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[logo]
ANNUAL REPORT FOR
YEAR ENDED
JUNE 30, 1996
MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND
[graphic omitted: two men sitting in front of a window]
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MFS(R) INSTITUTIONAL INTERNATI0NAL EQUITY FUND
TRUSTEES ASSISTANT TREASURER
A. Keith Brodkin* James O. Yost*
Chairman and President
SECRETARY
Nelson J. Darling, Jr. Stephen E. Cavan*
Trustee, Eastern Enterprises
(diversified holding company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
William R. Gutow
Vice Chairman, SHAREHOLDER SERVICE CENTER
Capitol Entertainment MFS Service Center, Inc.
(Blockbuster Video Franchise) P.O. Box 2281
Boston, MA 02107-9906
INVESTMENT ADVISER
Massachusetts Financial Services Company For general information,
500 Boylston Street call toll free: 1-800-637-2262
Boston, MA 02116-3741
CUSTODIAN
DISTRIBUTOR State Street Bank and Trust Company
MFS Fund Distributors, Inc.
500 Boylston Street AUDITORS
Boston, MA 02116-3741 Deloitte & Touche LLP
PORTFOLIO MANAGER
David Mannheim*
TREASURER
W. Thomas London*
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
We would like to welcome you as shareholders of MFS Institutional International
Equity Fund, which commenced operations on January 31, 1996. From that date
through June 30, 1996, the Fund provided a total return of 9.6% (including the
reinvestment of distributions). This compares to a 4.2% return for the Morgan
Stanley Capital International (MSCI) Europe, Australia, Far East (EAFE) Index, a
broad, unmanaged index of non-U.S. equities. The Fund seeks to provide capital
appreciation by investing in the stocks of companies whose principal activities
are located outside the United States. Our investment philosophy is to emphasize
stock selection as opposed to industry, country, or currency selection. This
bottom-up approach to stockpicking focuses on seeking quality companies with
superior growth prospects trading at attractive valuations. Country weightings
are merely byproducts of what we believe to be the most attractive investments.
Stock Markets
The first half of 1996 has seen a continuation of the positive performance of
global equity markets exhibited in 1995. Positive local currency returns were
generated throughout the world. The MSCI Europe Index was up 10.4%, with returns
ranging from 2.6% in the United Kingdom to 20.9% in Spain; the MSCI Pacific
Index was up 7.5%, with returns ranging from -2.2% in New Zealand to 14.3% in
Malaysia. Meanwhile, the Standard & Poor's 500 Composite Index, a popular,
unmanaged index of common stock performance, gained 10.1%, and the International
Finance Corp. Global Composite Index, a market-capitalization-weighted index
comprising the most active stocks of emerging markets (as defined by the World
Bank), rose 13.5%. The only major negative was the strong U.S. dollar, which
gained 6% against the Japanese yen and the German mark and ate into dollar-based
returns. We believe that the equity markets will continue to be fundamentally
driven, although the economic outlook is uncertain, with the strength of the
U.S. economy unclear, Japan starting to show more meaningful signs of recovery,
and Europe's recovery still in its early stages. Lower interest rates,
particularly in Europe and Japan, have helped support strong equity markets.
While we believe that interest rates are unlikely to fall further, a subdued
global inflation outlook could mean that rates rise little from current levels,
which should help support current equity market valuations. Therefore, for the
remainder of 1996, we believe corporate earnings growth will be the key to
further stock market gains.
Portfolio Performance and Strategy
Illustrating the importance of individual stock selection, the Fund benefited in
its first five months from the strong performance of a number of its holdings.
In local currency terms, Getronics and Adidas gained over 70% and 50%,
respectively, while DDI (a Japanese cellular and long-distance telephone
operator), Sparbanken (a Swedish bank), Bridgestone (a Japanese tire
manufacturer), Kwik-Fit (a U.K. auto repair chain), and Pilipino Telephone all
generated returns in excess of 20%. The biggest drags on performance were
PowerGen, a U.K. electricity generator, which declined 9% but became the Fund's
largest holding as additional shares were purchased; Singapore Finance, which
was down 9%; and Dalgety, a U.K. food processor, which declined 16%.
As of June 30, 1996, the Fund had holdings in 22 countries. The Fund's
equity weighting was spread as follows: 51% in Europe, 46% in Asia/Pacific, and
3% in the Americas. Globally, we are finding opportunities in companies that can
be characterized as "steady earners" which we believe could perform well
regardless of the state of the world's economies. Several of the Fund's larger
holdings which fit this description are PowerGen, DDI, Telecom Italia Mobile
(Italy's largest cellular telephone company), Lion Nathan (a New Zealand
brewer), and Astra (a Swedish pharmaceutical company).
