<PAGE>
[logo] Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
June 30, 1996
MFS(R) INSTITUTIONAL EMERGING MARKETS INCOME FUND
[graphic omitted: two men sitting in front of a window]
<PAGE>
MFS(R) INSTITUTIONAL EMERGING MARKETS INCOME FUND
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(diversified holding company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, MA 02116-3741
Vice Chairman,
Capitol Entertainment SHAREHOLDER SERVICE CENTER
(Blockbuster Video Franchise) MFS Service Center, Inc.
P.O. Box 2281
PORTFOLIO MANAGER Boston, MA 02107-9906
Jeffrey A. Kaufman*
For general information,
TREASURER call toll free: 1-800-637-2262
W. Thomas London*
CUSTODIAN
ASSISTANT TREASURER State Street Bank and Trust Company
James O. Yost*
AUDITORS
SECRETARY Deloitte & Touche LLP
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
From commencement of operations on August 7, 1995 through June 30, 1996, the
Fund provided a total return of 12.93% as it participated in the strong rally in
emerging market debt that followed panic market conditions early in 1995. The
Fund's return compares to a 4.76% return for the J.P. Morgan U.S. Treasury
Index, an unmanaged index of U.S. Treasury bonds with remaining maturities of at
least one year, and a 16.63% return for a blend of the J.P. Morgan Emerging
Markets Bond Index (50% of the blended index) and the Merrill Lynch U.S.
Treasury 91-Day Index (50%), an unmanaged index of U.S. Treasury bills. The J.P.
Morgan Emerging Markets Bond Index, an unmanaged total return index comprised
entirely of Brady bonds (U.S. dollar-denominated restructured bank loans), had a
total return of 29.09% during the period. The Fund typically invests half its
net assets in Brady bonds and half in local currency money market instruments.
Economic Environment
The global economic environment was benign for emerging markets during the past
year. Moderate economic growth of 2.5% in the OECD (Organization for Economic
Cooperation and Development) countries was strong enough to provide export
opportunities for most emerging markets, yet low enough to preclude significant
rises in both interest rates and external debt service.
Gross domestic product growth in emerging markets has been above OECD levels
for the past decade, and we believe it should remain so for the foreseeable
future. Latin America is bouncing back from the recession brought on by the
December 1994 Mexican peso devaluation, while Europe's emerging economies appear
to be turning the corner and showing positive growth after a difficult
transition from communism. Asia is experiencing a much-needed, policy-induced
easing in its high, stable growth rates. Meanwhile, emerging markets continue to
gain market share in world trade as exports remain strong for most countries.
Current-account deficits generally have fallen over the past year, with foreign
direct investment financing a growing portion of capital needs. Broadly
speaking, fiscal trends in developing countries remain healthy and closer to
balance than in industrial countries.
Most emerging markets have stuck to - and, in many cases, reinforced their
commitment to market reforms in the wake of the Mexican peso crisis. Although
some individual countries face a difficult path to sound macroeconomic
development, the overall thrust of policy has been very constructive throughout
Asia, Europe, Africa, and Latin America. Capital inflows into emerging markets
will continue to be driven by OECD monetary policies in the short term. However,
the longer-term secular trend of rising capital flows to reforming emerging
markets remains on track.
Portfolio Performance and Strategy
While the Fund provided a 4.73% total return from its inception on August 7,
1995 through December 31, 1995, that still represented an underperformance
relative to the Fund's custom index, primarily due to the time it took to become
fully invested. The Brady market steadily rallied as the Fund held its initial
cash balances. In addition, the Fund's investment in Mexican Treasury bills
(cetes) was hurt by currency weakness from October through December 1995.
However, in the first six months of 1996, the Fund essentially matched the
performance of the custom index (7.83% for the Fund and 7.91% for the custom
index). The decision to underweight Brady bonds in mid-February initially led to
dramatic outperformance in the first quarter but hurt the Fund's relative
returns in the second quarter as Brady bonds rallied strongly. Steady returns
from Asian and European local markets continued to boost the Fund's returns.
