<PAGE>
[logo] M F S (SM) Semiannual Report
INSTITUTIONAL ADVISORS, INC. December 31, 1997
- ------------------------------------------------------------------------------
MFS(R) INSTITUTIONAL MID CAP GROWTH FUND
(FORMERLY MFS INSTITUTIONAL MID CAP GROWTH EQUITY FUND)
[graphic omitted]
<PAGE>
MFS(R) INSTITUTIONAL MID CAP GROWTH FUND
(FORMERLY MFS(R) INSTITUTIONAL MID CAP GROWTH EQUITY FUND)
<TABLE>
<S> <C>
TRUSTEES INVESTMENT ADVISER
Nelson J. Darling, Jr. Massachusetts Financial Services Company
Trustee, Eastern Enterprises 500 Boylston Street
(diversified holding company) Boston, MA 02116-3741
William R. Gutow DISTRIBUTOR
Vice Chairman, MFS Fund Distributors, Inc.
Capitol Entertainment Management Company 500 Boylston Street
(Blockbuster Video franchise) Boston, MA 02116-3741
PORTFOLIO MANAGERS INVESTOR SERVICE
John W. Ballen* MFS Service Center, Inc.
Mark Regan* P.O. Box 1400
Boston, MA 02107-9906
TREASURER
W. Thomas London* For additional information,
contact your financial adviser.
ASSISTANT TREASURERS
Mark E. Bradley* CUSTODIAN
Ellen Moynihan* State Street Bank and Trust Company
James O. Yost*
WORLD WIDE WEB
SECRETARY www.mfs.com
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
</TABLE>
- -------------------------------------------------------------------------------
[Dalbar logo] For the fourth year in a row, MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey, Main Office Operations Service Quality
Category. The firm achieved a 3.42 overall score on a scale of 1 to 4 in the
1997 survey. A total of 111 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 11 categories, including "knowledge
of operations contact," "keeping you informed," and "ease of doing business"
with the firm.
- -------------------------------------------------------------------------------
*Affiliated with the Investment Adviser
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
MFS Mourns Chairman's Passing
It is with deep regret that we inform you of the death on February 2, 1998, of
A. Keith Brodkin, Chairman and Chief Executive Officer of MFS Investment
Management(SM). Mr. Brodkin joined MFS in 1970 and made enormous contributions
to the organization, including helping to build the firm's investment staff,
which will continue to manage all of the MFS investment portfolios. His
leadership, friendship, and wise counsel will be sorely missed.
- -------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholders:
Thanks to a sustained period of relative stability and moderate growth, the U.S.
economy has produced thousands of new jobs, inflation has remained under
control, and the investment climate has -- for the most part -- been favorable.
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. The rapid pace of growth seen in the first
quarter slowed to an annual rate of 3.3% in the second quarter and 3.5% in the
third. We believe this economic momentum will carry well into the first quarter
of 1998 as a result of lower interest rates and continuing growth in the money
supply. While U.S. economic growth continues to be impressive, events in the
Pacific Rim will somewhat offset that and, therefore, markets are likely to
continue to focus on Federal Reserve Board activity.
The extreme volatility seen in the U.S. equity market in the fall was, we
believe, the consequence of overvaluations that had been evident for some
months. As a result, the stock market has been vulnerable to some type of
correction and has been impacted in the near term by chaotic market conditions
in the Pacific Rim. In the face of all this, however, the equity market
continues to exhibit surprising strength, much of it the result of continued
gains in corporate earnings, a trend that could be an important indicator of the
market's future direction. Certainly the situation throughout Asia bears close
scrutiny because it appears to be clearly deflationary and raises the prospect
of trade wars developing throughout the area. We are not convinced that U.S.
markets have escaped totally from October's volatility. Thus, not only is the
near-term outlook for profits being adjusted for the Asian crisis, we also
believe equity valuations have risen to a point where a cautious investment
approach seems warranted, with a need for particular attention to be paid to the
effect of Pacific Rim volatility on the earnings of U.S. companies.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
President, MFS Investment Management
January 12, 1998
<PAGE>
PORTFOLIO MANAGERS' OVERVIEW
Dear Shareholders:
For the six months ended December 31, 1997, the Fund provided a total return of
10.34% (including the reinvestment of distributions). This compares to a 14.54%
return for the Russell Mid Cap Growth Index, an unmanaged index measuring the
performance of the 800 smallest securities in the Russell 2000 Total Return
Index. The Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock total return performance, posted a 10.58% return
over the same period.
