1.415 DEM 11,415 14,474
Deutsche Marks/British Pounds
July/2.29 869 2
Japanese Bonds
August/108.985 JPY 232,000 233
Japanese Yen
July/85.25 JPY 818,320 70,375
Japanese Yen/Deutsche Marks
September/63 589,030 29,451
- --------------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $201,816) $ 129,752
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $74,837,059) $ 76,201,420
- --------------------------------------------------------------------------------------------------------
Call Options Written - (0.6)%
- --------------------------------------------------------------------------------------------------------
Japanese Bonds
July/110.2 JPY 288,000 $ (150,624)
August/109.3 387,000 (207,432)
Japanese Yen
August/80 767,925 (23,037)
March 1996/78 305,002 (85,095)
- --------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $423,385) $ (466,188)
- --------------------------------------------------------------------------------------------------------
Put Options Written - (0.2)%
- --------------------------------------------------------------------------------------------------------
Australian Dollars
September/0.705 AUD 3,279 $ (48,192)
British Pounds
September/1.530 GBP 2,626 (15,032)
Deutsche Marks
August/1.50 DEM 7,017 (3,109)
September/1.465 11,818 (33,978)
September/1.49 6,312 (9,725)
Italian Lire/Deutsche Marks
September/1227.5 ITL 1,964,000 (13,748)
Japanese Bonds
September/108.284023 JPY 397,000 (16,277)
September/108.577 232,000 (6,032)
Japanese Yen
March 1996/93 363,656 (25,092)
- --------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $412,420) $ (171,185)
- --------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.7% $ 514,233
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 76,078,280
- --------------------------------------------------------------------------------------------------------
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Dutch Guilders
ESP = Spanish Pesetas NZD = New Zealand Dollars
FRF = French Francs SEK = Swedish Kronor
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $74,837,059) $ 76,201,420
Cash 62,599
Foreign currency, at value (identified cost, $3,216) 3,709
Net receivable for forward foreign currency exchange
contracts purchased 3,090,458
Interest receivable 1,325,129
Receivable from investment adviser 202,991
Deferred organization expenses 3,621
Other assets 620
------------
Total assets $ 80,890,547
------------
Liabilities:
Written options outstanding, at value
(premiums received, $835,805) $ 637,373
Net payable for forward foreign currency exchange contracts
sold 3,819,692
Net payable for forward foreign currency exchange contracts 277,711
Payable to affiliates -
Management fee 1,364
Shareholder servicing agent fee 2,258
Accrued expenses and other liabilities 73,869
------------
Total liabilities $ 4,812,267
------------
Net assets $ 76,078,280
============
Net assets consist of:
Paid-in capital $ 73,488,154
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 552,946
Accumulated undistributed net realized gain on investments
and foreign currency transactions 2,149,194
Accumulated distributions in excess of net investment income (112,014)
------------
Total $ 76,078,280
============
Shares of beneficial interest outstanding 7,508,732
=========
Net asset value, redemption price and offering price
per share (net assets of $76,078,280 / 7,508,732 shares
of beneficial interest outstanding) $10.13
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended June 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 3,885,884
----------
Expenses -
Management fee $ 395,873
Trustees' compensation 5,918
Shareholder servicing agent fee 2,442
Auditing fees 66,000
Custodian fee 49,639
Printing 27,365
Legal fees 6,110
Amortization of organization expenses 2,178
Miscellaneous 44,282
----------
Total expenses $ 599,807
Reduction of expenses by investment adviser (222,036)
----------
Net expenses $ 377,771
----------
Net investment income $ 3,508,113
----------
Realized and unrealized gain on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 513,047
Written option transactions 959,229
Foreign currency transactions 935,395
-----------
Net realized gain on investments and foreign currency
transactions $ 2,407,671
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 343,592
