<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
SEMIANNUAL REPORT
DECEMBER 31, 1999
[Graphic Omitted]
MFS(R) INSTITUTIONAL
CORE EQUITY FUND
<PAGE>
<TABLE>
MFS(R) INSTITUTIONAL CORE EQUITY 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.
John D. Laupheimer, Jr.*
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
</TABLE>
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<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 investment 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 3.35%, including the reinvestment of any distributions. During the same
period, the average growth and income fund tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance,
returned 2.35%. The Fund's return also compares to a 7.69% return for the
Standard & Poor's 500 Composite Index (the S&P 500). The S&P 500 is a popular,
unmanaged index of common stock total return performance.
The Fund lagged the S&P 500 primarily due to its underweighting in technology
stocks, which drove the narrow strength of the market. If we look at the
performance of the S&P 500, the top 25 performers in technology and
telecommunications stocks accounted for a majority of its total return over
the past year. In an extremely narrow, momentum-focused market like we've
experienced during the period, it is very difficult for a diversified growth
and income portfolio that has had a lower risk profile than its index to
outperform its benchmark over the short term. Also worth mentioning is the
fact that the average yield on the S&P 500 is at a historic low. In the
January 4, 2000, edition of The New York Times, a front page article noted
"for the first time in recent history -- and probably the first time since the
depression -- a quarter of the value of the S&P 500 came from companies that
do not pay dividends. Twenty years ago, only 2% of the value of the index came
from such companies." Today, companies paying and even increasing dividends
haven't been able to keep pace with stock returns. A good example of this is
General Electric. Although management has raised the dividend in each of the
last three years, the yield on that stock has gone from 2.10% as of the end of
1996 to almost half that, or 1.06%, at the end of 1999 as a result of the
appreciation in the stock price.
The Fund remained underweighted in technology stocks at about 24% of its net
assets, versus the S&P 500, which had approximately 27% of its holdings in
technology at the end of the period. While I increased the Fund's exposure to
technology stocks during the period, I did not abandon my focus on blue-chip
companies with strong, long-term fundamentals and reasonable valuations. As a
result, I decided it was prudent to gradually increase the Fund's weighting in
technology and telecommunications relative to the index, while at the same time
keeping a close eye on valuations and the fundamental business outlooks for
these companies.
Some of the technology names that met my investment criteria and provided a
strong boost to performance were companies such as Intel, Oracle, Cisco, and
Motorola. In telecommunications, the Fund benefited from a major position in
Mannesmann, the German wireless telecommunications provider. Sprint and Bell
Atlantic also produced strong results due to the huge growth in Internet usage
and demand for data and voice services. These are companies with solid track
records that we could actually do balance sheet and income statement analysis
on, and I believe they proved to have attractive long-term business models.
In addition to increasing the Fund's holdings in blue-chip technology names
that have displayed attractive long-term business opportunities relative to
their valuations, I've been working on other ways to try to take advantage of
Internet mania without exposing the Fund to all of or much of the risks and
volatility of traditional "dot.com" companies. I was able to capitalize on the
rapid acceleration of advertising spending by Internet companies through our
media holdings such as Tribune, New York Times, and General Electric, which
owns NBC.
While investors remained focused on technology and telecommunications stocks, I
managed to locate what I believe are strong performers from a wide range of
industries, including energy, industrial goods and services, consumer staples,
retailing, and financial services. Stocks such as BP Amoco, United Technologies,
Procter & Gamble, Wal-Mart, and American International Group produced solid
gains for the Fund. The success of these stocks and the broadly diversified
structure of the Fund highlight precisely what the Fund is trying to accomplish
- -- to provide growth of capital, with less risk or price volatility than the S&P
500.
On the negative side, there were a few holdings that detracted from the Fund's
performance, including Kroger, Safeway, Service Corp., and Xerox. Although
supermarket operators Kroger and Safeway struggled in this narrow market, I
maintained positions because I believe these companies possess strong business
prospects and favorable growth and earnings outlooks. I sold off my positions
in Service Corp. and Xerox because I felt the long-term outlooks for these
companies deteriorated. Service Corp. looked to me like it had the potential
to continue its run of accelerating growth, but it ran into financial problems
due to rapid expansion and hurt performance. Xerox looked like a classic
turnaround story, but as competition increased, its business plan stumbled and
investors ran for the exits.
