<PAGE>
[Logo} Semiannual Report
THE FIRST NAME IN MUTUAL FUNDS December 31, 1995
MFS(R) INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
<PAGE>
MFS(R) INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
<TABLE>
<S> <C>
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* - Chairman and President Massachusetts Financial Services Company
500 Boylston Street
Nelson J. Darling, Jr. Boston, MA 02116-3741
Trustee, Eastern Enterprises
(diversified holding company) DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow 500 Boylston Street
Vice Chairman, Capitol Boston, MA 02116-3741
Entertainment Management Company
(Blockbuster Video Franchise) PORTFOLIO MANAGER
Richard O. Hawkins*
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, Massachusetts 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
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
An environment of declining interest rates and a favorable outlook for
inflation helped establish a pattern of positive performance in both fixed-
income and equity markets around the world during the past six months. A
series of reductions in short-term interest rates by the Federal Reserve
Board, as well as by several central banks around the world, contributed to
declining yields and rising prices of many fixed-income securities throughout
the period.
For the six months ended December 31, 1995, the Fund posted a total
return of 2.38% (including the reinvestment of distributions). This compares
to a 1.87% return for the Salomon Brothers World Government Bond Index (the
Index), an unmanaged, market-weighted index which includes straight-issue
bonds from the complete universe of 14 government sectors with remaining
maturities of at least one year. Our overweighting in the U.S. dollar bloc and
European bond markets contributed to performance against the Index, while
European currency volatility and our currency weightings within the dollar
bloc detracted from performance.
A pattern of slow to moderate growth and low and controlled inflation
remains a dominant theme in major industrialized countries, including the
United States. While the recent recovery of the dollar against the German mark
and the Japanese yen has added some strength to the economies of Europe and
Japan, the outlook is for sluggish economic growth, in the near term at least.
And although moves by central banks in Germany and Japan to lower interest
rates are intended to stimulate domestic demand, many industrial companies in
these countries are still struggling to compete in a global marketplace in
which their products are less competitively priced. On the positive side, this
does mean little to no inflationary pressure in these countries, and we
believe that this, combined with further reductions in interest rates, could
help provide a foundation for stronger economic growth in the long run.
Inflation in most overseas economies remains in a downward trend, providing
fixed-income investors with opportunities for relatively attractive real
(adjusted for inflation) rates of interest, accompanied by price appreciation.
For next year, we believe that slow U.S. growth, if it continues, could lead
to a cyclical reduction in our borrowing of foreign capital, taking some of
the pressure off the dollar.
The high returns of the U.S. bond market as measured by the Lehman
Brothers Government Bond Index have been echoed in other U.S. dollar-bloc
markets, including those of Australia, New Zealand, and Canada, all of which
saw positive performance over the last 12 months according to Salomon
Brothers. Currently, the Australian market offers significantly higher yields
than the U.S. market and we believe represents good value. As long as the
outlook for U.S. bonds remains positive, these related markets could
outperform the U.S. market.
The majority of our foreign-based holdings remains in Europe. The core
markets, such as Germany and the Netherlands, continue to provide solid
returns against a backdrop of slow growth, low inflation, and declining
official interest rates and remain an important anchor to our foreign
holdings. Other European markets, such as Denmark's, offer a combination of
higher yields with moderate growth and low inflation. The highest yielding
markets have recovered over the last six months, and the Fund has increased
both its bond and currency weightings in these markets. The first part of next
year could be supportive of fixed-income investments, since moderate to slow
growth, with commensurate declines in overall inflation rates, could lead to
further reductions in official interest rates. European governments,
meanwhile, are engaged in multi-year programs to reduce their budget deficits
and debt levels. These programs are positive for bonds, in that lower
government deficits tend to reduce inflationary pressures and lower issuance
of government debt reduces supply pressures on the bond market.