Written options 397,678
Translation of assets and liabilities in foreign currencies (936,277)
----------
Net unrealized gain on investments $ (195,007)
----------
Net realized and unrealized gain on investments and
foreign currency translation $ 2,212,664
----------
Increase in net assets from operations $ 5,720,777
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended June 30, 1995 1994
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,508,113 $ 1,970,599
Net realized gain (loss) on investments and
foreign currency transactions 2,407,671 (1,082,332)
Net unrealized gain (loss) on investments and
foreign currency translation (195,007) (1,424,987)
------------ ------------
Increase (decrease) in net assets from
operations $ 5,720,777 $ (536,720)
------------ ------------
Distributions declared to shareholders -
From net investment income $ (1,092,709) $ (954,455)
From net realized gain on investments and
foreign currency transactions (2,993,073) --
In excess of net investment income -- (1,701,501)
------------ ------------
Total distributions declared to shareholders $ (4,085,782) $ (2,655,956)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 8,656,241 $ 21,150,123
Issued in connection with the acquisition of
MFS Investment Funds for
Employee Benefit Trusts 22,443,892 --
Net asset value of shares issued to
shareholders in reinvestment of
distributions 3,030,706 695,168
Cost of shares reacquired (2,051,722) (254,325)
------------ ------------
Increase in net assets from Fund share
transactions $ 32,079,117 $ 21,590,966
------------ ------------
Total increase in net assets $ 33,714,112 $ 18,398,290
Net assets:
At beginning of period 42,364,168 23,965,878
------------ ------------
At end of period (including accumulated
distributions in excess of net investment
income of $(112,014) and $(1,701,501),
respectively) $ 76,078,280 $ 42,364,168
============ ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------
Year Ended June 30, 1995 1994 1993<F1>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.64 $ 10.50 $ 10.00
-------- ------- -------
Income from investment operations<F3> -
Net investment income<F4> $ 0.65 $ 0.63 $ 0.17
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.70 (0.63) 0.33
-------- ------- -------
Total from investment operations $ 1.35 $ -- $ 0.50
-------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.23) $ (0.31) $ --
In excess of net investment income -- (0.55) --
From net realized gain on investments and foreign
currency transactions (0.63) -- --
-------- ------- -------
Total distributions declared to shareholders $ (0.86) $ (0.86) $ --
-------- ------- -------
Net asset value - end of period $ 10.13 $ 9.64 $ 10.50
======== ======= =======
Total return 15.10% (0.57)% 5.00%
Ratios (to average net assets)/Supplemental data<F4>:
Expenses 0.72% 0.75% 0.80%<F2>
Net investment income 6.66% 6.09% 5.53%<F2>
Portfolio turnover 279% 212% 73%
Net assets at end of period (000 omitted) $ 76,078 $42,364 $23,966
<FN>
<F1> For the period from the commencement of investment operations, September
30, 1992 to June 30, 1993.
<F2> Annualized.
<F3> Per share data for the periods subsequent to June 30, 1993 is based on
average shares outstanding.
<F4> 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 income $ 0.61 $ 0.58 $ 0.15
Ratios (to average net assets):
Expenses 1.14% 1.23% 1.48%<F2>
Net investment income 6.23% 5.61% 4.85%<F2>
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Worldwide Fixed Income Fund (the Fund) is a non-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
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, 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.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the base currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options and options on futures
contracts listed on commodities exchanges are valued at closing settlement
prices. Over-the-counter options are valued by brokers through the use of a
pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of 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 and 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.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying security may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
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.
