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[Logo]
INSTITUTIONAL ADVISORS, INC. Annual Report
for Year Ended
June 30, 1997
MFS(R) INSTITUTIONAL MID-CAP GROWTH EQUITY FUND
[Graphic Omitted]
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<TABLE>
MFS(R) INSTITUTIONAL MID-CAP GROWTH EQUITY FUND
<S> <C>
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 Management Company INVESTOR SERVICE
(Blockbuster Video franchise) MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGERS
John W. Ballen*
Mark Regan* For additional information,
contact your financial adviser.
TREASURER
W. Thomas London* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* AUDITORS
Ellen Moynihan* Deloitte & Touche LLP
James O. Yost*
WORLD WIDE WEB
SECRETARY www.mfs.com
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
[DALBAR For the third year in a row,
LOGO] MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey,
Main Office Operations Service Quality
Category. The firm achieved a 3.48
overall score on a scale of 1 to 4 in
the 1996 survey. A total of 110 firms
responded, offering input on the
quality of service they received from
29 mutual fund companies nationwide.
The survey contained questions about
service quality in 15 categories,
including "knowledge of phone service
contacts," "accuracy of transaction
processing," and "overall ease of
doing business with the firm."
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. While some lenders are beginning to tighten standards to address this
problem, consumer debt and personal bankruptcies continue to rise. Because of
this, plus slight declines in other indicators such as average hourly wages and
the corporate purchasing-managers index, we do not expect the rapid pace of
growth seen in the first quarter of 1997 to continue. While second-quarter
growth has slowed dramatically, we do expect the second half of the year to pick
up once again with real (inflation-adjusted) growth centering around 2 1/2%.
We have been surprised by the strength of the U.S. equity market in the
first half of 1997. Much of this is the result of continuing gains in corporate
earnings. Even as the current recovery enters its seventh year, more and more
U.S. companies have been exceeding analysts' earnings estimates. In the first
quarter of 1997, for example, two-thirds of all companies met or exceeded
analysts' expectations, a trend that could be an important indicator of the U.S.
equity market's future direction. However, while the near-term outlook for
profits is generally favorable, we believe equity valuations have risen to a
point where a cautious investment approach seems warranted.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
July 14, 1997
PORTFOLIO MANAGERS' OVERVIEW
Dear Shareholders:
For the 12 months ended June 30, 1997, the Fund provided a total return of
12.80% (including the reinvestment of any distributions), compared to a 17.60%
gain for the Russell Mid-Cap Growth Index (an unmanaged index measuring the
performance of the 800 smallest securities in the Russell 1000 Index). The
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance, posted a 34.48% return over the same
period.
The second quarter of 1997 was marked by extraordinary volatility in the
markets, with records being established for most indices and numerous economic
indicators suggesting favorable market trends. The sell-off in the growth and
smaller-capitalization stocks that started at the end of the first quarter
worsened in April, with small- and mid-cap growth portfolios being hit
exceptionally hard. However, favorable earnings reports from a number of key
technology companies and solid economic numbers showing growth without
inflationary pressures helped propel the markets to new records.
Although performance in 1996 was hampered by widespread declines in
technology and health care stocks, the Fund's more recent gains were driven by a
strong recovery in these same sectors. In the second quarter of 1997, for
example, the Fund's technology holdings added over 800 basis points (8%) to
performance, while health care companies added almost 500 basis points (5%).
Strong gains were posted for many of the larger technology holdings, including
Cadence Design, Synopsys, Gemstar, Oracle Systems Corp., Edify, and Electronic
Arts, and we added to these positions over the first quarter and into the middle
of April. The gains from these stocks were actually larger than expected because
we were able to add to them significantly when their prices dropped in April.