In the Japanese market, powerful deflationary forces have supported a drop
in yields to historically low levels. We now feel this process may be drawing
to an end, given a reversal of priorities at the central bank from fighting
inflation, which is now non-existent, to offsetting the downward spiral of
deflation. Thus, the weighting in Japan, which has been neutral for much of
the past year, will most likely be reduced in the coming year.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ Richard O. Hawkins
A. Keith Brodkin Richard O. Hawkins
Chairman and President Portfolio Manager
January 12, 1996
Note to Shareholders: Effective January 1, 1996, Richard O. Hawkins succeeds
Leslie Nanberg as portfolio manager of the Fund. He has also assumed the
position of director of the International Fixed Income Department at MFS. Mr.
Nanberg will continue in his role as chief fixed income officer, overseeing
the implementation of the overall fixed-income strategy at MFS.
<PAGE>
PORTFOLIO MANAGER PROFILE
Richard Hawkins joined MFS in 1988 as a member of the Fixed Income Department.
He is a graduate of Brown University, and received a Masters in Business
Administration degree from the University of Pennsylvania's Wharton School of
Business. He was named Vice President in 1991 and Senior Vice President in
1994. As of January 1, 1996, Mr. Hawkins became director of the International
Fixed Income Department as well as Portfolio Manager of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks not only preservation, but also growth of capital, together
with moderate current income. Shares of the Fund are purchased at net asset
value. The minimum initial investment is generally $3 million.
The Fund seeks to achieve its objective by investing, under normal market
conditions, at least 80% of its assets in an internationally diversified
portfolio of fixed-income securities. Up to 20% of the Fund's assets may also
be invested in equity securities. Fixed-income securities include bonds,
debentures, mortgage securities, notes, commercial paper, obligations issued
or guaranteed by a government or any of its political subdivisions, agencies
or instrumentalities, and certificates of deposit.
PERFORMANCE SUMMARY
Because mutual funds like MFS Institutional Worldwide Fixed Income Fund are
designed for investors with long-term goals, we have provided cumulative
results as well as the average annual total returns for the applicable time
periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
(net asset value change including reinvested distributions)
9/30/92+-
6 Months 1 Year 12/31/95
- ------------------------------------------------------------------------------
Cumulative Total Return +2.38% +15.49% +23.02%
- ------------------------------------------------------------------------------
Average Annual Total Return -- +15.49% + 6.58%
- ------------------------------------------------------------------------------
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares,
when redeemed, may be worth more or less than their original cost. All Fund
results reflect the applicable expense subsidy which is explained in the Notes
to Financial Statements. Had the subsidy not been in effect, the results would
have been less favorable.
+Commencement of offering of shares.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1995
Bonds - 78.3%
- -----------------------------------------------------------------------------
Principal
Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
U.S. Treasury Obligations - 18.0%
U.S. Treasury Notes, 5.875s, 2005 $ 4,900 $ 5,010,250
U.S. Treasury Notes, 8.875s, 2017 5,790 7,754,952
- -----------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Identified Cost, $12,592,564) $12,765,202
- -----------------------------------------------------------------------------
Foreign Denominated - 60.3%
Australia - 5.8%
Commonwealth of Australia, 9.5s, 2003 AUD 2,400 $ 1,922,260
Commonwealth of Australia, 9.75s, 2002 2,700 2,178,577
-----------
$ 4,100,837
- -----------------------------------------------------------------------------
Canada - 2.7%
Government of Canada, 8.75s, 2005 CAD 2,300 $ 1,883,657
- -----------------------------------------------------------------------------
Denmark - 6.0%
Kingdom of Denmark, 9s, 1998 DKK 1,914 $ 375,261
Kingdom of Denmark, 9s, 2000 2,430 486,000
Kingdom of Denmark, 8s, 2001 17,486 3,371,401
-----------
$ 4,232,662
- -----------------------------------------------------------------------------
France - 7.0%
Government of France, 7s, 1999 FRF 9,390 $ 2,002,089
Government of France, 7.75s, 2000 13,720 2,999,457
-----------
$ 5,001,546
- -----------------------------------------------------------------------------
Germany - 10.2%
Deutschland Republic, 6.5s, 2003 DEM 7,220 $ 5,234,689
German Unity Fund, 8.5s, 2001 2,550 2,035,207
-----------
$ 7,269,896
- -----------------------------------------------------------------------------
Italy - 7.4%