Looking forward, I'll continue to look for opportunities in areas such as
pharmaceutical companies, and drugstore operators such as CVS, which have been
beaten down due to concerns over Medicare reform and potential government
price controls. While the risks remain high in this area during an election
year, I believe, many pharmaceutical companies and drugstore chains
demonstrate promising long-term growth prospects, reliable cash flows and
compelling valuations.
Although it was a difficult period for the Fund, I believe my well-balanced
exposure to market leaders in technology, telecommunications, financial
services, retailing, and industrial goods and services provided favorable
growth prospects. If market strength continues to broaden as I anticipate, I
believe the portfolio is well positioned to take advantage of this
environment.
Respectfully,
/s/ John D. Laupheimer, Jr.
John D. Laupheimer, Jr.
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.
<PAGE>
PORTFOLIO MANAGER'S PROFILE
John D. Laupheimer, Jr., is Senior Vice President and Director of Equity
Research of MFS Investment Management(R). He is also lead portfolio manager of
Massachusetts Investors Trust, America's oldest
mutual fund.
He also manages MFS(R) Institutional Core Equity Fund, the Massachusetts
Investors Trust Series offered through MFS(R)/Sun Life annuity products, and
MFS(R) Growth with Income Series (part of MFS(R) Variable Insurance Trust
(SM)). Mr. Laupheimer joined the MFS Research Department in 1981 as a research
analyst. He was named Investment Officer in 1983, Assistant Vice President in
1984, Vice President in 1986, portfolio manager in 1987, Senior Vice President
in 1995, and Director of Equity Research in 1999. Mr. Laupheimer is a graduate
of Boston University and the Sloan School of Management of the Massachusetts
Institute of Technology. He is a Chartered Financial Analyst and a member of
The Boston Security Analysts Society, Inc.
All equity portfolio managers began their careers at MFS Investment
Management(R) as research analysts. Our portfolio managers 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 long-term growth of capital generally consistent with that of
a diversified large-cap portfolio and income equal to approximately 90% of the
dividend yield of the S&P 500.
Commencement of investment operations: December 31, 1998
Size: $12.5 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.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH DECEMBER 31, 1999
6 Months 1 Year Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +3.35% +10.58% +10.58%
- -------------------------------------------------------------------------------
Average Annual Total Return -- % +10.58% +10.58%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
December 31, 1998, through December 31, 1999.
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.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - December 31, 1999
<TABLE>
<CAPTION>
Stocks - 94.4%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 84.6%
Aerospace - 3.7%
General Dynamics Corp. 600 $ 31,650
Honeywell International, Inc. 1,019 58,784
TRW, Inc. 1,080 56,092
United Technologies Corp. 4,796 311,740
-----------
$ 458,266
- -------------------------------------------------------------------------------------------------------
Automotive - 0.4%
Federal-Mogul Corp. 664 $ 13,363
Ford Motor Co. 758 40,506
-----------
$ 53,869
- -------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 4.8%
Bank America Corp. 2,413 $ 121,102
Bank One Corp. 2,300 73,744
Northern Trust Corp. 1,444 76,532
Providian Financial Corp. 620 56,459
U.S. Bancorp 3,997 95,178
Wells Fargo Co. 4,477 181,039
-----------
$ 604,054
- -------------------------------------------------------------------------------------------------------
Biotechnology - 0.6%
Guidant Corp.* 1,688 $ 79,336
- -------------------------------------------------------------------------------------------------------
Business Machines - 4.0%
Hewlett-Packard Co. 1,515 $ 172,615
International Business Machines Corp. 1,180 127,440
Sun Microsystems, Inc.* 2,596 201,028
-----------
$ 501,083
- -------------------------------------------------------------------------------------------------------
Business Services - 2.6%
Computer Sciences Corp.* 1,443 $ 136,544
First Data Corp. 3,338 164,605
United Parcel Service, Inc. 270 18,630
-----------
$ 319,779
- -------------------------------------------------------------------------------------------------------
Cellular Telephones - 0.6%
Sprint Corp. (PCS Group)* 749 $ 76,772
- -------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 4.5%
Microsoft Corp.* 4,831 $ 564,019
- -------------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.9%
Computer Associates International, Inc. 1,727 $ 120,782
Oracle Corp.* 2,108 236,228
-----------
$ 357,010
- -------------------------------------------------------------------------------------------------------
Conglomerates - 0.4%
Tyco International Ltd. 1,366 $ 53,103
- -------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.0%
Colgate-Palmolive Co. 1,548 $ 100,620