A sharp, across-the-board correction in technology stocks in the fourth quarter
of 1997 accounted for almost all of the Fund's underperformance relative to the
Russell Mid Cap Growth Index during the period. This decline significantly
impacted mid-cap, growth-oriented strategies, as seen in the more than 680
basis-point (6.80%) spread between the Russell Mid Cap Value Index and the
lesser-performing Russell Mid Cap Growth Index in the fourth quarter.
Despite the hostile environment for mid-cap stocks in the latter part of the
year, there were some bright spots in sectors such as retailing and special
products and services. In retailing, three of our larger holdings, Gymboree,
Fred Meyer, and Rite Aid, reported strong results relative to the overall
market. Meanwhile, Tyco and Shared Medical helped the performance of the special
products and services sector, while Edify, a large technology holding, went
against that sector's declining trend to advance more than 30% in the fourth
quarter.
Several sector changes made in the first half of 1997 helped performance in the
past six months. For example, positions in three industry groups -- health
maintenance organizations, gaming, and lower-tier financing companies -- were
reduced because we did not feel that their prospects for the year were good.
These were replaced by health care information companies such as HBO & Co.,
Identix, and Shared Management. Positions were also taken in investment
management companies such as Franklin Resources and Kansas City Southern, as
well as in oil services companies such as Diamond Offshore, Cooper Cameron, and
Carbo Ceramic. Each of the groups that was added dramatically outperformed those
that were eliminated.
In the Fund's largest sector, technology, we took advantage of market volatility
by reducing positions in the third quarter of 1997. Prices of many of these
companies had increased more than 50% from their lows in April before reaching
their highs in the third quarter. Positions in companies such as Oracle Corp.,
Adobe, Electronic Arts, Synopsys, Cadence Design Systems, Edify, Intel, and
Quantum were all reduced by the third quarter, which benefited the Fund. Partly
as a result of these moves, the Fund's technology weighting has been reduced
from a high of over 38% of assets to approximately 28%, a below- index weighting
that reflects our cautious stance based on the Asian financial crisis.
Looking ahead, we believe the financial turmoil in Asia and other developing
regions will impact a large number of industries, and we have positioned the
portfolio with this in mind. In the near term, many technology companies will be
affected, especially those involved in commodity products such as memory chips,
disk drives, and graphics cards. The Fund does not own companies in these
industries; rather, our technology holdings are focused on software and data
communications companies that we regard as dominant players in their market
segment and that have excellent growth visibility.
Currently, a large percentage of our holdings are in predominately domestic
companies, including specialty retailers and business services companies in the
health care area. For companies with larger international exposure, we have
tried to make sure that they are well positioned to weather the impact of the
Asian financial turmoil, meaning that they do not face significant Asian
competition for their products, or that Asia does not constitute a large
percentage of their sales.
Low interest rates, driven by the current worldwide uncertainty and low U.S.
inflation, suggest strong valuations for companies that are able to realize
strong earnings growth. As an organization dedicated to in-depth research, we
continue to focus on identifying industries and stocks that we believe are
likely to deliver superior earnings gains in this environment.