However, a position in South Africa dragged down performance during a period of
currency weakness in February.
Looking forward, we remain sanguine about the policy environment in most
emerging markets in the long term. In the short term, however, valuations in the
Brady bond market have recovered from the depressed levels of early 1995 and
appear to offer only fair value at the moment. Therefore, we plan to keep our
exposure to that market at or below the index weighting, while maintaining an
overweighting in the local currency markets of high-quality emerging markets.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ Jeffrey A. Kaufman
A. Keith Brodkin Jeffrey A. Kaufman
Chairman and President Portfolio Manager
July 10, 1996
PORTFOLIO MANAGER PROFILE
Jeffrey Kaufman joined MFS in 1994 and was named Assistant Vice President in
1996. He is a graduate of the University of North Carolina and has Masters
degrees in Business Administration and International Affairs from Columbia
University. Mr. Kaufman specializes in emerging markets debt.
OBJECTIVE AND POLICIES
The Fund's objective is to seek total return (high current income and long-term
growth of capital). The Fund seeks to achieve its objective by investing, under
normal market conditions, at least 65% of its total assets in fixed-income
securities of government, government-related, supra-national and corporate
issuers located, or primarily conducting their business, in emerging markets.
The Fund will generally invest not less than 50% of its total assets in
government and government-related issuers, until such time as the net assets of
the Fund reach $10 million. The Fund has adopted the investment policy to
invest, under normal market conditions, at least 65% of its total assets in the
fixed-income securities listed above and in forward foreign currency exchange
contracts. Shares of the Fund are purchased at net asset value.
The minimum initial investment is generally $3 million.
PERFORMANCE SUMMARY
The information on the following page illustrates the historical performance of
MFS Institutional Emerging Markets Income Fund shares 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.
AVERAGE ANNUAL TOTAL RETURNS
Life of Class
through 6/30/96
- ------------------------------------------------------------------------------
MFS(R) Institutional Emerging Markets Income Fund* +12.93%
- ------------------------------------------------------------------------------
J.P. Morgan U.S. Treasury Index* + 4.76%
- ------------------------------------------------------------------------------
50% J.P. Morgan Emerging Markets Bond Index / 50% Merrill
Lynch U.S. Treasury 91-Day Index +16.63%
- ------------------------------------------------------------------------------
J.P. Morgan Emerging Markets Bond Index* +29.09%
- ------------------------------------------------------------------------------
Consumer Price Index(S)+ + 2.49%
- ------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value 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.
* For the period from the commencement of operations, August 7, 1995 to June
30, 1996.
+ Benchmark comparisons begin on September 1, 1995.
(S) The Consumer Price Index is a popular measure of change in prices.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1996
Bonds - 46.0%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Foreign - U.S. Dollar Denominated
Argentina - 7.5%
Republic of Argentina, 5s, 2023 $ 250 $ 137,188
Republic of Argentina, 6.4375s, 2023 250 174,375
----------
$ 311,563
- -----------------------------------------------------------------------------
Brazil - 8.6%
Federal Republic of Brazil, 6.5s, 2024 $ 500 $ 355,625
- -----------------------------------------------------------------------------
Bulgaria - 3.1%
National Republic of Bulgaria, "A", 6.29s,
2024 $ 250 $ 129,375
- -----------------------------------------------------------------------------
Czech Republic - 8.7%
Komercni Banka, 11.55s, 1999 $ 10,000 $ 362,817
- -----------------------------------------------------------------------------
Ecuador - 3.4%
Republic of Ecuador, 6.063s, 2025 $ 250 $ 142,813
- -----------------------------------------------------------------------------
Mexico - 11.0%
Bancomer S.A., 8s, 1998## $ 100 $ 98,950
United States of Mexico, 6.25s, 2019 250 162,812
United States of Mexico, 6.391s, 2019 250 196,562
----------
$ 458,324
- -----------------------------------------------------------------------------
Venezuela - 3.7%
Republic of Venezuela, 6.75s, 2020 $ 250 $ 153,750
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,817,475) $1,914,267
- -----------------------------------------------------------------------------
Warrant
- -----------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------
Foreign Stock
