<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
SEMIANNUAL REPORT
DECEMBER 31, 1999
[Graphic Omitted]
MFS(R) INSTITUTIONAL
MID CAP GROWTH FUND
<PAGE>
<TABLE>
MFS(R) INSTITUTIONAL MID CAP GROWTH FUND
<CAPTION>
<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.
Mark Regan*
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 45.74% (including the reinvestment of any distributions), which compares to
a return of 23.34% for the average mid-cap fund tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance. Over
the same period, the Fund's return also compares to a 32.49% return for the
Russell Mid Cap Growth Index (the Russell Index), which measures the
performance of the 800 smallest companies in the Russell 1000 Index.
As a mid-cap portfolio, the Fund looks for growing businesses that have made
the transition from small cap to mid cap. Often that means the Fund's assets
are invested in industries in which the competitive field has narrowed down to
just a few companies. Our goal is to use our research to pick the company or
companies that will wind up dominating the field and to invest in those
companies early, before the market recognizes their true worth.
Over the past six months, two main areas that contributed to the Fund's
outperformance relative to our benchmarks were semiconductor capital equipment
and Internet infrastructure.
Semiconductor capital equipment is the machinery that semiconductor
manufacturers use to make, test, and package computer chips. One Fund holding
in this field is MKS Instruments, which we believe makes the best equipment
for measuring the pressure of the gas plasma used in making chips. MKS, like
many of our investments in this area, dominates a critical niche in a very
technical manufacturing process.
Semiconductor capital equipment stocks tend to be cyclical. In our research
visits to these companies, we were hearing that business was improving, and they
were seeing strong sales. We bought into semiconductor capital equipment
companies when many of their stock prices were stagnating, and indeed they rose
strongly late in the year. Other examples of our semiconductor holdings include
Teradyne, which we believe makes some of the world's best equipment for testing
a chip to ensure it runs properly; KLA-Tencor, whose products allow chip makers
to increase the efficiency of their manufacturing processes and thereby decrease
the cost per chip; and Applied Science and Technology, which makes systems that
produce the gas plasma that gets deposited on wafers to make semiconductors.
Another area that performed very strongly for the Fund was Internet
infrastructure companies. As distinguished from e-commerce or Internet portal
sites, infrastructure companies provide the products and services that make
the Internet work. Our biggest success in this area was Network Solutions, the
company that "rents" the domain names for the Internet. They own the exclusive
rights to the registry for the .com, .net, .edu, and .org names, so they're
virtually the worldwide building permit issuer for the Internet. Any domestic
company doing business on the Internet has to pay Network Solutions $35 per
year to register its domain, or site, names.* In the early '90s this was a
federal government operation that was losing money, so it was sold to a
private company. At that time the government believed there would never be
more than a million domain names; today, Network Solutions is adding roughly a
million new names every 75 days.*
But in the middle of 1999 there was a controversy about whether the government
might take away Network Solutions' monopoly, and the stock price dropped by
two-thirds. We did extensive research, analyzing legal precedents and so
forth, and concluded that the company had a very strong case for retaining its
existing arrangement. So we bought the stock on the dip in price, and
subsequently Network Solutions negotiated a very favorable contract with the
government; they became, in essence, a government-sanctioned monopoly. Since
then, the stock has taken off. Network Solutions exemplifies one of the things
we look for in the market: "second-chance" opportunities, when a company has
suffered a decline in share price that we believe is unjustified and therefore
temporary.
Another success in the Internet infrastructure area was CheckFree. This is a
company that provides electronic home-banking and other electronic-commerce
services to a large number of financial institutions. We bought the stock
because a company visit and further research led us to believe CheckFree was a
dominant player in its business, and that it would benefit directly from the
explosive growth of the Internet. And in the fourth quarter the stock indeed
appreciated quite significantly over our purchase price.
Outside of the areas of semiconductor capital equipment and Internet
infrastructure, individual stocks in several areas contributed strongly to
performance. Gemstar International, which we've written about in several
previous Fund reports, is a great example of a company we bought into early,
that became the only player in its industry. Gemstar consolidated the onscreen
electronic program guide industry, so they receive a royalty of between $5 -
$10 on every TV, VCR, cable box, and satellite box that is sold with an
electronic guide; additionally, they will control the advertising space on
these guides.* According to our research, domestic TV sets alone are being
replaced at a rate of 25 million per year, so the potential is enormous. The
stock doubled in price in the first half of 1999, and doubled again in the
second half after the company agreed to acquire TV Guide.