Procter & Gamble Co. 1,417 155,250
-----------
$ 255,870
- -------------------------------------------------------------------------------------------------------
Electrical Equipment - 5.1%
Emerson Electric Co. 1,834 $ 105,226
General Electric Co. 3,431 530,947
-----------
$ 636,173
- -------------------------------------------------------------------------------------------------------
Electronics - 2.6%
Agilent Technologies, Inc.* 150 $ 11,597
Intel Corp. 3,820 314,434
-----------
$ 326,031
- -------------------------------------------------------------------------------------------------------
Entertainment - 1.6%
Carnival Corp. 660 $ 31,556
Time Warner, Inc. 2,381 172,474
-----------
$ 204,030
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 3.3%
American Express Co. 574 $ 95,427
Citigroup, Inc. 1,105 61,397
Federal Home Loan Mortgage Corp. 1,404 66,076
State Street Corp. 2,558 186,894
-----------
$ 409,794
- -------------------------------------------------------------------------------------------------------
Financial Services - 0.5%
AXA Financial, Inc. 1,696 $ 57,452
- -------------------------------------------------------------------------------------------------------
Food and Beverage Products - 1.3%
Anheuser-Busch Cos., Inc. 800 $ 56,700
Nabisco Holdings Corp., "A" 1,280 40,480
Quaker Oats Co. 990 64,969
-----------
$ 162,149
- -------------------------------------------------------------------------------------------------------
Insurance - 3.0%
American International Group, Inc. 1,597 $ 172,676
Hartford Financial Services Group, Inc. 2,627 124,454
Lincoln National Corp. 1,836 73,440
-----------
$ 370,570
- -------------------------------------------------------------------------------------------------------
Machinery - 0.5%
Deere & Co., Inc. 1,390 $ 60,291
- -------------------------------------------------------------------------------------------------------
Medical and Health Products - 3.5%
American Home Products Corp. 1,772 $ 69,883
Bausch & Lomb, Inc. 840 57,487
Bristol-Myers Squibb Co. 1,775 113,933
Pfizer, Inc. 3,405 110,450
Pharmacia & Upjohn, Inc. 1,917 86,265
-----------
$ 438,018
- -------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.9%
Medtronic, Inc. 5,568 $ 202,884
United Healthcare Corp. 539 28,634
-----------
$ 231,518
- -------------------------------------------------------------------------------------------------------
Oils - 3.6%
Coastal Corp. 1,930 $ 68,394
Conoco, Inc. 2,230 55,471
Exxon Mobil Corp. 3,425 275,927
Unocal Corp. 1,600 53,700
-----------
$ 453,492
- -------------------------------------------------------------------------------------------------------
Printing and Publishing - 4.2%
Gannett Co., Inc. 1,689 $ 137,759
New York Times Co. 3,456 169,776
Tribune Co. 3,934 216,616
-----------
$ 524,151
- -------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.4%
McDonald's Corp. 1,292 $ 52,084
- -------------------------------------------------------------------------------------------------------
Stores - 6.0%
CVS Corp. 2,090 $ 83,469
Dayton Hudson Corp. 1,808 132,775
Home Depot, Inc. 2,097 143,776
TJX Cos., Inc. 4,601 94,033
Wal-Mart Stores, Inc. 4,304 297,514
-----------
$ 751,567
- -------------------------------------------------------------------------------------------------------
Supermarkets - 2.0%
Kroger Co.* 4,048 $ 76,406
Safeway, Inc.* 4,821 171,447
-----------
$ 247,853
- -------------------------------------------------------------------------------------------------------
Technology - 0.6%
National Semiconductor Corp.* 1,730 $ 74,066
- -------------------------------------------------------------------------------------------------------
Telecommunications - 15.8%
Alltel Corp. 677 $ 55,979
AT&T Corp. 2,100 106,575
Bell Atlantic Corp. 3,545 218,239
BroadWing, Inc.* 2,100 77,438
Cisco Systems, Inc.* 2,422 259,457
Corning, Inc. 1,470 189,538
General Instrument Corp.* 700 59,500
Lucent Technologies, Inc. 1,720 128,678
MCI WorldCom, Inc.* 3,448 182,959
Motorola, Inc. 1,791 263,725
Nortel Networks Corp. 1,760 177,760
SBC Communications, Inc. 3,323 161,996
Sprint Corp. 1,360 91,545
-----------
$ 1,973,389
- -------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.2%
Duke Energy Corp. 1,570 $ 78,696
FirstEnergy Corp. 1,586 35,983
Peco Energy Co. 2,215 76,971
Texas Utilities Co. 2,365 84,105
-----------
$ 275,755
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $10,571,544
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 9.8%
Canada - 0.4%
Canadian National Railway Co. (Railroads) 1,726 $ 45,415
- -------------------------------------------------------------------------------------------------------
Finland - 0.8%
Nokia Corp., ADR (Telecommunications) 500 $ 95,000
- -------------------------------------------------------------------------------------------------------
France - 0.5%
AXA (Insurance) 470 $ 65,510
- -------------------------------------------------------------------------------------------------------
Germany - 1.7%
Mannesmann AG (Conglomerate) 873 $ 210,568
- -------------------------------------------------------------------------------------------------------