Respectfully,
/s/ John W. Ballen /s/ Mark Regan
John W. Ballen Mark Regan
Portfolio Manager Portfolio Manager
<PAGE>
PORTFOLIO MANAGERS' PROFILES
John W. Ballen began his career at MFS in 1984 as an industry specialist and was
promoted to Investment Officer in 1986, Vice President -- Investments in 1987,
Director of Research in 1988, Senior Vice President in 1990, Director of Equity
Portfolio Management in 1993, Chief Equity Officer in 1995, and Executive Vice
President in 1997. A graduate of Harvard College, the University of New South
Wales, and the Stanford University Graduate School of Business Administration,
he has managed MFS Institutional Mid Cap Growth Fund since its inception in
1995.
Mark Regan began his career at MFS in 1989 as a research analyst and was
promoted to Investment Officer in 1990, Assistant Vice President -- Investments
in 1991, and Vice President -- Investments in 1992. A graduate of Cornell
University and the Massachusetts Institute of Technology Sloan School of
Management, he has managed MFS Institutional Mid Cap Growth 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 $5 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 which are usually necessary to continue sustained growth.
Commencement of investment operations: December 28, 1995
PERFORMANCE SUMMARY
Because mutual funds like MFS Institutional Mid Cap Growth 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. The minimum
initial investment is generally $3 million. Shares of the Fund are purchased at
net asset value.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN AS OF DECEMBER 31, 1997
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- --------------------------------------------------------------------------------
Cumulative Total Return +10.34% +24.69% +38.64%
- --------------------------------------------------------------------------------
Average Annual Total Return -- +24.69% +17.64%
- --------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations,
December 28, 1995, through December 31, 1997.
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>
PORTFOLIO OF INVESTMENTS (Unaudited) - December 31, 1997
Stocks - 98.2%
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
Airlines
Midway Airlines Corp.* 100 $ 1,513
- --------------------------------------------------------------------------------
Banks and Credit Companies - 2.1%
Banc One Corp. 5,113 $ 277,700
Compass Bancshares, Inc. 3,500 153,125
First Hawaiian, Inc. 3,400 135,150
-----------
$ 565,975
- --------------------------------------------------------------------------------
Biotechnology - 0.2%
IDEXX Laboratories, Inc.* 3,600 $ 57,375
- --------------------------------------------------------------------------------
Business Machines - 0.2%
Affiliated Computer Services, Inc., "A"* 1,800 $ 47,363
- --------------------------------------------------------------------------------
Business Services - 7.4%
BISYS Group, Inc.* 4,100 $ 136,325
Cendant Corp.* 4,189 143,997
Computer Sciences Corp.* 4,350 363,225
Concord EFS, Inc.* 8,900 221,387
DST Systems, Inc.* 5,500 234,781
First Data Corp. 4,700 137,475
Fiserv, Inc.* 8,650 424,931
PRT Group, Inc.* 300 3,413
SPS Transaction Services, Inc.* 10,500 236,906
Technology Solutions Co.* 5,050 133,194
-----------
$ 2,035,634
- --------------------------------------------------------------------------------
Chemicals - 0.9%
Cambrex Corp. 3,200 $ 147,200
Cytec Industries, Inc.* 2,000 93,875
-----------
$ 241,075
- --------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.3%
Electronic Arts, Inc.* 1,175 $ 44,430
Microprose, Inc.* 20,200 44,187
-----------
$ 88,617
- --------------------------------------------------------------------------------
Computer Software - Systems - 14.4%
Adobe Systems, Inc. 4,500 $ 185,625
Aspen Technology, Inc.* 2,600 89,050
BMC Software, Inc.* 3,700 242,813
Cadence Design Systems, Inc.* 8,020 196,490
Clarify, Inc.* 9,900 115,088
Compuware Corp.* 7,500 240,000
Comverse Technology, Inc.* 6,000 234,000
Edify Corp.* 59,100 1,108,125
Oracle Corp.* 37,963 847,038
Rational Software Corp.* 2,200 25,025
Scopus Technology* 5,400 64,800
