<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) DECEMBER 31, 1999
[graphic omitted]
MFS(R) INSTITUTIONAL
GLOBAL FIXED INCOME FUND
<PAGE>
<TABLE>
MFS(R) INSTITUTIONAL GLOBAL FIXED INCOME FUND
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman and Chief Executive Officer, 500 Boylston Street
MFS Investment Management(R) Boston, MA 02116-3741
Nelson J. Darling, Jr.+ DISTRIBUTOR
Private investor and trustee MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow+ Boston, MA 02116-3741
Private investor and real estate consultant;
Vice Chairman, Capitol Entertainment INVESTOR SERVICE
Management Company (video franchise) MFS Service Center, Inc.
P.O. Box 2281
CHAIRMAN AND PRESIDENT Boston, MA 02107-9906
Jeffrey L. Shames*
For additional information,
PORTFOLIO MANAGER contact your financial consultant.
Stephen C. Bryant*
CUSTODIAN
TREASURER State Street Bank and Trust Company
W. Thomas London*
WORLD WIDE WEB
ASSISTANT TREASURERS www.mfs.com
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that
this new communication medium is changing forever the way we work, play, and
shop. One might also argue that investing in this new technology represents
the investment opportunity of a lifetime. The question for any investor is
whether and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well-informed and to trade at bargain prices. But
we believe the facts argue that, for most of us, professionally managed
investment portfolios purchased through a financial consultant will continue
to be one of the best products for long-term investing in this new millennium.
Why do we believe managed portfolios plus professional advice will continue to
define the best course of action for many investors? Let's look at some of the
characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up markets and down. And for many investors,
working with a financial consultant may be the best way to develop a plan.
Although the Internet abounds with calculators for developing all sorts of
investment plans, none has your consultant's high level of experience and an
understanding of your unique situation. And no calculator can counsel you
during a down market, when you may be tempted to abandon your goals and your
plan.
o DIVERSIFICATION: Few individual investors can afford to own a large number of
holdings, so poor performance of one company can potentially drag down their
entire personal portfolio. This is especially true when investing in volatile
new areas such as the Internet. On the other hand, a diversified,
professionally managed investment portfolio that owns dozens or even hundreds
of holdings is better positioned to survive a disappointment in one or several
investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost inevitable
part of investing. Few investment portfolios, of course, are going to be up
when the overall market is down. But we believe diversified, professionally
managed investment portfolios may be less likely to suffer the extreme
downturns experienced by a large number of individual holdings when the market
heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few managed portfolios even attempt. The downside is that the most
exciting investments are also likely to be the ones that give you sleepless
nights. The diversification and professional management of investment
portfolios help make them inherently less risky than individual stock picking,
and managed portfolios are available in a wide range of risk profiles.
We believe that now, more than ever, managed portfolios sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
January 15, 2000
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
Mutual funds are designed for long-term retirement investing; please see your
financial consultant for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended December 31, 1999, the Fund provided a total return
of 2.67% (including the reinvestment of any distributions), which compares to
a return of 3.13% for the Salomon Brothers World Government Bond Index (the
Salomon Index), an unmanaged index of complete universes of government bonds
with remaining maturities of at least five years. The Fund's return also
compare to a -0.89% return for the average global income fund tracked by
Lipper Analytical Services Inc., an independent firm that reports mutual fund
performance.
In the second half of 1999, most of the bond markets around the globe
continued to deteriorate out of concern that the growing global economy would
spark inflationary pressures. In particular, market observers were concerned
about an increase in personal consumption. Two of the most influential central
banks, the U.S. Federal Reserve Board (the Fed) and the European Central Bank,
reversed course by tightening monetary policy in November as a pre-emptive
move against inflation. Most other central banks followed suit. One exception
was Japan, where the economy was only in the early stages of recovery.
Over the past year, the Fed tightened three times, neutralizing the three rate
cuts it had implemented in late 1998 during the emerging market crisis.
Similarly, the European Central Bank's November increase brought its key
lending rate back to the same level where it started the year. The European
Central Bank did so after having lowered rates to stimulate growth in the
first quarter of 1999. Meanwhile, Japanese monetary policy was very stable
during the year, with the overnight discount rate unchanged at 0.50%.