Respectfully,
/s/ A. Keith Brodkin /s/ David Mannheim
A. Keith Brodkin David Mannheim
Chairman and President Portfolio Manager
July 10, 1996
PORTFOLIO MANAGER PROFILE
David Mannheim began his career at MFS in 1988 as a research specialist and was
promoted to Assistant Vice President - Investments in 1991. In 1992, he was
named Vice President - Investments and Portfolio Manager of MFS World Equity
Fund. Mr. Mannheim is a graduate of Amherst College and of Massachusetts
Institute of Technology's Sloan School of Management.
OBJECTIVE AND POLICIES
The Fund's investment objective is to provide long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in equity securities of companies whose principal activities are located outside
the United States.
TAX FORM SUMMARY
In January 1997, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1996.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1996
Foreign Stocks and Warrants - 98.8%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Australia - 4.6%
Aristocrat Leisure Ltd. (Leisure)* 6,000 $ 13,693
Q.B.E. Insurance Group (Insurance) 8,800 52,288
Seven Network Ltd. (Broadcasting) 15,700 50,041
----------
$ 116,022
- -----------------------------------------------------------------------------
Canada - 1.5%
Canadian National Railway (Railroads) 2,000 $ 36,750
- -----------------------------------------------------------------------------
Chile - 1.3%
Chilectra S.A., ADR (Utilities - Electric) 600 $ 33,300
- -----------------------------------------------------------------------------
China - 0.3%
Guangshen Railway Ltd., ADR (Railroads)* 400 $ 7,650
- -----------------------------------------------------------------------------
Denmark - 0.8%
Novo-Nordisk, "B" (Pharmaceuticals) 140 $ 19,814
- -----------------------------------------------------------------------------
Finland - 1.8%
Aamulehti Yhtymae Oy II (Publishing) 950 $ 25,626
Huhtamaki Oy I, Free Shares (Consumer Products) 600 20,069
----------
$ 45,695
- -----------------------------------------------------------------------------
France - 4.9%
Dassault Systemes, ADR (Computer Software)* 100 $ 3,100
Michelin (C.G.D.E.) (Tire and Rubber) 550 26,930
Rhone Poulenc Rorer (Pharmaceuticals) 200 13,425
Total S.A., "B" (Oils) 350 25,965
Union des Assurances Federales (Insurance) 440 54,289
----------
$ 123,709
- -----------------------------------------------------------------------------
Germany - 2.6%
Adidas AG (Apparel) 480 $ 40,331
Volkswagen AG (Automobiles) 65 24,147
----------
$ 64,478
- -----------------------------------------------------------------------------
Greece - 0.5%
Hellenic Telecommunications
(Telecommunications) 800 $ 13,260
- -----------------------------------------------------------------------------
Hong Kong - 7.1%
Asia Satellite Telecommunications, ADR
(Telecommunications)* 500 $ 14,875
Cosco Pacific Ltd. (Transportation)*## 44,000 31,549
Dah Sing Financial (Banks and Credit Cos.) 5,600 16,965
Giordano International (Retail) 35,000 33,913
Hong Kong Land Holdings (Real Estate)* 8,000 18,000
Liu Chong Hing Bank (Banks and Credit Cos.) 15,000 20,445
Peregrine Investment Holdings (Finance) 12,000 17,286
Peregrine Investment Holdings, Warrants (Finance) 1,200 148
Wing Hang Bank (Banks and Credit Cos.) 6,000 23,797
----------
$ 176,978
- -----------------------------------------------------------------------------
Italy - 4.5%
Esaote S.p.A., ADR (Medical Technology)*## 400 $ 14,300
Mediolanum (Insurance)*## 2,400 23,874
Telecom Italia Mobile S.p.A.