Another strong performer was Cytyc Corporation, a company we've held for some
time, through several rocky periods, because our research indicated it would
eventually dominate its area of business. Cytyc developed the Thinprep System,
an improved Pap test that is rapidly becoming a new standard in the health
care industry. The stock was boosted this period by better-than-expected
acceptance in an initial product rollout in New England, as well as an
agreement by Aetna, a major health insurer, to accept the Cytyc test for
reimbursement.
Looking toward 2000, we have positioned a substantial part of the portfolio in
three major areas: energy, transaction processors, and health care.
In the energy sector, we have significantly increased our sector weighting
since mid-1999 and focused on two themes: deep-water oil drillers and natural
gas exploration and production. Oil companies have found that the most
productive wells, those with the lowest overall cost per barrel, are located
in deep water over about 5,000 feet. The deep-water rigs to drill these wells
cost in the vicinity of $300 million, take three years to build, and are owned
primarily by four companies: Transocean, Noble Drilling, Diamond Offshore, and
Falcon. When the price of oil is above $18 per barrel -- and it's currently in
the mid-twenties -- the leases for these rigs are usually bid up in price
every time they're renewed.* So we think this is a good business to be in, and
we own positions in most of the dominant rig companies.
Natural gas is a situation dominated by a supply/demand imbalance. Gas demand
is growing faster than that for oil, as more houses each year are being hooked
up to gas and electric utilities are switching to gas-powered turbines.* But
gas-drilling activity has been down the past few years, so demand is growing
faster than supply, and we believe some of the gas exploration and production
companies are good investments.
Transaction processors are another major theme for the Fund going forward.
These are companies that process customer transactions for mutual funds,
banks, and credit-card issuers, as well as bill payment for the cable
industry. These businesses tend to benefit strongly from new technologies such
as the Internet, which are continually driving down the cost of each
individual transaction. In 1999 many of these companies weren't growing their
businesses as quickly as expected. We believe this was Year 2000 (Y2K)
related; potential customers were reluctant to change their processing systems
in the last three quarters of 1999. So although some processors and other
business services in the portfolio did well in 1999, we bought many of them at
depressed prices in order to position the Fund for potential growth in 2000.
By and large, we believe the processors should have a good year in 2000, with
demand coming back and technology continuing to drive down their costs. Our
holdings in this area include SunGard Data Systems, which provides software
and transaction processing for financial services companies, and NOVA
Corporation, which does credit-card processing for retail merchants.
Health care is an additional area in which we've positioned the Fund for 2000.
Stocks in this sector were generally beaten down in 1999 because Medicare cut
back reimbursements and changed the payment system. This drastically impacted
health care providers like nursing homes and hospitals. Except for some
companies like Cytyc, the reimbursement issue also cast a shadow over many
health care-related companies that actually had what we consider to be good
businesses. We invested in several of these beaten-down health care companies
in the second half of the year. Unfortunately, we may have been a bit early,
as some of their stock prices declined further and detracted from the Fund's
short-term performance. We do, however, believe that these are solid companies
with good potential for stock price appreciation.
Respectfully,
/s/ Mark Regan
Mark Regan
Portfolio Manager
*Source: MFS Research
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 MANAGERS' PROFILES
Mark Regan is Senior Vice President of MFS Investment Management(R), portfolio
manager of MFS(R) Mid Cap Growth Fund, and a portfolio manager of MFS(R)
Institutional Mid Cap Growth Fund.
He joined MFS in 1989 as a research analyst. He was named Investment Officer
in 1990, Assistant Vice President in 1991, Vice President in 1992, portfolio
manager in 1993, and Senior Vice President in 1999. Mr. Regan is a graduate of
Cornell University and the Sloan School of Management of the Massachusetts
Institute of Technology.
John W. Ballen is President, Chief Investment Officer, and a member of the
Management Committee and Board of Directors of MFS Investment Management(R).
He is the portfolio manager of MFS(R) Emerging Growth Fund and a portfolio
manager of MFS(R) Emerging Growth Series (part of MFS(R) Variable Insurance
Trust(SM)), the Emerging Growth Series offered through MFS(R)/Sun Life annuity
products, MFS(R) Global Growth Fund, and the Global Growth Series offered
through MFS(R)/Sun Life annuity products. In addition, Mr. Ballen oversees the
portfolio management of MFS(R) Institutional Mid Cap Growth Fund and MFS(R)
Institutional Emerging Equities Fund.