Ireland - 0.5%
Bank of Ireland (Banks and Credit Cos.)* 7,300 $ 58,079
- -------------------------------------------------------------------------------------------------------
Japan - 0.8%
Fast Retailing Co. (Retail) 100 $ 40,713
Hitachi Ltd. (Electronics) 4,000 64,200
-----------
$ 104,913
- -------------------------------------------------------------------------------------------------------
Netherlands - 1.6%
Akzo Nobel N.V. (Chemicals) 1,400 $ 70,215
KPN N.V. (Telecommunications)* 800 78,070
STMicroelectronics N.V. (Electronics)* 370 56,032
-----------
$ 204,317
- -------------------------------------------------------------------------------------------------------
Switzerland - 0.4%
Nestle S.A. (Food and Beverage Products) 28 $ 51,314
- -------------------------------------------------------------------------------------------------------
United Kingdom - 3.1%
BP Amoco PLC, ADR (Oils) 4,458 $ 264,415
Reuters Group PLC, ADR (Business Services) 829 66,994
Zeneca Group PLC (Medical and Health Products) 1,460 60,615
-----------
$ 392,024
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 1,227,140
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $10,569,878) $11,798,684
- -------------------------------------------------------------------------------------------------------
Convertible Bonds - 0.5%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------------
Financial Services - 0.2%
Bell Atlantic Financial Services, Inc., 4.25s, 2005## $ 25 $ 30,750
- -------------------------------------------------------------------------------------------------------
Telecommunications - 0.3%
NTL, Inc., 5.75s, 2009## $ 30 $ 32,250
- -------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $58,323) $ 63,000
- -------------------------------------------------------------------------------------------------------
Short-Term Obligation - 4.8%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00, at
Amortized Cost $ 595 $ 594,950
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $11,223,151) $12,456,634
Other Assets, Less Liabilities - 0.3% 34,273
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $12,490,907
- -------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC rule 144A restriction.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $11,223,151) $12,456,634
Investments of cash collateral for securities loaned, at value
(identified cost, $975,187) 975,187
Cash 1,142
Interest and dividends receivable 9,180
Receivable from investment adviser 37,764
-----------
Total assets $13,479,907
-----------
Liabilities:
Collateral for securities loaned, at value $ 975,187
Payable to affiliates -
Management fee 201
Shareholder servicing agent fee 1
Accrued expenses and other liabilities 13,611
-----------
Total liabilities $ 989,000
-----------
Net assets $12,490,907
===========
Net assets consist of:
Paid-in capital $11,764,109
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 1,233,481
Accumulated net realized loss on investments and foreign
currency transactions (515,208)
Accumulated undistributed net investment income 8,525
-----------
Total $12,490,907
===========
Shares of beneficial interest outstanding 1,135,879
=========
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $11.00
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 13,974
Dividends 63,808
Foreign taxes withheld (485)
-----------
Total investment income $ 77,297
-----------
Expenses -
Management fee $ 36,531
Trustees' compensation 3,100
Shareholder servicing agent fee 452
Administrative fee 661
Custodian fee 4,579
Printing 5,537
Auditing fee 14,500
Legal fees 623
Registration fees 11,753
Miscellaneous 8
-----------
Total expenses $ 77,744
Fees paid indirectly (405)
Reduction of expenses by investment adviser (37,764)
-----------
Net expenses $ 39,575
-----------
Net investment income $ 37,722
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (480,146)
Foreign currency transactions (760)
-----------
Net realized loss on investments and foreign currency
transactions $ (480,906)
-----------
Change in unrealized appreciation -
Investments $ 802,185
Translation of assets and liabilities in foreign currency 273
-----------
Net unrealized gain on investments and foreign currency
translation $ 802,458
-----------
Net realized and unrealized gain on investments and
foreign currency $ 321,552
-----------
Increase in net assets from operations $ 359,274
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
DECEMBER 31, 1999 JUNE 30, 1999*
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 37,722 $ 26,681
Net realized loss on investments and foreign
currency transactions (480,906) (25,781)
Net unrealized gain on investments and foreign
currency translation 802,458 431,023
----------- -----------
Increase in net assets from operations $ 359,274 $ 431,923
----------- -----------
Distributions declared to shareholders -
From net investment income $ (55,768) --
In excess of realized gain on investments and foreign
currency transactions (8,631) --
----------- -----------
Total distributions declared to shareholders $ (64,399) --
----------- -----------