Mexico VRR Discount (Identified Cost, $0) 635,000 $ 0
- -----------------------------------------------------------------------------
Short-Term Obligations - 62.1%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
U.S. Dollar Denominated - 43.3%
Federal Home Loan Mortgage Corp., due 7/01/96 $ 1,800 $1,800,000
- -----------------------------------------------------------------------------
Foreign Denominated - 18.8%
Mexican Pesos - 4.5%
Mexico Cetes, 0s, 1996 MXP 1,500 $ 188,047
- -----------------------------------------------------------------------------
Indonesian Rupiah - 9.6%
Pembangunan Perumahan, 0s, 1996 IDR 1,000,000 $ 400,052
- -----------------------------------------------------------------------------
Thai Baht - 4.7%
Krung Thai NCD, 0s, 1996 THB 5,000 $ 194,728
- -----------------------------------------------------------------------------
Total Foreign Denominated $ 782,827
- -----------------------------------------------------------------------------
Total Short-Term Obligations (Identifed Cost, $2,582,277) $2,582,827
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $4,399,752) $4,497,094
Other Assets, Less Liabilities - (8.1)% (337,573)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $4,159,521
- -----------------------------------------------------------------------------
## SEC Rule 144A restrictions.
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.
CZK = Czech Republic Korunas IDR = Indonesian Rupiah
DEM = Deutsche Marks MXP = Mexican Pesos
HKD = Hong Kong Dollars THB = Thai Baht
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $4,399,752) $4,497,094
Cash 7,240
Net receivable for forward foreign currency exchange
contracts purchased 2,503
Net receivable for forward foreign currency exchange
contracts sold 4,860
Net receivable for forward foreign currency exchange
contracts 4,332
Interest receivable 42,981
Deferred organization expenses 16,795
Other assets 23
----------
Total assets $4,575,828
----------
Liabilities:
Payable for investments purchased $ 399,085
Payable to affiliate for management fee 290
Accrued expenses and other liabilities 16,932
----------
Total liabilities $ 416,307
----------
Net assets $4,159,521
==========
Net assets consist of:
Paid-in capital $3,902,750
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currency 109,107
Accumulated undistributed net realized gain on investments
and foreign currency transactions 81,629
Accumulated undistributed net investment income 66,035
----------
Total $4,159,521
==========
Shares of beneficial interest outstanding 382,364
==========
Net asset value, redemption price and offering price per share
(net asset of $4,159,521 / 382,364 shares of beneficial
interest outstanding) $10.88
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended June 30, 1996*
- ------------------------------------------------------------------------------
Net investment income:
Interest income $207,910
--------
Expenses -
Management fee $ 20,043
Trustees' compensation 2,820
Shareholder servicing agent fee 174
Registration fees 32,555
Printing 23,884
Auditing fees 10,770
Amortization of organization expenses 3,622
Legal fees 2,423
Custodian fee 1,691
Miscellaneous 919
--------
Total expenses $ 98,901
Reduction of expenses by investment adviser (69,426)
--------
Net expenses $ 29,475
--------
Net investment income $178,435
--------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(83,760)
Foreign currency transactions 128,993
--------
Net realized gain on investments $ 45,233
--------
Change in unrealized appreciation -
Investments $ 97,342
Translation of assets and liabilities in foreign currencies 11,765
--------
Net unrealized gain on investments $109,107
--------
Net realized and unrealized gain on investments and
foreign currency $154,340
--------
Increase in net assets from operations $332,775
========
* For the period from the commencement of investment operations, August 7, 1995
to June 30, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended June 30, 1996*
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 178,435
Net realized gain on investments and foreign currency
transactions 45,233
Net unrealized gain on investments and foreign currency
translation 109,107
----------
Increase in net assets from operations $ 332,775
----------
Distributions declared to shareholders from net investment income $ (76,004)
----------
Fund share (principal) transactions -
Net proceeds from sale of shares $3,826,723
Net asset value of shares issued to shareholders in
reinvestment of distributions 76,004
Cost of shares reacquired (77)
----------
Increase in net assets from Fund share transactions $3,902,650
---------
Total increase in net assets $4,159,421
Net assets:
At beginning of period 100
----------