He joined the MFS Research Department in 1984 as a research analyst. He was
named Investment Officer and portfolio manager in 1986, Vice President in
1987, Director of Research in 1988, Senior Vice President in 1990, Director of
Equity Portfolio Management in 1993, Chief Equity Officer in 1995, Executive
Vice President in 1997, and President, Chief Investment Officer, and a member
of the Board in 1998. Mr. Ballen is a graduate of Harvard College and earned a
Master of Commerce degree from the University of New South Wales in Australia
and an M.B.A. degree from Stanford University.
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 to provide long-term growth of capital.
Commencement of investment operations: December 28, 1995
Size: $101.8 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 amount 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 3 Years Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +45.74% +72.43% +159.61% +188.66%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +72.43% + 37.44% + 30.27%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
December 28, 1995, 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 - 100.1%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural Products - 1.0%
AGCO Corp. 72,400 $ 972,875
- -------------------------------------------------------------------------------------------------------
Biotechnology - 0.8%
Waters Corp.* 15,100 $ 800,300
- -------------------------------------------------------------------------------------------------------
Broadcasting
Spanish Broadcasting Systems, Inc.* 325 $ 13,081
- -------------------------------------------------------------------------------------------------------
Business Machines - 1.9%
Affiliated Computer Services, Inc., "A"* 12,200 $ 561,200
Seagate Technology, Inc.* 28,600 1,331,688
------------
$ 1,892,888
- -------------------------------------------------------------------------------------------------------
Business Services - 6.2%
BISYS Group, Inc.* 6,700 $ 437,175
Collectors Universe, Inc.* 19,730 123,313
DST Systems, Inc.* 7,100 541,819
Fiserv, Inc.* 28,337 1,085,661
Learning Tree International, Inc.* 14,600 408,800
National Data Corp. 30,500 1,035,094
NOVA Corp.* 81,300 2,566,031
United Parcel Service, Inc. 1,910 131,790
------------
$ 6,329,683
- -------------------------------------------------------------------------------------------------------
Computer Software - Services - 5.0%
RSA Security, Inc.* 65,600 $ 5,084,000
- -------------------------------------------------------------------------------------------------------
Computer Software - Systems - 7.0%
Aspen Technology, Inc.* 20,600 $ 544,613
CheckFree Holdings Corp.* 2,500 261,250
Citrix Systems, Inc.* 1,200 147,600
Computer Network Technology Corp.* 22,800 522,975
CSG Systems International, Inc.* 17,500 697,812
Etec Systems, Inc.* 14,300 641,712
Harbinger Corp.* 46,400 1,476,100
Interliant, Inc.* 7,100 184,600
SunGard Data Systems, Inc.* 109,600 2,603,000
------------
$ 7,079,662
- -------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.0%
LoJack Corp.* 33,200 $ 224,100
Sportsline USA, Inc.* 57,300 2,872,162
------------
$ 3,096,262
- -------------------------------------------------------------------------------------------------------
Containers - 0.7%
Smurfit-Stone Container Corp.* 27,900 $ 683,550
- -------------------------------------------------------------------------------------------------------
Electronics - 10.5%
Agilent Technologies, Inc.* 1,080 $ 83,498
Analog Devices, Inc.* 15,000 1,395,000
Cable Design Technologies Corp.* 95,750 2,202,250
Cypress Semiconductor Corp.* 12,900 417,637
DuPont Photomasks, Inc.* 19,900 960,175
KLA-Tencor Corp.* 9,700 1,080,337
LTX Corp.* 5,700 127,538
MKS Instruments, Inc.* 25,000 903,125
Novellus Systems, Inc.* 2,000 245,062
Sawtek, Inc.* 7,600 505,875
SIPEX Corp.* 57,200 1,404,975
Teradyne, Inc.* 20,800 1,372,800
------------
$ 10,698,272
- -------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
Hearst-Argyle Television, Inc.* 12,000 $ 319,500
Macromedia, Inc.* 2,900 212,062
Readers Digest Assn., Inc., "A" 15,200 444,600
Sinclair Broadcast Group, Inc., "A"* 1,500 18,305
------------
$ 994,467
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 3.0%
Edwards (A.G.), Inc. 96,100 $ 3,081,206
- -------------------------------------------------------------------------------------------------------
Financial Services - 0.3%
S1 Corp.* 3,399 $ 265,547