<PAGE>
Health care stocks have also performed well, with health care information
stocks, including HCIA, Transition Systems, HPR, Cerner, and HBO & Co. showing
particular strength. In the sub-acute care nursing home sector, Mariner Health
has had strong performance, while several drug distribution companies, including
Rite Aid and Smith's Food and Drug, also performed very well. The largest
financial services holding, Franklin Resources, has added to the Fund's return,
as have semiconductors and recently purchased wireless holdings, including
Aerial Communications and U.S. Cellular. Recently, we have reduced some of our
technology weightings on their strong quarterly performance and increased our
exposure in some business and financial services companies.
Performance has been hindered primarily by retailing companies, including
Gymboree, Viking Office Products, and Ann Taylor. And despite the overall strong
performance of the technology sector this year, a number of issues have
detracted from performance, particularly Ascend Communications, which declined
24% in the second quarter. This is a large position for the Fund and one that we
expect to contribute to performance by year-end. We also expect a recently
disappointing holding, Spectrum Holobyte, to perform significantly better in the
second half of the year.
Looking forward, we continue to view NASDAQ as an attractive market. On
average, the portfolio holdings are trading at a discount to the projected
growth rate of the individual companies' earnings. The stocks in the portfolio
have a price-to-earnings (P/E) ratio of 21. We feel this is attractive when
compared to the S&P 500, which has a P/E of 19 and a 12% expected earnings
growth rate.
Respectfully,
/s/ John W. Ballen /s/ Mark Regan
John W. Ballen Mark Regan
Portfolio Manager Portfolio Manager
PORTFOLIO MANAGERS' PROFILES
John W. Ballen began his career at MFS as an industry specialist in 1984. A
graduate of Harvard College, the University of New South Wales, and Stanford
University's Graduate School of Business Administration, he was promoted to
Investment Officer in 1986, Vice President - Investments in 1987, Director of
Research in 1988, and Senior Vice President in 1990. In 1993, he became Director
of Equity Portfolio Management, and in 1995, he became Chief Equity Officer. He
has been a portfolio manager of MFS Institutional Mid-Cap Growth Equity Fund
since its inception in 1995.
Mark Regan began his career at MFS in 1989 as a research analyst. A graduate of
Cornell University and the Sloan School of Management of the Massachusetts
Institute of Technology, he was promoted to Investment Officer in 1990,
Assistant Vice President - Investments in 1991, and Vice President Investments
in 1992. Mr. Regan has co-managed MFS Institutional Mid-Cap Growth Equity Fund
since its inception in 1995.
OBJECTIVE AND POLICIES
The Fund's investment objective is to provide 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 equity securities of companies
with medium-market capitalizations (mid-cap companies). Mid-cap companies are
those companies with a market capitalization within the range of approximately
$500 million to $4 billion. Such companies generally would be expected to show
earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation, and would have the products, management, and
market opportunities that are usually necessary to continue sustained growth.
Commencement of investment operations: December 28, 1995.
<PAGE>
TAX FORM SUMMARY
In January 1998, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
For the year ended June 30, 1997, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to
5.22%.
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS
Institutional Mid-Cap Growth Equity Fund shares in comparison to various market
indicators. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. It is not possible to invest directly in an index. Shares of the Fund
are purchased at net asset value. The minimum initial investment is $3 million
dollars.
GROWTH OF A HYPOTHETICAL $3,000,000 INVESTMENT
(For the period January 1, 1996, through June 30, 1997)
MFS
INSTITUTIONAL
RUSSELL CONSUMER MID-CAP
MID-CAP PRICE GROWTH
S&P 500 GROWTH INDEX INDEX-U.S. EQUITY FUND
------- ------------ ---------- -------------
Jan/96 30.00 30.00 30.00 30.00
June/96 33.00 33.13 30.60 33.18
June/97 44.50 38.96 31.30 37.43
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1997
<CAPTION>
1 Year Life of Fund*
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<S> <C> <C>
MFS Institutional Mid-Cap Growth Equity Fund +12.80% +15.91%
- -------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +34.48% +30.04%
- -------------------------------------------------------------------------------------------
Russell Mid-Cap Growth Index +17.60% +19.03%
- -------------------------------------------------------------------------------------------
Consumer Price Index** + 2.14% + 2.86%
- -------------------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations,
December 28, 1995, through June 30, 1997.