Republic of Italy, 8.5s, 1999 ITL 5,430,000 $ 3,291,531
Republic of Italy, 9.5s, 1999 1,560,000 960,378
Republic of Italy, 8.5s, 2004 1,840,000 1,030,725
-----------
$ 5,282,634
- -----------------------------------------------------------------------------
Netherlands - 4.4%
Netherlands Government, 8.25s, 2007 NLG 4,282 $ 3,090,927
- -----------------------------------------------------------------------------
Spain - 9.2%
Government of Spain, 10.9s, 2003 ESP 280,940 $ 2,456,435
Government of Spain, 10.5s, 2003 478,000 4,100,456
-----------
$ 6,556,891
- -----------------------------------------------------------------------------
United Kingdom - 7.6%
United Kingdom Treasury, 8s, 2000 GBP 1,600 $ 2,605,097
United Kingdom Treasury, 7s, 2001 1,800 2,797,129
-----------
$ 5,402,226
- -----------------------------------------------------------------------------
Total Foreign Denominated
(Identified Cost, $41,954,042) $42,821,276
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $54,546,606) $55,586,478
- -----------------------------------------------------------------------------
Short-Term Obligations - 22.2%
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 1/09/96 $ 3,000 $ 2,996,313
Federal Home Loan Mortgage Corp., due 1/02/96 2,500 2,499,620
Federal Home Loan Mortgage Corp., due 1/05/96 2,700 2,698,356
Federal Home Loan Mortgage Corp., due 1/16/96 2,300 2,294,701
Federal National Mortgage Assn., due 1/03/96 2,500 2,499,243
Federal National Mortgage Assn., due 1/16/96 2,800 2,793,618
- -----------------------------------------------------------------------------
Total Short-Term Obligations,
at Amortized Cost and Value $15,781,851
- -----------------------------------------------------------------------------
Call Options Purchased - 0.1%
- -----------------------------------------------------------------------------
Principal
Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
- -----------------------------------------------------------------------------
Italian Lire/Deutsche Marks
January/1085.0 ITL 4,312,875 $ 4,313
Japanese Bonds
March/107.489 JPY 190,050 13,494
March/115.828 800,000 16,800
March/112.796 205,000 8,405
Japanese Yen
January/97.5 816,911 817
Swedish Kronor/Deutsche Marks
February/4.535 SEK 43,598 38,278
- -----------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $227,870) $ 82,107
- -----------------------------------------------------------------------------
Put Options Purchased - 0.1%
- -----------------------------------------------------------------------------
Australian Dollars
January/.745 AUD 2,011 $ 16,744
Deutsche Marks
February/1.460 DEM 9,706 52,761
Deutsche Marks/British Pounds
March/2.265 6,682 30,395
- -----------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $142,012) $ 99,900
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $70,698,339) $71,550,336
- -----------------------------------------------------------------------------
Call Options Written - (0.2)%
- -----------------------------------------------------------------------------
Deutsche Marks/British Pounds
March/2.1476 DEM 6,335 $ (17,917)
Italian Lire/Deutsche Marks
August/1125.0 ITL 10,493,451 (178,389)
- -----------------------------------------------------------------------------
Total Call Options Written
(Premiums Received, $202,070) $ (196,306)
- -----------------------------------------------------------------------------
Put Options Written - (0.6)%
- -----------------------------------------------------------------------------
Australian Dollars
January/.745 AUD 2,011 $ (16,743)
Italian Lire/Deutsche Marks
August/1125.0 ITL 10,493,451 (314,804)
Japanese Bonds
March/107.489 JPY 190,050 (33,829)
March/112.796 205,000 (50,020)
- -----------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $463,678) $ (415,396)
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.1% $ 15,991
=============================================================================
Net Assets - 100.0% $70,954,625
- -----------------------------------------------------------------------------
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 FRF = French Francs
CAD = Canadian Dollars GBP = British Pounds
CHF = Swiss Francs ITL = Italian Lire
CZK = Czech Republic Korunas JPY = Japanese Yen
DEM = Deutsche Marks NLG = Dutch Guilders
DKK = Danish Kroner NZD = New Zealand Dollars
ESP = Spanish Pesetas SEK = Swedish Kronor
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $70,698,339) $71,550,336
Cash 100,485
Foreign currency, at value (identified cost, $3,215) 3,597
Net receivable for forward foreign currency exchange
contracts sold 387,764
Interest receivable 1,410,176
Receivable from investment adviser 78,903
Deferred organization expenses 3,621
Other assets 620
-----------
Total assets $73,535,502
-----------
Liabilities:
Payable for investments purchased $ 1,050,103
Written options outstanding, at value (premiums received,
$665,748) 611,702
Net payable for forward foreign currency exchange contracts