(Telecommunications) 54,000 73,620
----------
$ 111,794
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Japan - 18.4%
Bridgestone Corp. (Tire and Rubber) 2,000 $ 38,166
Canon, Inc. (Electrical Equipment) 2,000 41,636
DDI Corp. (Telecommunications) 10 87,289
Daiwa House Industrial Co. (Manufactured Housing) 1,000 15,522
East Japan Railway (Railroads) 6 31,501
Kinki Coca-Cola (Beverages) 1,000 15,157
Kirin Beverage (Beverages) 2,000 29,401
Matsushita Electric, Indiana (Electrical Equipment) 2,000 37,253
Murata Manufacturing (Electrical Equipment) 1,000 37,892
Omron Corp. (Electronics) 2,000 42,549
Osaka Sanso Kogyo (Chemicals) 7,000 29,401
Takeda Chemical Industries (Chemicals)* 3,000 53,140
----------
$ 458,907
- -----------------------------------------------------------------------------
Malaysia - 1.3%
New Straits Times (Publishing) 6,000 $ 31,281
- -----------------------------------------------------------------------------
Netherlands - 5.2%
Getronics N.V. (Computer Software and Services) 1,824 $ 40,407
IHC Caland N.V. (Transportation - Marine) 600 29,537
Royal Dutch Petroleum Co. (Oils) 325 50,208
Toolex-Alpha N.V. (Electrical Equipment)* 400 9,600
----------
$ 129,752
- -----------------------------------------------------------------------------
New Zealand - 5.3%
Lion Nathan Ltd. (Beverages) 27,000 $ 70,589
Sky City Ltd. (Casinos)* 11,000 47,931
Tranz Rail Holdings (Railroads)* 1,000 13,875
----------
$ 132,395
- -----------------------------------------------------------------------------
Philippines - 2.3%
Alsons Cement Corp. (Building Materials)*## 41,000 $ 18,780
Hi Cement (Building Materials)*## 27,000 10,203
Pilipino Telephone (Utilities - Telephone)* 19,000 29,000
----------
$ 57,983
- -----------------------------------------------------------------------------
Singapore - 3.5%
Mandarin Oriental Hotel (Lodging) 16,000 $ 22,400
Singapore Finance (Finance) 26,000 44,233
Singapore Finance, Rights (Finance) 5,200 368
Singapore Press (Publishing) 1,000 19,635
----------
$ 86,636
- -----------------------------------------------------------------------------
South Korea - 1.3%
Korea Mobile Telecom, ADR (Telecommunications)* 1,950 $ 33,393
- -----------------------------------------------------------------------------
Spain - 5.9%
Acerinox (Iron and Steel) 440 $ 45,854
Cubiertas Y Mzov (Engineering and Construction) 600 39,110
Iberdrola (Utilities - Electric) 2,000 20,530
Repsol S.A. (Oils) 1,200 41,733
----------
$ 147,227
- -----------------------------------------------------------------------------
Sweden - 12.0%
ABB AB, "B" (Engineering and Construction) 740 $ 78,300
Astra AB, "B", Free Shares (Pharmaceuticals) 1,350 58,890
Ericsson L.M. Co., ADR, "B"
(Telecommunications - Equipment) 1,100 23,650
Marieberg Tidings (Publishing) 1,000 25,056
Nobel Biocare (Medical and Health Products) 1,200 22,279
Sparbanken Svergie, "A" (Banks and Credit Cos.) 4,000 51,924
Tornet Fastighet (Real Estate) 430 3,504
Volvo AB, "B" (Automobiles) 1,600 36,467
----------
$ 300,070
- -----------------------------------------------------------------------------
Thailand - 1.0%
Total Access Communications
(Telecommunications) 3,000 $ 25,500
- -----------------------------------------------------------------------------
United Kingdom - 12.7%
Asda Group PLC (Stores) 28,000 $ 50,856
Capital Radio (Broadcasting) 2,050 20,749
Dalgety PLC (Food Products) 6,200 33,927
Jarvis Hotels (Lodging)*+ 3,000 8,104
Kwik-Fit Holdings (Retail - Automobiles) 9,000 31,855
Lloyds TSB Group (Banks and Credit Cos.) 3,700 18,093
Orange PLC, ADR (Telecommunications)* 700 12,250
Pace Micro Technology (Electronics)* 5,000 14,592
PowerGen PLC (Utilities - Electric) 11,000 80,128
PowerGen PLC -- 380P/P (Utilities - Electric) 3,900 19,918
Storehouse PLC (Retail Department Stores) 5,200 25,766
----------
$ 316,238
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Total Foreign Stocks and Warrants (Identified Cost, $2,305,973) $2,468,832
Other Assets, Less Liabilities - 1.2% 29,032
- -----------------------------------------------------------------------------
Net Assets - 100.0% $2,497,864
- -----------------------------------------------------------------------------
*Non-income producing security.
+Restricted security.
##SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,305,973) $2,468,832
Foreign currency, at value (identified cost, $13,075) 13,130
Receivable for investments sold 32,877
Interest and dividends receivable 9,447
Deferred organization expenses 6,407
----------
Total assets $2,530,693
----------
Liabilities:
Cash overdraft $ 8,894
Payable for investments purchased 16,031
Payable to affiliate for management fee 153
Accrued expenses and other liabilities 7,751
----------
Total liabilities $ 32,829
----------
Net assets $2,497,864
==========
Net assets consist of:
Paid-in capital $2,288,536
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 162,850
Accumulated undistributed net realized gain on investments
and foreign currency transactions 24,653
Accumulated undistributed net investment income 21,825
----------
Total $2,497,864
==========
Shares of beneficial interest outstanding 227,905
==========
Net asset value, redemption price and offering price per share
(net assets of $2,497,864 / 227,905 shares of beneficial
interest outstanding) $10.96
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Period Ended June 30, 1996*
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 26,262
Interest 5,214
--------
Total investment income $ 31,476
--------
Expenses -
Management fee $ 7,030
Trustees' compensation 1,570
Shareholder servicing agent fee 69
Registration fees 18,310
Auditing fees 8,900
Printing 6,500
Legal fees 1,927
Custodian fee 897
Amortization of organization expenses 578
Miscellaneous 85
--------
Total expenses $ 45,866
Fees paid indirectly (317)
Reduction of expenses by investment adviser (37,067)
--------
Net expenses $ 8,482
--------
Net investment income $ 22,994
--------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 24,653
Foreign currency transactions (1,169)
--------
Net realized gain on investments and foreign currency
transactions $ 23,484
--------
Change in unrealized appreciation (depreciation) -
Investments $162,859
Translation of assets and liabilities in foreign currencies (9)
--------
Net unrealized gain on investments $162,850
--------
Net realized and unrealized gain on investments and
foreign currency $186,334
--------
Increase in net assets from operations $209,328
========
*For the period from the commencement of investment operations, January 31, 1996
to June 30, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Period Ended June 30, 1996*
- ------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income $ 22,994
Net realized gain on investments and foreign currency
transactions 23,484
Net unrealized gain on investments and foreign currency
translation 162,850
----------
Increase in net assets from operations $ 209,328
----------
Fund share (principal) transactions -
Net proceeds from sale of shares $2,288,526
----------
Total increase in net assets $2,497,854
Net assets:
At beginning of period 10
----------
At end of period (including accumulated undistributed net
investment income of $21,825) $2,497,864
==========
*For the period from the commencement of investment operations, January 31, 1996
to June 30, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Period Ended June 30, 1996*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00
------
Income from investment operations# -
Net investment income(S) $ 0.13
Net realized and unrealized gain on investments 0.83
------
Total from investment operations $ 0.96
------
Net asset value - end of period $10.96
======
9.60%++
Total return
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.94%+
Net investment income 2.46%+
Portfolio turnover 19%
Average commission rate### $0.0182
Net assets at end of period (000 omitted) $2,498
* For the period from the commencement of investment operations, January 31,
1996 to June 30, 1996.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
(S) The investment adviser voluntarily agreed to maintain the expenses of the
Fund at no more than 0.85% of average daily net assets effective May 3,
1996. During the period January 31, 1996 to May 2, 1996, the adviser agreed
to maintain the expenses at not more than 0.95%. To the extent actual
expenses were over these limitations, the net investment loss per share and
ratios would have been:
Net investment loss $(0.08)
Ratios (to average net assets):
Expenses## 4.91 %+
Net investment loss (1.51)%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Institutional International Equity 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. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed
issues, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which mature
in 60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued 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, 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.
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 into 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. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax 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 period ended June 30, 1996, $1,169 was reclassified from
accumulated undistributed net investment income to accumulated net realized gain
on investments, due to differences between book and tax accounting for currency
transactions. This change had no effect on the net assets or 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 0.75% of
average daily net assets.
MFS has voluntarily agreed to pay all of the Fund's operating expenses exclusive
of management fees such that the Fund's aggregate expenses do not exceed 0.85%
of its 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 of the officers and Trustees of
the Fund are officers or directors of MFS and MFS Service Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of average daily net assets of the Fund at an effective annual rate
of up to 0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $2,622,364 and $341,044, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $2,305,973
==========
Gross unrealized appreciation $ 202,362
Gross unrealized depreciation (39,503)
----------
Net unrealized appreciation $ 162,859
==========
(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:
Period Ended June 30, 1996* Shares Amount
- ----------------------------------------------------------
Shares sold 227,904 $2,288,526
======= ==========
*For the period from the commencement of investment operations, January 31,
1996 to June 30, 1996.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the period ended June 30,
1996 was $11.
(7) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At June 30, 1996, the
Fund owned the following restricted security (constituting 0.3% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933. The Fund does not have the right to demand that such security be
registered. The value of this security is determined by valuations supplied by a
pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
Description Date of Acquisition Share Amount Cost Value
- ----------------------------------------------------------------------------
Jarvis Hotels PLC 6/21/96 3,000 $8,066 $8,057
======
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of MFS Institutional
International Equity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Institutional International Equity Fund
(one of the series comprising MFS Institutional Trust) as of June 30, 1996, and
the related statement of operations, the statement of changes in net assets and
the financial highlights for the period from January 31, 1996, the commencement
of operations, to June 30, 1996. 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 audit.
We conducted our audit 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, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. 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 audit provides 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 Institutional
International Equity Fund at June 30, 1996, the results of its operations, the
changes in its net assets, and its financial highlights for the period from
January 31, 1996, the commencement of operations, to June 30, 1996 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 2, 1996
--------------------------------------------
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.