+Source: AIM.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
</TABLE>
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - June 30, 1997
Stocks - 93.0%
<CAPTION>
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Issuer Shares Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 91.3%
Apparel and Textiles
Polo Ralph Lauren Corp.* 300 $ 8,212
- ---------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.4%
Banc One Corp. 5,013 $ 242,817
Compass Bancshares, Inc. 3,400 114,325
First Hawaiian, Inc. 3,300 112,613
ONBANCorp., Inc. 2,400 122,400
-----------
$ 592,155
- ---------------------------------------------------------------------------------------------
Business Machines - 0.3%
Affiliated Computer Services, Inc., "A"* 2,400 $ 67,200
- ---------------------------------------------------------------------------------------------
Business Services - 9.1%
AccuStaff, Inc.* 5,900 $ 139,756
ADT Ltd.* 15,700 518,100
BISYS Group, Inc.* 4,000 167,000
Claremont Technology Group, Inc.* 9,000 213,750
Computer Sciences Corp.* 4,250 306,531
DST Systems, Inc.* 5,100 169,894
First USA Paymentech, Inc.* 100 2,894
Fiserv, Inc.* 9,950 444,019
SPS Transaction Services, Inc.* 10,200 188,700
Technology Solutions Co.* 3,300 130,350
-----------
$ 2,280,994
- ---------------------------------------------------------------------------------------------
Cellular Telephones - 0.8%
Telephone & Data Systems, Inc. 4,950 $ 187,791
- ---------------------------------------------------------------------------------------------
Chemicals - 0.5%
Cambrex Corp. 3,100 $ 123,225
- ---------------------------------------------------------------------------------------------
Computer Hardware - Systems - 1.8%
Cascade Communications Corp.* 6,300 $ 174,037
Quantum Corp.* 11,400 231,562
Seagate Technology, Inc.* 1,400 49,263
-----------
$ 454,862
- ---------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.8%
Activision, Inc.* 3,700 $ 53,187
Electronic Arts, Inc.* 11,275 379,122
Spectrum Holobyte, Inc.* 4,700 22,913
-----------
$ 455,222
- ---------------------------------------------------------------------------------------------
Computer Software - Systems - 11.8%
Adobe Systems, Inc. 6,900 $ 241,931
BDM International, Inc.* 5,400 124,200
BMC Software, Inc.* 3,600 199,350
Cadence Design Systems, Inc.* 15,660 524,610
Cerner Corp.* 2,100 44,100
Computer Associates International, Inc. 2,900 161,494
Edify Corp.* 26,300 387,925
HPR, Inc.* 6,200 114,700
Oracle Systems Corp.* 9,975 502,491
Pure Atria Corp.* 5,000 70,625
Synopsys, Inc.* 15,450 567,787
-----------
$ 2,939,213
- ---------------------------------------------------------------------------------------------
Conglomerates - 1.1%
Kansas City Southern Industries, Inc. 4,100 $ 264,450
- ---------------------------------------------------------------------------------------------
Electrical Equipment - 1.6%
Kulicke & Soffa Industries, Inc.* 12,600 $ 409,106
- ---------------------------------------------------------------------------------------------
Electronics - 4.3%
Actel Corp.* 5,800 $ 98,963
Analog Devices, Inc.* 9,300 247,031
Atmel Corp.* 2,100 58,800
Gemstar Group Ltd.* 24,461 449,471
KLA-Tencor Corp.* 3,500 170,625
LSI Logic Corp.* 1,700 54,400
-----------
$ 1,079,290
- ---------------------------------------------------------------------------------------------
Entertainment - 0.9%
Cox Communications, Inc.* 1,600 $ 38,400
Cox Radio, Inc.* 3,300 84,563
Harrah's Entertainment, Inc.* 5,850 106,762
Silverleaf Resorts, Inc.* 200 3,075
-----------
$ 232,800
- ---------------------------------------------------------------------------------------------
Financial Institutions - 4.9%
Advanta Corp., "B" 3,400 $ 121,337
Finova Group, Inc. 3,100 237,150
Franklin Resources, Inc. 12,000 870,750
-----------
$ 1,229,237
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Food and Beverage Products - 1.0%
Earthgrains Co. 400 $ 26,225
McCormick & Co., Inc. 9,200 232,300
-----------
$ 258,525
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Industrial - 1.0%
Keystone International, Inc. 7,200 $ 249,750
- ---------------------------------------------------------------------------------------------
Insurance - 1.8%
Compdent Corp.* 10,000 $ 210,625
Conseco, Inc. 6,000 222,000
Hartford Life, Inc., "A"* 200 7,500
Nationwide Financial Services, Inc., "A" 300 7,969