purchased 794,083
Net payable for forward foreign currency exchange contracts 73,235
Payable to affiliates for management fees 3,794
Accrued expenses and other liabilities 47,960
-----------
Total liabilities $ 2,580,877
-----------
Net assets $70,954,625
===========
Net assets consist of:
Paid-in capital $73,659,460
Unrealized appreciation on investments and translation of
assets and liabilities in
foreign currencies 418,874
Accumulated distributions in excess of net realized gain on
investments and foreign
currency transactions (2,170,815)
Accumulated distributions in excess of net investment
income (952,894)
-----------
Total $70,954,625
===========
Shares of beneficial interest outstanding 7,577,349
===========
Net asset value, offering price, and redemption price per
share (net assets of $70,954,625 / 7,577,349 shares of
beneficial interest outstanding) $9.36
=====
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Six Months Ended December 31, 1995
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 2,733,474
-----------
Expenses -
Management fee $ 245,388
Trustees' compensation 2,733
Shareholder servicing agent fee 2,803
Custodian fee 30,523
Auditing fees 23,500
Printing 9,015
Legal fees 1,915
Miscellaneous 8,414
-----------
Total expenses $ 324,291
Preliminary reduction of expenses by investment adviser (78,903)
-----------
Net expenses $ 245,388
-----------
Net investment income $ 2,488,086
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 3,604,072
Written option transactions (179,790)
Foreign currency transactions (4,068,558)
-----------
Net realized loss on investments and foreign currency
transactions $ (644,276)
-----------
Change in unrealized appreciation (depreciation) -
Investments $ (512,364)
Written options (144,432)
Translation of assets and liabilities in foreign currencies 522,724
-----------
Net unrealized loss on investments $ (134,072)
-----------
Net realized and unrealized loss on investments and
foreign currency transactions $ (778,348)
-----------
Increase in net assets from operations $ 1,709,738
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Six Months Ended Year Ended
December 31, 1995 June 30, 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 2,488,086 $ 3,508,113
Net realized gain (loss) on investments
and foreign currency transactions (644,276) 2,407,671
Net unrealized loss on investments and
foreign currency (134,072) (195,007)
----------- -----------
Increase in net assets from operations $ 1,709,738 $ 5,720,777
----------- -----------
Distributions declared to shareholders -
From net investment income $(2,488,086) $(1,092,709)
From net realized gain on investments
and foreign currency transactions (2,149,194) (2,993,073)
In excess of net investment income (840,880) --
In excess of net realized gain on
investments and foreign currency
transactions (1,526,539) --
----------- -----------
Total distributions declared to
shareholders $(7,004,699) $(4,085,782)
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $11,144,020 $31,100,133
Net asset value of shares issued to
shareholders in reinvestment of
distributions 6,002,734 3,030,706
Cost of shares reacquired (16,975,448) (2,051,722)
----------- -----------
Increase in net assets from Fund share
transactions $ 171,306 $32,079,117
----------- -----------
Total increase (decrease) in net assets $(5,123,655) $33,714,112
Net assets:
At beginning of period 76,078,280 42,364,168
----------- -----------
At end of period (including accumulated
distributions in excess of net investment
income of $952,894 and $112,014,
respectively) $70,954,625 $76,078,280
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Year Ended June 30,
Six Months Ended ------------------------------
December 31, 1995 1995 1994 1993*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 10.13 $ 9.64 $ 10.50 $ 10.00
------- ------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.33 $ 0.65 $ 0.63 $ 0.17
Net realized and unrealized gain
(loss) on investments (0.09) 0.70 (0.63) 0.33
------- ------- ------- -------
Total from investment
operations $ 0.24 $ 1.35 $ -- $ 0.50
------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.33) $ (0.23) $ (0.31) $ --
In excess of net investment
income (0.15) -- (0.55) --
From net realized gain on
investments (0.31) (0.63) -- --
In excess of net realized gains
on investments (0.22) -- -- --
------- ------- ------- -------
Total distributions declared
to shareholders $ (1.01) $ (0.86) $ (0.86) $ --
------- ------- ------- -------
Net asset value - end of period $ 9.36 $ 10.13 $ 9.64 $ 10.50
------- ------- ------- -------
Total return 2.38%++ 15.10% (0.57)% 5.00%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.65%+ 0.72% 0.75% 0.80%+
Net investment income 6.59%+ 6.66% 6.09% 5.53%+
Portfolio turnover 242% 279% 212% 73%
Net assets at end of period (000
omitted) $70,955 $76,078 $42,364 $23,966
* For the period from the commencement of investment operations, September 30,
1992 to June 30, 1993.