During the second half of 1999, all bond markets in the Salomon Index -- with
the exception of Japan's -- registered negative returns in local currency
terms. The Japanese bond market, which represents about 25% of the Salomon
Index, and the Japanese yen were very strong. A weak euro -- its value
relative to the U.S. dollar fell about 20% in 1999 -- hurt returns in most
European bond markets, and detracted from the return of the Salomon Index,
about 40% of which is made up of bonds from countries within the euro bloc.
Similarly, exposure to weakening currencies hampered the portfolio's returns,
with the euro being the main culprit. Higher interest rates and corresponding
declining bond prices also ate into returns. Nevertheless, we were able to add
value relative to the index by keeping the portfolio's duration (a measure of
its sensitivity to changes in interest rates) shorter than that of the index,
making it less susceptible than the index to the negative price influence of
higher interest rates. In addition, we helped add value through appropriate
allocation of assets to particular bond blocs (euro, dollar, etc.), and from
diversification into the top-performing Japanese market. Another help to our
performance was individual bond selection in the United Kingdom and Greece.
The latter was the only country to lower rates in the fourth quarter of 1999,
in preparation for its entry into the European monetary union.
As the new millennium begins, caution continues to be warranted for most bond
markets. We expect both the Federal Reserve and the European Central Bank to
further tighten monetary policy with most other Central Banks following.
Looking more closely at the euro, this beleaguered currency should be better
supported this year as Western European markets become more economically
liberated. We anticipate that the U.S. dollar will strengthen versus the yen
and that the euro will strengthen versus the U.S. dollar and the yen. As the
global economy continues to grow with modestly higher interest rates
preventing inflation, the higher global real rates generated by tight monetary
policies may eventually equate to more attractive bond markets.
Respectfully,
/s/ Stephen C. Bryant
Stephen C. Bryant
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
Stephen C. Bryant is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Institutional Global Fixed Income Fund, MFS(R)
Intermediate Income Fund, and the Global Governments Series offered through
MFS(R)/Sun Life annuity products. He also manages MFS(R) Government Markets
Income Trust and MFS(R) Intermediate Income Trust, two closed-end funds.
He joined MFS in 1987 as Assistant Vice President. He was named Vice President
in 1989, portfolio manager in 1992, and Senior Vice President in 1993. Mr.
Bryant is a graduate of Wesleyan University.
All portfolio managers at MFS Investment Management(R) are supported by an
investment staff of over 100 professionals utilizing MFS Original Research(R), a
global, company- oriented, bottom-up process of selecting securities.
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
FUND FACTS
Objective: Seeks income and capital appreciation.
Commencement of investment operations: September 30, 1992
Size: $24.1 million net assets as of December 31, 1999
PERFORMANCE SUMMARY
Because mutual funds 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. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. The minimum
investment is generally $3 million. Shares of the Fund are purchased at net
asset value. (See Notes to Performance Summary.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH DECEMBER 31, 1999
<CAPTION>
6 Months 1 Year 3 Years 5 Years Life*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +2.67% -4.27% +10.54% +33.76% +42.49%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- -4.27% + 3.40% + 5.99% + 5.00%
- ---------------------------------------------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, September 30, 1992, through December 31, 1999.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
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.
MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS. Performance results reflect any applicable
expense subsidies and waivers, without which the results would have been less
favorable. Subsidies and waivers may be rescinded at any time. See the
prospectus for details.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility. See the
prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - December 31, 1999
Bonds - 83.0%
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 37.2%
Computer Software - Services - 1.0%
Unisystem Corp., 7.875s, 2008 $ 250 $ 241,875
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 0.8%
FNMA, 1.75s, 2008 JPY 20,000 $ 199,941
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 2.4%
Ford Motor Credit Co., 6.7s, 2004 $ 300 $ 293,625
Toyota Motor Credit Corp., 3.45s, 2004 30,000 292,719
-----------
$ 586,344
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 33.0%
U.S. Treasury Notes, 6s, 2004 $ 3,765 $ 3,706,153
U.S. Treasury Notes, 7.875s, 2004 565 597,397
U.S. Treasury Notes, 5.875s, 2005 3,430 3,329,776
U.S. Treasury Notes, 3.875s, 2009 307 297,009
-----------
$ 7,930,335
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 8,958,495
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 45.8%
Canada - 1.2%
Government of Canada, 5s, 2004 CAD 459 $ 301,818
- -----------------------------------------------------------------------------------------------------