Security Dynamics Technologies, Inc.* 3,900 139,425
Synopsys, Inc.* 8,362 298,941
Vantive Corp.* 8,000 202,000
-----------
$ 3,988,420
- --------------------------------------------------------------------------------
Consumer Goods and Services - 4.2%
Tyco International Ltd. 25,728 $ 1,159,368
- --------------------------------------------------------------------------------
Electronics - 4.7%
Actel Corp.* 6,000 $ 75,750
Analog Devices, Inc.* 9,800 271,337
Teradyne, Inc.* 29,800 953,600
-----------
$ 1,300,687
- --------------------------------------------------------------------------------
Entertainment - 7.0%
American Radio Systems Corp., "A"* 2,900 $ 154,606
Cox Radio, Inc., "A"* 3,400 136,850
Gemstar International Group Ltd.* 58,661 1,429,862
Hearst-Argyle Television, Inc.* 1,700 50,575
Jacor Communications, Inc.* 3,300 175,313
-----------
$ 1,947,206
- --------------------------------------------------------------------------------
Financial Institutions - 4.6%
CIT Group, Inc., "A"* 700 $ 22,575
Conning Corp.* 100 1,675
Finova Group, Inc. 6,400 318,000
Franklin Resources, Inc. 7,100 617,256
Green Tree Financial Corp. 3,100 81,181
Paymentech, Inc.* 15,700 231,575
-----------
$ 1,272,262
- --------------------------------------------------------------------------------
Food and Beverage Products - 2.5%
McCormick & Co., Inc. 9,400 $ 263,200
Mondavi (Robert) Corp.* 3,400 165,750
Tootsie Roll Industries, Inc. 4,400 275,000
-----------
$ 703,950
- --------------------------------------------------------------------------------
Insurance - 1.2%
Compdent Corp.* 10,000 $ 202,813
Conseco, Inc. 2,800 127,225
ESG Re Ltd.* 200 4,700
-----------
$ 334,738
- --------------------------------------------------------------------------------
Medical and Health Products - 2.4%
Acuson Corp.* 4,200 $ 69,562
Mentor Corp. 6,500 237,250
Transition Systems, Inc.* 13,800 305,325
Uromed Corp.* 16,800 59,325
-----------
$ 671,462
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 13.9%
AmeriSource Health Corp., "A"* 6,900 $ 401,925
Concentra Managed Care, Inc.* 1,936 65,340
HBO & Co. 6,880 330,240
HCIA, Inc.* 19,400 230,375
Health Management Associates, Inc., "A"* 2,400 60,600
HEALTHSOUTH Corp.* 8,440 234,210
Hologic, Inc.* 5,700 117,919
Mariner Health Group, Inc.* 55,600 903,500
Physician Sales and Service, Inc.* 1,600 34,400
Renal Treatment Centers, Inc.* 5,800 209,525
Shared Medical Systems Corp. 10,600 699,600
St. Jude Medical, Inc.* 6,650 202,825
United Healthcare Corp. 6,950 345,328
-----------
$ 3,835,787
- --------------------------------------------------------------------------------
Oil Services - 4.8%
Camco International, Inc. 600 $ 38,212
Cooper Cameron Corp.* 4,800 292,800
Diamond Offshore Drilling, Inc. 4,800 231,000
Dril-Quip, Inc.* 100 3,513
Global Industries, Inc.* 19,500 331,500
IRI International Corp.* 300 4,200
National Oilwell, Inc.* 2,000 68,375
Noble Drilling Corp.* 4,900 150,062
Transocean Offshore, Inc. 4,000 192,750
-----------
$ 1,312,412
- --------------------------------------------------------------------------------
Oils - 0.4%
Apache Corp. 3,300 $ 115,706
- --------------------------------------------------------------------------------
Printing and Publishing - 0.5%
Scripps (E.W.) Howard, Inc. 2,600 $ 125,938
- --------------------------------------------------------------------------------
Railroads - 1.8%
Kansas City Southern Industries, Inc. 12,600 $ 400,050
Wisconsin Central Transportation Corp.* 4,250 99,344
-----------
$ 499,394
- --------------------------------------------------------------------------------
Restaurants and Lodging - 1.8%
Applebee's International, Inc. 7,100 $ 128,244
Choice Hotels, Inc.* 2,750 44,000
Four Seasons Hotels, Inc. 2,500 79,062
Friendly Ice Cream Corp.* 800 9,300
Landry's Seafood Restaurants, Inc. 10,000 240,000
-----------
$ 500,606
- --------------------------------------------------------------------------------
Stores - 7.8%
Gymboree Corp.* 21,200 $ 580,350
Home Depot, Inc. 4,750 279,656
Office Depot, Inc.* 9,900 236,981
Rite Aid Corp. 9,700 569,269
Viking Office Products, Inc.* 22,300 486,419
-----------
$ 2,152,675