+ Annualized.
++ Not annualized.
# Per share data for periods subsequent to June 30, 1993 is based on average
shares outstanding.
(S) The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and ratios would have been:
Net investment income $ 0.32 $ 0.61 $ 0.58 $ 0.15
Ratios (to average net assets):
Expenses 0.86%+ 1.14% 1.23% 1.48%+
Net investment income 6.38%+ 6.23% 5.61% 4.85%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Institutional Worldwide Fixed Income Fund (the Fund), formerly known as
the MFS Worldwide Fixed Income 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. 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. 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.
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 or foreign currency 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 or exchange 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.
(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 0.65% of average daily net assets. The investment adviser did not impose a
portion of its fee, which is reflected as a preliminary reduction of expenses
in the Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets at an effective annual rate of
0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
Purchases Sales
- ----------------------------------------------------------------------------
U.S. government securities $61,450,539 $71,845,726
=========== ===========
Investments (non-U.S. government securities) $74,585,257 $60,277,279
=========== ===========
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 $70,698,339
===========
Gross unrealized appreciation $ 1,064,449
Gross unrealized depreciation (212,452)
-----------
Net unrealized appreciation $ 851,997
===========
(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:
Six Months Ended Year Ended
December 31, 1995 June 30, 1995
---------------------------- -------------------------
Shares Amount Shares Amount
- ------------------------------------------------- -------------------------
Shares sold 1,098,142 $ 11,144,020 718,887 $ 8,656,241
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 642,004 6,002,734 335,998 3,030,706
Shares reacquired (1,671,529) (16,975,448) (214,803) (2,051,722)
---------- ------------ --------- -----------
Net increase 68,617 $ 171,306 3,115,630 $32,079,117
========== ============ ========= ===========
(6) Financial Instruments
The Fund regularly 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 December 31, 1995, is as
follows:
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 -
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
Options written -
Australian Dollars 5,564 54,314 3,344 33,926
Canadian Dollars 2,289 4,801 2,698 9,654
Deutsche Marks 18,362 48,431 24,260 123,235
Deutsche Marks/British
Pounds 11,432 60,881 -- --
Italian
Lire/Deutsche
Marks 16,186,297 192,245 15,022,010 447,958
Japanese Yen 664,584 101,341 8,407,616 903,945
Japanese
Yen/Deutsche
Marks -- -- 1,654,496 58,984
Swedish Kronor/
Deutsche Marks 51,613 33,338 -- --
Options terminated in closing transactions -
Australian Dollars (5,564) (54,314) (4,612) (47,213)
Canadian Dollars (2,289) (4,801) (2,698) (9,654)
Deutsche Marks -- -- (28,642) (188,030)
Japanese Yen (1,644,586) (459,932) (8,666,439) (997,552)
Japanese
Yen/Deutsche
Marks -- -- (1,654,496) (58,984)
Swedish Kronor/
Deutsche Marks (51,613) (33,338) -- --
Deutsche
Marks/British
Pounds (5,097) (32,714) -- --
Options exercised -
Italian
Lire/Deutsche
Marks -- -- (4,528,559) (61,578)
Japanese Yen (767,925) (64,794) -- --
Options expired -
British Pounds -- -- (2,626) (44,337)