At end of period (including accumulated undistributed net
investment income of $66,035) $4,159,521
==========
* For the period from the commencement of investment operations, August 7, 1995
to June 30, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Year 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) $ 0.70
Net realized and unrealized gain on investments 0.56
------
Total from investment operations $ 1.26
------
Less distributions declared to shareholders from net investment
income $(0.38)
------
Net asset value - end of period $10.88
======
Total return 12.93%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.25%+
Net investment income 7.59%+
Portfolio turnover 285%
Net assets at end of period (000 omitted) $4,160
* For the period from the commencement of investment operations, August 7,
1995 to June 30, 1996.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
(S) The Adviser voluntarily agreed to maintain the expenses of the Fund at
not more than 1.25% of average daily net assets. To the extent that actual
expenses were over these limitations, the net investment income per share
and the ratios would have been:
Net investment income $ 0.43
Ratios (to average net assets):
Expenses 4.21%+
Net investment income 4.63%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Institutional Emerging Markets 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. Effective
April 25, 1996, the Trustees of the Fund voted to change its name from the MFS
Institutional Emerging Markets Fixed Income Fund to the MFS Institutional
Emerging Markets Income Fund.
(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 - 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. 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 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. Interest
payments received in additional securities are recorded on the ex- interest date
in an amount equal to the value of the security on such date.
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. 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, 1996, $36,396 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 effective annual rate of
0.85% of average daily net assets.
Under a temporary expense reimbursement agreement with MFS, MFS has voluntarily
agreed to pay the Fund's operating expenses exclusive of management fees such
that total operating expenses do not exceed, valued basis, 1.25% of its average
daily net assets. The Fund in turn will pay MFS an expense reimbursement fee not
greater than 0.40% of average daily net assets. To the extent that the expense
reimbursement fee exceeds the Fund's actual expenses, the excess will be applied
to amounts paid by MFS in prior years. At June 30, 1996, the aggregate
unreimbursed expenses owed to MFS by the Fund amounted to $69,426 incurred
during the current period.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS and MFS Service Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of the Fund at an effective annual
rate of up to 0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, aggregated $4,585,218 and $2,852,053 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 $4,417,775
==========
Gross unrealized appreciation $ 79,319
----------
Net unrealized appreciation $ 79,319
==========
(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:
Shares Amount
- ------------------------------------------------------------------------------
Shares sold 374,769 $ 3,826,723
Shares issued to shareholders in reinvestment of
distributions 7,593 76,004
Shares reacquired (8) (77)
------- -----------
Net increase 382,354 $ 3,902,650
======= ===========
(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 year ended June 30,
1996 was $16.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange 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.
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>
Sales 7/11/96 - 10/23/96 DEM 866,426 $576,616 $571,137 $5,479
12/04/96 HKD 1,547,100 199,240 199,859 (619)
-------- -------- ------
$775,856 $770,996 $4,860
======== ======== ======
Purchases 7/11/96 - 8/15/96 CZK 13,791,640 $497,407 $499,910 $2,503
======== ======== ======
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net receivable of $4,332 at June 30, 1996.
At June 30, 1996, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of
MFS Institutional Emerging Markets Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Institutional Emerging Markets Income 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 August 7, 1995 (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
Emerging Markets Income Fund at June 30, 1996, the results of its operations,
the changes in its net assets, and its financial highlights for the period
August 7, 1995 (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.