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. During the year ended June 30, 1995, undistributed net investment income
and paid-in capital decreased and accumulated undistributed realized gains
increased by $825,917, $1,526,489 and $2,352,406, respectively, due to
differences between book and tax accounting for currency transactions. This
change had no effect on the net assets or the net asset value per share.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
average daily net assets. The investment adviser did not impose a portion of its
fee, which is reflected as a 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 based on the
number of shareholder accounts of the Fund.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------------------------------------------
U.S. government securities $31,407,103 $23,472,633
=========== ===========
Investments (non-U.S. government securities) $91,745,629 $89,508,478
=========== ===========
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 $74,822,570
===========
Gross unrealized appreciation $ 1,676,537
Gross unrealized depreciation (297,687)
-----------
Net unrealized appreciation $ 1,378,850
===========
(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 (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------- --------------------------------
Year Ended June 30, Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 718,887 $ 8,656,241 2,069,023 $21,150,123
Shares issued in connection with the
acquisition of MFS Investment Funds
for Employee Benefit Trusts 2,275,548 22,443,892 -- --
Shares issued to shareholders in
reinvestment of
distributions 335,998 3,030,706 66,972 695,168
Shares reacquired (214,803) (2,051,722) (26,444) (254,325)
--------- ----------- ---------- -----------
Net increase 3,115,630 $32,079,117 2,109,551 $21,590,966
========= =========== ========= ===========
</TABLE>
(6) 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
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. A
summary of obligations under these financial instruments at June 30, 1995, is as
follows:
<TABLE>
<CAPTION>
Written Option Transactions 1995 Calls 1995 Puts
-------------------------------- ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ----------------------------------------------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD -
<S> <C> <C> <C> <C>
Deutsche Marks 20,727 $ 252,933 19,471 $ 69,418
Italian Lire/Deutsche Marks -- -- 2,295,205 11,416
Japanese Yen 176,841 28,118 320,000 60,857
Spanish Pesetas/Deutsche Marks -- -- 273,065 19,570
Options written -
Australian Dollars 1,994 14,794 7,768 95,063
British Pounds 2,815 55,254 2,626 44,337
British Pounds/Deutsche Marks -- -- 2,721 17,391
Canadian Dollars -- -- 6,359 28,775
Deutsche Marks 73,143 416,593 54,961 337,207
Deutsche Marks/British Pounds 802 5,209 6,286 21,489
Italian Lire/Deutsche Marks 8,004,109 55,734 5,790,422 33,728
Japanese Yen 3,476,167 837,464 3,280,046 366,060
Japanese Yen/Deutsche Marks 393,254 90,448 -- --
Spanish Pesetas/Deutsche Marks -- -- 251,443 15,306
Swedish Kronor/Deutsche Marks 6,023 4,548 8,326 5,214
Swiss Francs/Deutsche Marks 2,165 9,116 -- --
United States Dollars -- -- 3,100 40,930
Options terminated in closing transactions -
Australian Dollars (1,994) (14,794) (4,489) (55,994)
British Pounds (2,815) (55,254) -- --
British Pounds/Deutsche Marks -- -- (2,721) (17,391)
Canadian Dollars -- -- (6,359) (28,775)
Deutsche Marks (13,570) (128,049) (29,507) (204,282)
Deutsche Marks/British Pounds (802) (5,209) (6,286) (21,489)
Japanese Yen (1,728,240) (414,079) (2,607,390) (265,633)
Japanese Yen/Deutsche Marks (393,254) (90,448) -- --
Italian Lire/Deutsche Marks (6,177,913) (52,667) (4,277,169) (26,245)
Spanish Pesetas/Deutsche Marks -- -- (524,508) (34,875)
Swedish Kronor/Deutsche Marks (6,023) (4,548) -- --
United States Dollars -- -- (3,100) (40,930)
Options exercised -
Deutsche Marks (37,920) (265,060) -- --
Italian Lire/Deutsche Marks -- -- (1,844,458) (3,126)
Swiss Francs/Deutsche Marks (2,165) (9,116) -- --
Options expired -
Deutsche Marks (42,380) (276,417) (19,778) (50,387)
Italian Lire/Deutsche Marks (1,826,195) (3,067) -- --
Japanese Yen (176,842) (28,118) -- --
Swedish Kronor/Deutsche Marks -- -- (8,326) (5,214)
--------- -------- --------- --------
OUTSTANDING, END OF PERIOD 1,747,927 $423,385 2,987,708 $412,420
========= ======== ========= ========
OPTIONS OUTSTANDING AT END OF PERIOD
CONSIST OF -
Australian Dollars -- $ -- 3,279 $ 39,069
========= ======== ========= ========
British Pounds -- $ -- 2,626 $ 44,337
========= ======== ========= ========
Deutsche Marks -- $ -- 25,147 $151,956
========= ======== ========= ========
Italian Lire/Deutsche Marks -- $ -- 1,964,000 $ 15,773
========= ======== ========= ========
Japanese Yen 1,747,927 $423,385 992,656 $161,285
========= ======== ========= ========
At June 30, 1995, the Fund had sufficient cash and/or securities at least equal to the value of the written options.