-----------
$ 448,094
- ---------------------------------------------------------------------------------------------
Machinery - 0.9%
AGCO Corp. 2,800 $ 100,625
Greenfield Industries, Inc. 4,300 116,100
-----------
$ 216,725
- ---------------------------------------------------------------------------------------------
Medical and Health Products - 1.5%
Mentor Corp. 4,000 $ 118,500
Transition Systems, Inc.* 14,500 263,719
-----------
$ 382,219
- ---------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 14.5%
Acuson Corp.* 4,100 $ 94,300
AmeriSource Health Corp., "A"* 6,500 324,187
CRA Managed Care, Inc.* 1,700 88,719
HBO & Co. 1,700 117,088
HCIA, Inc.* 19,400 649,900
Health Management Associates, Inc., "A"* 7,750 220,875
HEALTHSOUTH CORP.* 2,740 68,329
IDX Systems Corp.* 3,600 124,200
Mariner Health Group, Inc.* 35,400 546,487
Nellcor Puritan Bennett, Inc.* 8,400 152,250
Renal Treatment Centers, Inc.* 4,500 120,937
Safeguard Health Enterprises, Inc.* 2,800 29,750
St. Jude Medical, Inc.* 18,250 711,750
Trigon Healthcare, Inc.* 8,700 210,975
United Healthcare Corp. 3,150 163,800
-----------
$ 3,623,547
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Metals and Minerals - 0.4%
Global Industries, Inc.* 4,100 $ 95,773
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Oil Services - 2.3%
Apache Corp. 3,300 $ 107,250
Cooper Cameron Corp.* 3,200 149,600
Diamond Offshore Drilling, Inc.* 1,300 101,563
National Oilwell, Inc.* 1,000 57,500
Santa Fe International Corp.* 200 6,800
Transocean Offshore, Inc. 1,900 137,987
-----------
$ 560,700
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Pollution Control
Waste Industries, Inc.* 100 $ 1,763
- ---------------------------------------------------------------------------------------------
Printing and Publishing
Times Mirror Co., "A" 3 $ 166
- ---------------------------------------------------------------------------------------------
Railroads - 2.0%
Wisconsin Central Transportation Corp.* 13,650 $ 508,462
- ---------------------------------------------------------------------------------------------
Restaurants and Lodging - 3.7%
Applebee's International, Inc.* 2,600 $ 69,550
Choice Hotels Holdings, Inc.* 2,750 46,578
HFS, Inc.* 4,750 275,500
Louisiana Quinta Inns, Inc. 9,500 207,813
Prime Hospitality Corp.* 5,500 108,625
Promus Hotel Corp.* 5,850 226,687
-----------
$ 934,753
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Stores - 9.4%
Ann Taylor Stores Corp.* 7,600 $ 148,200
Gymboree Corp.* 21,200 508,800
Home Depot, Inc. 3,100 213,706
Office Depot, Inc.* 3,400 66,088
Rite Aid Corp. 10,800 538,650
Smith's Food and Drug Centers, Inc., "B"* 7,600 407,550
Viking Office Products, Inc.* 25,000 475,000
-----------
$ 2,357,994
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Telecommunications - 11.5%
Aerial Communications, Inc.* 17,800 $ 151,300
AirTouch Communications, Inc.* 5,300 145,088
Ascend Communications, Inc.* 21,400 842,625
Aspect Telecommunications Corp.* 10,800 240,300
Cable Design Technologies Corp.* 29,800 877,237
Heritage Media Corp.* 18,200 343,525
U.S. Cellular Corp.* 8,000 237,000
U.S. West, Inc.* 2,100 42,525
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$ 2,879,600
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Total U.S. Stocks $22,841,828
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Foreign Stocks - 1.7%
Canada - 0.5%
Rogers Communications, Inc., "B"
(Telecommunications)* 19,100 $ 118,181
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United Kingdom - 1.2%
Danka Business Systems, ADR (Business Services) 7,500 $ 306,563
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Total Foreign Stocks $ 424,744
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Total Stocks (Identified Cost, $21,126,043) $23,266,572
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Short-Term Obligations - 6.7%
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Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 07/15/97 $1,000 $ 997,885
Federal National Mortgage Assn.,
due 07/09/97 - 7/18/97 670 668,589
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Total Short-Term Obligations, at Amortized Cost $ 1,666,474
- ---------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $22,792,517) $24,933,046
Other Assets, Less Liabilities - 0.3% 73,857