Denmark - 2.3%
Kingdom of Denmark, 7s, 2007 DKK 3,673 $ 543,295
- -----------------------------------------------------------------------------------------------------
France - 4.8%
Republic of France, 3.5s, 2004 EUR 650 $ 619,920
Republic of France, 4s, 2009 598 535,999
-----------
$ 1,155,919
- -----------------------------------------------------------------------------------------------------
Germany - 11.1%
Germany Federal Republic, 4.75s, 2008 EUR 1,400 $ 1,352,838
Germany Federal Republic, 4.5s, 2009 1,396 1,316,636
-----------
$ 2,669,474
- -----------------------------------------------------------------------------------------------------
Greece - 4.4%
Hellenic Republic, 8.9s, 2003 GRD 65,000 $ 211,937
Hellenic Republic, 8.7s, 2005 40,000 133,903
Hellenic Republic, 8.6s, 2008 204,000 704,393
-----------
$ 1,050,233
- -----------------------------------------------------------------------------------------------------
Italy - 5.9%
Republic of Italy, 3.25s, 2004 EUR 650 $ 609,774
Republic of Italy, 5s, 2008 824 803,212
-----------
$ 1,412,986
- -----------------------------------------------------------------------------------------------------
Japan - 4.9%
International Bank Recon & Dev, 2s, 2008 (Banks and
Credit Cos.) JPY 115,000 $ 1,174,985
- -----------------------------------------------------------------------------------------------------
Sweden - 3.1%
Kingdom of Sweden, 13s, 2001 SEK 800 $ 104,758
Kingdom of Sweden, 6s, 2005 4,300 517,772
Kingdom of Sweden, 9s, 2009 900 130,418
-----------
$ 752,948
- -----------------------------------------------------------------------------------------------------
United Kingdom - 8.1%
United Kingdom Treasury, 6.5s, 2003 GBP 793 $ 1,291,581
United Kingdom Treasury, 6.75s, 2004 400 663,759
-----------
$ 1,955,340
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $11,016,998
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $20,688,005) $19,975,493
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 10.4%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00, at
Amortized Cost $ 2,500 $ 2,499,791
- -----------------------------------------------------------------------------------------------------
Call Options Purchased - 0.4%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -----------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.4518 CAD 1,031 $ 15,707
Japanese Govt Bonds/February/130.2 JPY 80,000 23,410
Japanese Govt Bonds/February/128 90,000 43,687
Swiss Francs/Euro/February/1.59 CHF 2,309 771
- -----------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $55,191) $ 83,575
- -----------------------------------------------------------------------------------------------------
Put Options Purchased
- -----------------------------------------------------------------------------------------------------
Euro/February/1.05 $ 1,136 $ 4,301
Japanese Yen/January/110 JPY 2,397 700
Japanese Yen/February/109.75 109,299 874
- -----------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $13,629) $ 5,875
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $23,256,616) $22,564,734
- -----------------------------------------------------------------------------------------------------
Call Options Written
- -----------------------------------------------------------------------------------------------------
Australian Dollars/April/.625 $ 837 $ (4,226)
Canadian Dollars/September/1.40 CAD 994 (5,382)
- -----------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $14,616) $ (9,608)
- -----------------------------------------------------------------------------------------------------
Put Options Written
- -----------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.55 CAD 994 $ (963)
Japanese Govt Bonds/February/130.20 JPY 80,000 (3,054)
Japanese Govt Bonds/February/128 90,000 (1,409)
- -----------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $43,793) $ (5,426)
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 6.2% 1,509,163
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $24,058,863
- -----------------------------------------------------------------------------------------------------
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 GRD = Greek Drachma
CAD = Canadian Dollars JPY = Japanese Yen
CHF = Swiss Francs NZD = New Zealand Dollars
DKK = Danish Kroner PLN = Polish Zloty
EUR = Euro SEK = Swedish Krona
GBP = British Pounds
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $23,256,616) $22,564,734
Cash 1,105,798
Net receivable for forward foreign currency exchange contracts to sell 22,235
Net receivable for forward foreign currency exchange contracts to
purchase 45,747
Interest receivable 359,685
Other assets 408
-----------
Total assets $24,098,607
-----------
Liabilities:
Net payable for forward foreign currency exchange contracts either
closed or involved in master netting agreements $ 24,278
Written options outstanding, at value (premiums received, $58,409) 15,034
Payable to affiliates -
Management fee 427
Shareholder servicing agent fee 5
-----------
Total liabilities $ 39,744
-----------
Net assets $24,058,863
===========
Net assets consist of:
Paid-in capital $28,679,403
Unrealized depreciation on investments and translation of assets and
liabilities in foreign currencies (608,627)
Accumulated net realized loss on investments and foreign currency
transactions (4,490,321)
Accumulated undistributed net investment income 478,408
-----------