</TABLE>
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 7/05/95 - 9/27/95 AUD 12,611,696 $ 9,097,684 $ 8,939,982 $ 157,702
7/07/95 - 8/02/95 CAD 4,711,041 3,414,434 3,428,326 (13,892)
7/10/95 CHF 4,037,040 3,516,185 3,512,867 3,318
7/05/95 - 9/28/95 DEM 193,124,851 137,184,956 139,966,579 (2,781,623)
9/01/95 DKK 19,132,161 3,397,166 3,543,984 (146,818)
7/05/95 - 7/10/95 ESP 542,503,739 4,170,307 4,486,658 (316,351)
7/10/95 - 8/25/95 FRF 39,989,467 7,998,122 8,242,093 (243,971)
7/07/95 - 8/25/95 GBP 7,213,160 11,426,751 11,480,029 (53,278)
8/04/95 IEP 814,678 1,327,925 1,335,406 (7,481)
9/11/95 - 10/02/95 ITL 10,766,923,303 6,518,268 6,527,909 (9,641)
7/05/95 - 9/25/95 JPY 3,382,927,186 39,806,470 40,104,306 (297,836)
9/01/95 - 9/26/95 NLG 9,002,607 5,719,659 5,843,052 (123,393)
7/24/95 - 9/12/95 NZD 5,279,242 3,502,666 3,511,152 (8,486)
7/13/95 - 8/16/95 SEK 28,372,180 3,914,802 3,892,745 22,057
----------- ----------- ---------
$240,995,395 $244,815,088 $(3,819,692)
============ ============ ===========
Purchases 7/05/95 - 8/25/95 AUD 3,138,564 $ 2,331,711 $ 2,227,765 $ (103,946)
7/07/95 - 8/01/95 CAD 1,376,041 995,852 1,001,411 5,559
7/10/95 CHF 4,037,040 3,400,781 3,512,867 112,086
7/05/95 - 10/06/95 DEM 199,015 141,712,911 144,235,772 2,522,861
9/08/95 - 9/28/95 DKK 24,632,684 4,523,517 4,560,910 37,393
7/05/95 - 7/10/95 ESP 493,201,043 3,912,561 4,079,072 166,511
7/10/95 - 8/02/95 FRF 19,994,733 3,904,127 4,122,358 218,231
7/07/95 - 8/25/95 GBP 7,519,147 11,851,518 11,966,924 115,406
9/11/95 - 9/14/95 ITL 4,715,827,476 2,818,784 2,862,507 43,723
7/05/95 - 9/22/95 JPY 5,216,232,539 61,911,387 61,818,921 (92,466)
9/08/95 - 9/15/95 NZD 3,468,374 2,289,619 2,304,181 14,562
7/13/95 - 8/16/95 SEK 28,372,180 3,842,207 3,892,745 50,538
----------- ----------- -----------
$243,494,975 $246,585,433 $ 3,090,458
============ ============ ===========
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net payable of $277,711 at June 30, 1995.
At June 30, 1995, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(7) Acquisitions
At the close of business on March 31, 1995, the Fund acquired all of the assets
and liabilities of MFS Investment Funds for Employee Benefit Trusts. The
acquisition was accomplished by a tax-free exchange of 2,275,548 shares of the
Fund (valued at $22,443,892) for all of the assets, subject to all of the
liabilities of MFS Investment Funds for Employee Benefit Trusts. MFS Investment
Funds for Employee Benefit Trusts then converted all of its outstanding shares
for the shares of the Fund and distributed the shares to its shareholders. MFS
Investment Funds for Employee Benefit Trusts' net assets on that date
($22,443,892), including $1,685,495 of unrealized appreciation, were combined
with those of the Fund. The aggregate net assets of the Fund after the
acquisition were $72,126,481.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of MFS Worldwide
Fixed Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Worldwide Fixed Income Fund (one of the
series comprising MFS Institutional Trust) as of June 30, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended June 30, 1995 and 1994, and the financial highlights
for each of the years in the three year period ended June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at June
30, 1995 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Worldwide Fixed
Income Fund at June 30, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
---------------------------------------------
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.