- ---------------------------------------------------------------------------------------------
Net Assets - 100.0% $25,006,903
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*Non-income producing security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ----------------------------------------------------------------------------
June 30, 1997
- ----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $22,792,517) $24,933,046
Cash 106,911
Receivable for investments sold 148,876
Dividends receivable 4,872
Deferred organization expenses 5,576
Receivable from investment adviser 70,463
-----------
Total assets $25,269,744
-----------
Liabilities:
Payable for investments purchased $ 238,150
Payable to affiliates -
Management fee 1,219
Administrative fee 30
Accrued expenses and other liabilities 23,442
-----------
Total liabilities $ 262,841
-----------
Net assets $25,006,903
===========
Net assets consist of:
Paid-in capital $22,737,065
Unrealized appreciation on investments 2,140,529
Accumulated undistributed net realized gain on investments 129,309
-----------
Total $25,006,903
===========
Shares of beneficial interest outstanding 2,041,255
=========
Net asset value, offering price and redemption price
per share (net assets of $25,006,903 / 2,041,255 shares
of beneficial interest outstanding) $12.25
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended June 30, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 70,662
Dividends 26,105
----------
Total investment income $ 96,767
----------
Expenses -
Management fee $ 91,314
Trustees' compensation 5,000
Shareholder servicing agent fee 1,128
Administrative fee 684
Auditing fee 31,792
Custodian fee 10,569
Registration fee 5,573
Printing 2,715
Amortization of organization expenses 691
Legal fee 586
Miscellaneous 943
----------
Total expenses $ 150,995
Fees paid indirectly (2,257)
Reduction of expenses by investment adviser (50,187)
----------
Net expenses $ 98,551
----------
Net investment loss $ (1,784)
----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) on
investment transactions $ 349,787
Change in unrealized appreciation on investments 2,091,782
----------
Net realized and unrealized gain on investments $2,441,569
----------
Increase in net assets from operations $2,439,785
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- -------------------------------------------------------------------------------------------------
Year Ended Period Ended
June 30, 1997 June 30, 1996*
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,784) $ (6,263)
Net realized gain on investments 349,787 143,437
Net unrealized gain on investments 2,091,782 48,747
----------- ----------
Increase in net assets from operations $ 2,439,785 $ 185,921
----------- ----------
Distributions declared to shareholders from net realized
gain on investments
$ (355,868) $ --
----------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $14,503,643 $5,000,100
Net proceeds from subscriptions in kind
-- 2,963,332
Net asset value of shares issued to shareholders in
reinvestment of distributions 269,980 --
----------- ----------
Increase in net assets from Fund share transactions $14,773,623 $7,963,432
----------- ----------
Total increase in net assets $16,857,540 $8,149,353
Net assets:
At beginning of period 8,149,363 10
----------- ----------
At end of period (including accumulated net investment
loss of $0 and $0, respectively) $25,006,903 $8,149,363
=========== ==========
*For the period from the commencement of the Fund's investment operations,
December 28, 1995, through June 30, 1996.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended Period Ended
June 30, 1997 June 30 1996*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period
$ 11.13 $ 10.00
------- -------
Income from investment operations# -
Net investment loss
Net realized and unrealized gain on $ (0.00)** $ (0.01)
investments
1.40 1.14
Total from investment operations ------- -------
$ 1.40 $ 1.13
Less distributions declared to ------- -------
shareholders -
From net realized gains on investments
$ (0.28) $ --
Net asset value - end of period ------- -------
$ 12.25 $ 11.13
======= =======
Total return 12.80% 11.30%++
Ratios (to average net assets)/Supplemental data(S):
Expenses
Net investment loss 0.65% 0.70%+
Portfolio turnover (0.01)% (0.25)%+