Deutsche Marks (18,362) (48,431) (20,765) (87,161)
Italian
Lire/Deutsche
Marks (5,692,847) (18,342) (1,964,000) (15,773)
Japanese Yen -- -- (338,783) (16,162)
---------- --------- ---------- ---------
OUTSTANDING,
END OF PERIOD 10,499,785 $ 202,070 10,890,512 $ 463,678
---------- --------- ---------- ---------
OPTIONS OUTSTANDING AT END OF PERIOD
CONSIST OF:
Australian Dollars -- $ -- 2,011 $ 25,782
---------- --------- ---------- ---------
Deutsche
Marks/British
Pounds 6,335 28,167 -- --
---------- --------- ---------- ---------
Italian
Lire/Deutsche
Marks 10,493,450 173,903 10,493,451 386,380
---------- --------- ---------- ---------
Japanese Yen -- -- 395,050 51,516
---------- --------- ---------- ---------
10,499,785 $ 202,070 10,890,512 $ 463,678
---------- --------- ---------- ---------
At December 31, 1995, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<PAGE>
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 3/18/96 AUD 5,962,559 $ 4,398,567 $ 4,409,974 $ (11,407)
2/26/96 - 2/29/96 CAD 5,693,872 4,163,743 4,172,587 (8,844)
5/31/96 CHF 9,050,621 7,986,782 7,962,645 24,137
1/16/96 - 5/31/96 DEM 80,542,041 56,217,288 56,208,460 8,828
4/12/96 DKK 29,527,921 5,383,738 5,323,589 60,149
1/08/96 ESP 813,694,535 6,583,816 6,686,942 (103,126)
1/12/96 - 4/12/96 FRF 47,246,059 9,482,097 9,641,164 (159,067)
1/30/96 GBP 3,468,773 5,347,372 5,367,958 (20,586)
3/07/96 ITL 18,273,348,387 11,949,743 12,045,843 (96,100)
2/23/96 - 6/07/96 JPY 2,800,298,960 28,161,632 27,577,329 584,303
1/22/96 NLG 8,447,967 5,385,266 5,262,729 122,537
1/12/96 NZD 2,635,000 1,705,845 1,718,905 (13,060)
------------ ------------ ------------
$146,765,889 $146,378,125 $ 387,764
============ ============ ============
Purchases
3/18/98 AUD 462,750 $ 341,186 $ 342,255 $ 1,069
2/26/96 CAD 2,741,172 2,023,358 2,008,791 (14,567)
1/16/96 CHF 5,048,041 4,323,989 4,379,882 55,893
1/17/96 CZK 36,378,462 1,366,584 1,362,301 (4,283)
1/16/96 - 5/31/96 DEM 88,365,383 61,789,725 61,734,631 (55,094)
2/29/96 - 4/12/96 DKK 33,683,474 6,119,889 6,069,901 (49,988)
1/31/96 - 5/31/96 ITL 14,917,169,314 9,211,403 9,304,980 93,577
2/23/96 - 6/07/96 JPY 3,297,637,614 33,102,209 32,268,957 (833,252)
1/22/96 NLG 3,182,088 1,971,383 1,982,295 10,912
3/18/96 NZD 5,388,908 3,499,460 3,496,216 (3,244)
3/21/96 SEK 12,236,987 1,841,777 1,830,824 (10,953)
------------ ------------ --------------
$133,269,343 $132,475,260 $ (794,083)
------------ ------------ -------------
</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 $73,235 at December 31, 1995.
At December 31, 1995, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(7) 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 six months ended
December 31, 1995 was $727.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of
MFS Institutional Worldwide Fixed Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Institutional Worldwide Fixed
Income Fund (one of the series comprising MFS Institutional Trust) as of
December 31, 1995, the related statement of operations for the six months
ended December 31, 1995, the statement of changes in net assets for the six
months then ended and the year ended June 30, 1995, and the financial
highlights for the six months ended December 31, 1995 and 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 December 31, 1995 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
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 Institutional
Worldwide Fixed Income Fund at December 31, 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
February 1, 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.
<PAGE>
2/96 250