- --------------------------------------------------------------------------------
Supermarkets - 1.5%
Meyer (Fred), Inc.* 11,260 $ 409,583
- --------------------------------------------------------------------------------
Telecommunications - 13.6%
Aerial Communications, Inc.* 40,500 $ 288,562
Ascend Communications, Inc.* 53,610 1,313,445
Aspect Telecommunications Corp.* 24,900 519,787
Cable Design Technologies Corp.* 28,500 1,107,937
Cisco Systems, Inc.* 1,500 83,625
Cox Communications, Inc.* 5,000 200,313
Nextlink Communications, Inc., "A"* 200 4,263
U.S. Cellular Corp.* 8,200 254,200
----------
$ 3,772,132
- --------------------------------------------------------------------------------
Total Stocks (Identified Cost, $24,026,101) $27,139,878
- --------------------------------------------------------------------------------
Short-Term Obligations - 1.3%
- --------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 1/02/98,
at Amortized Cost $ 350 $ 349,952
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $24,376,053) $27,489,830
Other Assets, Less Liabilities - 0.5% 150,958
- --------------------------------------------------------------------------------
Net Assets - 100.0% $27,640,788
- --------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------
December 31, 1997
- -----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $24,376,053) $27,489,830
Cash 7,046
Receivable for investments sold 183,679
Dividends receivable 11,787
Receivable from investment adviser 17,433
Deferred organization expenses 4,998
Other assets 6,964
-----------
Total assets $27,721,737
-----------
Liabilities:
Payable for investments purchased $ 66,273
Payable to affiliates -
Management fee 446
Administrative fee 10
Accrued expenses and other liabilities 14,220
-----------
Total liabilities $ 80,949
-----------
Net assets $27,640,788
===========
Net assets consist of:
Paid-in capital $24,112,594
Unrealized appreciation on investments 3,113,777
Accumulated undistributed net realized gain on investments 436,709
Accumulated net investment loss (22,292)
-----------
Total $27,640,788
===========
Shares of beneficial interest outstanding 2,150,331
=========
Net asset value, redemption price, and offering price per
share (net assets of $27,640,788 / 2,150,331 shares of
beneficial interest outstanding) $12.85
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended December 31, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 34,824
Interest 31,560
----------
Total investment income $ 66,384
----------
Expenses -
Management fee $ 81,855
Trustees' compensation 2,500
Shareholder servicing agent fee 1,039
Administrative fee 1,814
Registration fee 6,135
Custodian fee 4,908
Auditing fee 3,675
Printing 1,636
Legal fee 1,546
Amortization of organization 578
Miscellaneous 1,031
----------
Total expenses $ 106,717
Fees paid indirectly (608)
Preliminary reduction of expenses by investment adviser (17,433)
----------
Net expenses $ 88,676
----------
Net investment loss $ (22,292)
----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) on investment transactions 1,631,755
Change in unrealized appreciation on investments 973,248
----------
Net realized and unrealized gain on investments 2,605,003
----------
Increase in net assets from operations $2,582,711
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------
Six Months Ended
December 31, 1997 Year Ended
(Unaudited) June 30, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (22,292) $ (1,784)
Net realized gain on investments 1,631,755 349,787
Net unrealized gain on investments 973,248 2,091,781
------------ -----------
Increase in net assets from operations $ 2,582,711 $ 2,439,784
------------ -----------
Distributions declared to shareholders from net realized
gain on investments $ (1,324,355) $ (355,868)
------------ -----------
Net increase in net assets from Fund share transactions $ 1,375,529 $14,773,623
------------ -----------
Total increase in net assets $ 2,633,885 $16,857,540
Net assets:
At beginning of period 25,006,903 8,149,363
------------ -----------
At end of period (including accumulated net investment
loss of $22,292
and $0, respectively) $ 27,640,788 $25,006,903
============ ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended
December 31, 1997 Year Ended Period Ended
(Unaudited) June 30, 1997 June 30, 1996*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.25 $ 11.13 $ 10.00
------- ------- --------
Income from investment operations# -
Net investment loss(S) $ (0.01) $ (0.00)** $ (0.01)
Net realized and unrealized gain on investments 1.25 1.40 1.14
------- ------- --------
Total from investment operations $ 1.24 $ 1.40 $ 1.13
------- ------- --------
Less distributions declared to shareholders -
From net realized gain on investments $ (0.64) $ (0.28) $ --
------- ------- --------
Net asset value - end of period $ 12.85 $ 12.25 $ 11.13
======= ======= ========
Total return 10.34%++ 12.80% 11.30%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.65%+ 0.65% 0.70%+
Net investment loss (0.16)%+ (0.01)% (0.25)%+
Portfolio turnover 54% 136% 33%
Average commission rate $0.0580 $0.0527 $ 0.0505
Net assets at end of period (000 omitted) $27,641 $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 $(0.001).
+ 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 investment adviser voluntarily agreed to maintain the expenses of the Fund, exclusive of management fees, at no more
than 0.05% of average daily net assets effective May 3, 1996. During the period December 28, 1995, through May 2, 1996,
the Adviser agreed to maintain total expenses, subject to reimbursement by the Fund, at no more than 0.75% of the Fund's
average daily net assets. To the extent actual expenses were over these limitations, the net investment loss per share
and ratios would have been:
Net investment loss $(0.02) $(0.04) $(0.09)
Ratios (to average net assets):
Expenses## 0.78%+ 0.98% 2.59%+
Net investment loss (0.29)%+ (0.34)% (2.14)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Institutional Mid Cap Growth Fund (the Fund) is a diversified series of MFS
Institutional Trust (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies General - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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 is 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 and interest
payments received in additional securities are recorded on the ex- dividend or
ex-interest 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 that 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. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
(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 adviser has voluntarily agreed
to pay expenses of the Fund in order to maintain expenses, excluding management
fees, at no more than 0.05% of the Fund's average daily net assets. This is
reflected as a preliminary reduction of expenses in the Statement of Operations.
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 at the following annual percentages of the Fund's
average daily net assets, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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, MFS Fund Distributors, Inc. (MFD), 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 U.S. government securities and
short-term obligations, aggregated $15,101,684 and $13,833,242, 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 $24,376,053
-----------
Gross unrealized appreciation $ 4,891,972
Gross unrealized depreciation (1,778,195)
-----------
Net unrealized appreciation $ 3,113,777
===========
(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 December 31, 1997 Year Ended June 30, 1997
---------------------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 18,235 $ 250,000 1,284,350 $14,503,643
Shares issued to shareholders in
reinvestment of distributions 90,841 1,125,529 25,021 269,980
------- ---------- --------- -----------
Net increase 109,076 $1,375,529 1,309,371 $14,773,623
======= ========== ========= ===========
(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 six
months ended December 31, 1997, was $81.
- -------------------------------------------------------------------------------
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)1998 MFS Fund Distributors Inc., 500 Boylston Street, Boston, MA 02116-3741
IMD-3 2/98 .5M