Net increase (decrease) in net assets from Fund share
transactions $ (584,687) $12,348,796
----------- -----------
Total increase (decrease) in net assets $ (289,812) $12,780,719
Net assets:
At beginning of period $12,780,719 --
----------- -----------
At end of period (including accumulated undistributed net
investment income of $8,525 and $26,571, respectively) $12,490,907 $12,780,719
=========== ===========
* For the period from the commencement of the Fund's investment operations, December 31, 1998, through
June 30, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- -------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1999 JUNE 30, 1999*
(UNAUDITED)
- -------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 10.70 $ 10.00
------- -------
Income from investment operations# -
Net investment income(S) $ 0.03 $ 0.04
Net realized and unrealized gain on
investments and foreign currency
transactions 0.33 0.66
------- -------
Total from investment operations $ 0.36 $ 0.70
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.05) $ --
In excess of realized gain on investments
and foreign currency transactions (0.01) --
------- -------
Total distributions declared to
shareholders $ (0.06) $ --
------- -------
Net asset value - end of period $ 11.00 $ 10.70
======= =======
Total return 3.35%++ 7.00%++
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 0.66%+ 0.66%+
Net investment income 0.61%+ 0.68%+
Portfolio turnover 31% 36%
Net assets at end of period (000 Omitted) $12,491 $12,781
(S) The investment adviser voluntarily agreed to maintain the other expenses,
exclusive of management fees, at not more than 0.05% of average daily net
assets. To the extent actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income (loss) $ -- $ (0.01)
Ratios (to average net assets):
Expenses## 1.28%+ 1.40%+
Net investment loss (0.01)%+ (0.06)%+
* For the period from the commencement of the Fund's investment operations,
December 31, 1998, through June 30, 1999.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Institutional Core Equity 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.
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 - 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. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, 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. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith 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.
Security Loans - State Street Bank and Trust Company ("State Street") as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the Fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the Fund with indemnification against Borrower default. The
Fund bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the Fund and the lending agent. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At December 31, 1999, the value of securities loaned was $947,959. These loans
were collateralized by cash of $975,187, which was invested in the following
short-term obligation:
AMORTIZED
COST AND
SHARES VALUE
- -----------------------------------------------------------------------------
Navigator Security Lending Prime Portfolio, at cost 975,187 $975,187
--------
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All
discounts are 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 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 net 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 only distributions in excess of tax basis earnings and
profits are 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.
(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 0.60%
of the Fund's 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 0.05% 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 who 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 service 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 effective annual
rate of 0.0075%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
U.S. government securities $ -- $ 7,103
---------- ----------
Investments (non-U.S. government securities) $4,204,999 $5,064,912
---------- ----------
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 $11,223,151
-----------
Gross unrealized appreciation $ 1,936,560
Gross unrealized depreciation (703,077)
-----------
Net unrealized appreciation $ 1,233,483
===========
(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 PERIOD ENDED JUNE 30, 1999*
---------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 35,771 $ 378,354 1,194,211 $12,348,796
Shares issued to shareholders in
reinvestment of distributions 5,897 64,399 -- --
Shares reacquired (100,000) (1,027,440) -- --
-------- ----------- --------- -----------
Net increase (decrease) (58,332) $ (584,687) 1,194,211 $12,348,796
======== =========== ========= ===========
* For the period from the commencement of the Fund's investment operations, December 31, 1998, through
June 30, 1999.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $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 $0. The Fund had
no borrowings during the period.
<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
ICE-3 02/00 200