Total $24,058,863
===========
Shares of beneficial interest outstanding 2,763,045
=========
Net asset value, redemption price, and offering price per share
(net assets / shares of beneficial interest outstanding) $8.71
=====
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Interest income $ 453,403
---------
Expenses -
Management fee $ 52,630
Trustees' compensation 3,300
Shareholder servicing agent fee 607
Administrative fee 830
Auditing fees 18,500
Custodian fee 8,249
Registration fees 4,665
Printing 2,843
Legal fees 699
Miscellaneous 424
---------
Total expenses $ 92,747
Fees paid indirectly (301)
Reduction of expenses by investment adviser (39,816)
---------
Net expenses $ 52,630
---------
Net investment income $ 400,773
---------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(624,094)
Written option transactions (49,358)
Foreign currency transactions 337,551
---------
Net realized loss on investments and foreign currency transactions $(335,901)
---------
Change in unrealized appreciation -
Investments $ 786
Written options 93,243
Translation of assets and liabilities in foreign currencies 119,720
---------
Net unrealized gain on investments and foreign currency translation $ 213,749
---------
Net realized and unrealized loss on investments and foreign currency $(122,152)
---------
Increase in net assets from operations $ 278,621
=========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 400,773 $ 904,592
Net realized gain (loss) on investments and foreign
currency transactions (335,901) 1,662,929
Net unrealized gain (loss) on investments and foreign
currency translation 213,749 (490,997)
----------- ------------
Increase in net assets from operations $ 278,621 $ 2,076,524
----------- ------------
Distributions declared to shareholders from net
investment income
$ (545,516) $ --
----------- ------------
Net increase (decrease) in net assets from Fund
share transactions $ 9,419,130 $(13,185,973)
----------- ------------
Total increase (decrease) in net assets $ 9,152,235 $(11,109,449)
Net assets:
At beginning of period 14,906,628 26,016,077
----------- ------------
At end of period (including accumulated undistributed
net investment income of $478,408 and $623,151,
respectively) $24,058,863 $ 14,906,628
=========== ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
SIX MONTHS ENDED ------------------------------------------------------------------
DECEMBER 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 8.69 $ 8.18 $ 9.07 $ 9.28 $10.13 $ 9.64
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.43 $ 0.48 $ 0.58 $ 0.64 $ 0.65
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.01* 0.08 (0.16) (0.25) (0.48) 0.70
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.22 $ 0.51 $ 0.32 $ 0.33 $ 0.16 $ 1.35
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.20) $ -- $(1.10) $(0.54) $(0.48) $(0.23)
From net realized gain on
investments and foreign
currency transactions -- -- -- -- (0.31) (0.63)
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- -- (0.22) --
From paid-in capital -- -- (0.11) -- -- --
------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.20) $ -- $(1.21) $(0.54) $(1.01) $(0.86)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 8.71 $ 8.69 $ 8.18 $ 9.07 $ 9.28 $10.13
====== ====== ====== ====== ====== ======
Total return 2.67%++ 6.11% 3.70% 3.40% 1.51% 15.10%
Ratios (to average net assets)
/Supplemental data(S):
Expenses## 0.65%+ 0.67% 0.65% 0.65% 0.65% 0.72%
Net investment income 4.94%+ 4.86% 5.51% 6.09% 6.52% 6.66%
Portfolio turnover 76% 275% 413% 365% 425% 279%
Net assets at end of period
(000 Omitted) $24,059 $14,907 $26,016 $53,517 $62,807 $76,078
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating expenses, exclusive of
management fees. To the extent actual expenses were over this limitation, the net investment income per share and the ratios
would have been:
Net investment income $ 0.19 $ 0.39 $ 0.45 $ 0.55 $ 0.61 $ 0.61
Ratios (to average net assets):
Expenses## 1.14%+ 1.11% 1.01% 0.97% 0.95% 1.14%
Net investment income 4.45%+ 4.42% 5.17% 5.78% 6.22% 6.23%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
* The per share data are not in accord with the net realized and unrealized loss for the period because of the timing of sales
of Fund shares and the amount of the per share realized and unrealized gains and losses at such time.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Institutional Global Fixed Income Fund (the Fund), is a nondiversified
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. The Fund
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues and forward
contracts are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data,
without exclusive reliance upon exchange or over-the-counter prices. Short-
term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the foreign currency
and translated into U.S. dollars at the closing daily exchange rate. Options
and options on futures contracts listed on commodities exchanges are reported
at market value using closing settlement prices. Over-the-counter options on
securities are valued by brokers. Over-the-counter currency options are valued
through the use of a pricing model which takes into account foreign currency
exchange spot and forward rates, implied volatility, and short-term repurchase
rates. Securities for which there are no such quotations or valuations are
valued in good faith, at fair value, by 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.