- -------------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.5%
Del Monte Foods Co.* 211,000 $ 2,597,937
Keebler Foods Co.* 35,900 1,009,688
------------
$ 3,607,625
- -------------------------------------------------------------------------------------------------------
Machinery - 0.7%
Applied Science and Technology, Inc.* 20,800 $ 691,275
- -------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 16.7%
Cytyc Corp.* 93,300 $ 5,697,131
Health Management Associates, Inc., "A"* 297,600 3,980,400
IDEXX Laboratories, Inc.* 86,600 1,396,425
Lincare Holdings, Inc.* 20,500 711,094
Steris Corp.* 81,200 837,375
Total Renal Care Holdings, Inc.* 171,843 1,149,200
VISX, Inc.* 63,300 3,275,775
------------
$ 17,047,400
- -------------------------------------------------------------------------------------------------------
Oil Services - 7.1%
Cooper Cameron Corp.* 26,200 $ 1,282,163
Diamond Offshore Drilling, Inc. 31,100 950,494
Global Industries, Inc.* 217,100 1,872,487
Noble Drilling Corp.* 94,500 3,094,875
------------
$ 7,200,019
- -------------------------------------------------------------------------------------------------------
Oils - 13.2%
Apache Corp. 70,000 $ 2,585,625
EOG Resources, Inc. 88,900 1,561,306
Houston Exploration Co.* 87,400 1,731,612
Newfield Exploration Co.* 137,000 3,664,750
Transocean Sedco Forex, Inc. 94,100 3,169,994
Vastar Resources, Inc. 12,100 713,900
------------
$ 13,427,187
- -------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.9%
Sepracor, Inc.* 7,200 $ 714,150
United Therapeutics Corp.* 26,700 1,228,200
------------
$ 1,942,350
- -------------------------------------------------------------------------------------------------------
Printing and Publishing - 2.0%
Meredith Corp. 5,500 $ 229,281
Scholastic Corp.* 28,900 1,797,219
------------
$ 2,026,500
- -------------------------------------------------------------------------------------------------------
Retail - 0.3%
The Great Atlantic & Pacific Tea Company, Inc. 9,400 $ 262,025
- -------------------------------------------------------------------------------------------------------
Special Products and Services - 0.3%
U.S. Aggregates, Inc.* 28,125 $ 337,500
- -------------------------------------------------------------------------------------------------------
Stores - 1.5%
BJ's Wholesale Club, Inc.* 34,800 $ 1,270,200
Gymboree Corp.* 49,100 276,188
------------
$ 1,546,388
- -------------------------------------------------------------------------------------------------------
Supermarkets - 2.1%
Kroger Co.* 115,500 $ 2,180,063
- -------------------------------------------------------------------------------------------------------
Telecommunications - 10.4%
American Tower Corp., "A"* 44,900 $ 1,372,256
Ancor Communications, Inc.* 11,500 780,563
Emulex Corp.* 5,900 663,750
Intermedia Communications, Inc.* 85,000 3,299,063
Metromedia Fiber Network, Inc., "A"* 1,070 51,293
Network Solutions, Inc.* 18,600 4,046,662
RF Micro Devices, Inc.* 5,700 390,094
------------
$ 10,603,681
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $77,808,344) $101,863,806
- -------------------------------------------------------------------------------------------------------
Short-Term Obligation - 1.1%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00, at
Amortized Cost $ 1,170 $ 1,169,903
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $78,978,247) $103,033,709
Other Assets, Less Liabilities - (1.2)% (1,263,595)
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $101,770,114
- -------------------------------------------------------------------------------------------------------
* Non-income producing security.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $78,978,247) $103,033,709
Investment of cash collateral for securities loaned, at value
(identified cost, $20,705,100) 20,705,100
Cash 11,381
Receivable for investments sold 167,751
Dividends and interest receivable 27,638
Receivable from investment adviser 23,569
Deferred organization expenses 1,381
Other assets 440
------------
Total assets $123,970,969
------------
Liabilities:
Payable for investments purchased $ 776,947
Collateral for securities loaned, at value 20,705,100
Distributions payable 689,643
Payable to affiliates -
Management fee 1,629
Shareholder servicing agent fee 20
Accrued expenses and other liabilities 27,516
------------
Total liabilities $ 22,200,855
------------
Net assets $101,770,114
============
Net assets consist of:
Paid-in capital $ 67,340,266