Average commission rate 136% 33%
Net assets at end of period (000 omitted) $0.0527 $0.0505
$25,007 $ 8,149
* For the period from the commencement of the Fund's investment operations, December 28, 1995, through June 30, 1996.
** The per share net investment loss was $(0.00132).
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The adviser voluntarily agreed to maintain the expenses of the Fund at not more than 0.65% of average daily net assets
effective May 3, 1996. During the period December 28, 1995, through May 2, 1996, the Adviser agreed to maintain the expenses
at not more than 0.75%. To the extent actual expenses were over these limitations, the net investment loss per share and
ratios would have been:
Net investment loss $(0.04) $(0.09)
Ratios (to average net assets):
Expenses## 0.98% 2.59%+
Net investment loss (0.34)% (2.14)%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Institutional Mid-Cap Growth Equity Fund (the Fund) is a diversified series
of MFS(R) Institutional Trust (the Trust). The Trust is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
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 Fund
operations.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premiums and
original issue discounts are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend payments
received in additional securities are recorded on the ex-dividend date in an
amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement which measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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.
Distributions to shareholders are recorded on the ex-dividend date. 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, 1997, $1,784 was reclassified from accumulated net investment loss to
accumulated net realized gain on investments due to differences between book and
tax accounting for net investment loss and short-term capital gains. 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
0.60% of average daily net assets. The investment advisor has voluntarily agreed
to pay expenses of the fund in order to maintain total expenses at no more than
0.65% of the Fund's average daily net assets. This is reflected as a reduction
of expenses in the Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, and MFS Service Center, Inc. (MFSC).
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
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 U.S. government securities and
short-term obligations, aggregated $32,132,694 and $19,015,663, 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 $22,866,506
===========
Gross unrealized appreciation $ 2,677,988
Gross unrealized depreciation (611,448)
-----------
Net unrealized appreciation $ 2,066,540
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1997 Period Ended June 30, 1996*
--------------------------- ---------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,284,350 $14,503,643 435,550 $5,000,100
Subscriptions in kind -- -- 296,333 2,963,332
Shares issued to shareholders in
reinvestment
of distributions 25,021 269,980 -- --
--------- ----------- ------- ----------
Net increase 1,309,371 $14,773,623 731,883 $7,963,432
========= =========== ======= ==========
</TABLE>
*For the period from the commencement of the Fund's investment operations,
December 28, 1995, through June 30, 1996.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended June 30, 1997, was $40.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of MFS Institutional
Mid-Cap Growth Equity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Institutional Mid-Cap Growth Equity Fund
(one of a series comprising MFS Institutional Trust) as of June 30, 1997, the
related statement of operations for the year then ended, the statement of
changes in net assets and financial highlights for the year then ended and for
the period from December 28, 1995, commencement of operations, to year ended
June 30, 1996. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at June
30, 1997 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
Mid-Cap Growth Equity Fund at June 30, 1997, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 1, 1997
------------------------------------------
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>
(C) MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
IML-2 8/97 300