Written Options - The Fund may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is
subsequently adjusted to the current value of the options contract. When a
written option expires, the Fund realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written 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 securities 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 to the extent of the premium received.
Written options may also be used as part of an income producing strategy
reflecting the view of the Fund's management on the direction of interest
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 into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund may 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. The Fund 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 as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Interest payments received in additional
securities are recorded on 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 month end 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.
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 be reported in the financial statements as distributions from paid-in
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 net realized gains.
At June 30, 1999, the Fund, for federal income tax purposes, had a capital
loss carryforward of $3,959,876 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on June 30, 2004.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of the Funds average daily net assets. The investment adviser has voluntarily
agreed to pay the Fund's operating expenses exclusive of management fees such
that the Fund's aggregate expenses do not exceed 0.00% of its 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 - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, 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:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 Fund's average daily net assets at an 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 $ 6,240,136 $ 3,625,354
=========== ===========
Investments (non-U.S. government securities) $12,263,206 $ 6,483,608
=========== ===========
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $23,296,543
-----------
Gross unrealized depreciation $ (819,069)
Gross unrealized appreciation 87,260
-----------
Net unrealized depreciation $ (731,809)
===========
(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. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 YEAR ENDED JUNE 30, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,207,504 $ 10,875,000 -- $ --
Shares issued to shareholders in
reinvestment of distributions 62,472 544,130 -- --
Shares reacquired (221,976) (2,000,000) (1,466,943) (13,185,973)
------------ ------------ ------------ ------------
Net increase (decrease) 1,048,000 $ 9,419,130 (1,466,943) $(13,185,973)
============ ============ ============ ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 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, 1999, was $51. The Fund had
no borrowings during the period.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options and forward foreign currency
exchange contracts. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
<TABLE>
Written Option Transactions
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of period 4 $ 59,935
Options written 13 117,018
Options terminated in closing transactions (10) (94,451)
Options expired (2) (24,093)
--------
Outstanding, end of period $ 58,409
========
</TABLE>
At December 31, 1999, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<TABLE>
Forward Foreign Currency Exchange Contracts
<CAPTION>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 3/15/00 AUD 59,512 $ 37,960 $ 38,937 $ (977)
3/15/00 DKK 4,281,233 590,480 582,756 7,724
2/17/00 EUR 2,745,263 2,796,805 2,779,051 17,754
3/15/00 GBP 417,409 678,353 673,778 4,575
3/15/00 GRD 223,396,444 679,533 678,189 1,344
3/15/00 JPY 179,152,701 1,765,609 1,773,353 (7,744)
3/15/00 NZD 182,463 93,366 95,189 (1,823)
3/15/00 SEK 4,239,248 502,876 501,494 1,382
----------- ----------- --------
$ 7,144,982 $ 7,122,747 $ 22,235
=========== =========== ========
Purchases 3/15/00 AUD 812,907 $ 522,150 $ 531,860 $ 9,710
3/15/00 CAD 693,917 470,000 479,840 9,840
3/15/00 CHF 551,451 358,202 349,293 (8,909)
3/15/00 EUR 4,317,407 4,392,198 4,370,816 (21,382)
3/15/00 GBP 347,612 564,584 561,112 (3,472)
3/15/00 JPY 594,913,561 5,830,977 5,888,786 57,809
2/17/00 PLN 680,504 160,000 162,510 2,510
3/15/00 SEK 1,029,950 122,200 121,841 (359)
----------- ----------- --------
$12,420,311 $12,466,058 $ 45,747
=========== =========== ========
</TABLE>
At December 31, 1999, forward foreign currency purchases and sales under
master netting agreements excluded above amounted to a net payable of $35,561
with Merrill Lynch and a net receivable of $10,431 with Deutsche Bank and $852
with C.S. First Boston.
At December 31, 1999, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS fund shareholders, retirement plan
participants, or institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at WWW.MFS.COM, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
(C) 2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
IGF-3 02/00 200