Unrealized appreciation on investments 24,055,462
Accumulated undistributed net realized gain on investments 10,468,964
Accumulated net investment loss (94,578)
------------
Total $101,770,114
============
Shares of beneficial interest outstanding 4,835,956
=========
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $21.04
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 84,255
Income on securities loaned 22,245
Dividends 44,626
-----------
Total investment income $ 151,126
-----------
Expenses -
Management fee $ 214,414
Trustees' compensation 3,100
Shareholder servicing agent fee 2,682
Administrative fee 3,469
Custodian fee 14,486
Printing 4,830
Auditing fees 14,917
Legal fees 437
Amortization of organization expenses 703
Miscellaneous 14,941
-----------
Total expenses $ 273,979
Fees paid indirectly (4,706)
Reduction of expenses by investment adviser (23,569)
-----------
Net expenses $ 245,704
-----------
Net investment loss $ (94,578)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain on investment transactions (identified cost
basis) $15,412,107
Change in unrealized appreciation on investments 16,829,010
-----------
Net realized and unrealized gain on investments $32,241,117
-----------
Increase in net assets from operations $32,146,539
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (94,578) $ (30,648)
Net realized gain on investments 15,412,107 6,683,719
Net unrealized gain on investments 16,829,010 3,878,244
------------ -----------
Increase in net assets from operations $ 32,146,539 $10,531,315
------------ -----------
Distributions declared to shareholders from net realized
gain on investments $(11,347,449) $(5,353,020)
------------ -----------
Net increase in net assets from Fund share transactions $ 19,068,698 $ 7,788,253
------------ -----------
Total increase in net assets $ 39,867,788 $12,966,548
Net assets:
At beginning of period 61,902,326 48,935,778
------------ -----------
At end of period (including accumulated net investment
loss of $94,578 and $0, respectively) $101,770,114 $61,902,326
============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
SIX MONTHS ENDED ------------------------------------------------ PERIOD ENDED
DECEMBER 31, 1999 1999 1998 1997 JUNE 30, 1996*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $16.28 $15.04 $12.25 $11.13 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.02) $(0.01) $(0.02) $(0.00)** $(0.01)
Net realized and unrealized
gain on investments 7.41 2.96 3.45 1.40 1.14
------ ------ ------ ------ ------
Total from investment
operations $ 7.39 $ 2.95 $ 3.43 $ 1.40 $ 1.13
------ ------ ------ ------ ------
Less distributions declared to $
shareholders from net realized
gain on investments $(2.63) $(1.71) $(0.64) $(0.28) --
------ ------ ------ ------ ------
Net asset value - end of period $21.04 $16.28 $15.04 $12.25 $11.13
====== ====== ====== ====== ======
Total return 45.74%++ 22.05% 29.15% 12.80% 11.30%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.70%+ 0.66% 0.66% 0.66% 0.70%+
Net investment loss (0.26)%+ (0.07)% (0.17)% (0.01)% (0.25)%+
Portfolio turnover 76% 147% 143% 136% 33%
Net assets at end of period (000
omitted) $101,770 $61,902 $48,936 $25,007 $8,149
(S) From May 3, 1996, through October 31, 1999, the investment adviser voluntarily agreed to maintain the expenses of the
Fund, excluding management fees, at no more than 0.05% of average daily net assets. From December 28, 1995, through May
2, 1996, the investment adviser agreed to maintain the expenses at no more than 0.75%. To the extent actual expenses
were over these limitations, the net investment loss per share and the ratios would have been:
Net investment loss $(0.03) $(0.03) $(0.04) $(0.04) $(0.09)
Ratios (to average net assets):
Expenses## 0.77%+ 0.80% 0.83% 0.99% 2.59%+
Net investment loss (0.33)%+ (0.21)% (0.35)% (0.34)% (2.14)%+
* For the period from the commencement of the Fund's investment operations, December 28, 1995, through June 30, 1996.
** The per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Institutional Mid Cap Growth Fund (the Fund) is a diversified series of MFS
Institutional Trust (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued in good faith, at
fair value, by the Trustees.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Security Loans - State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, 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 and Chase provide 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 agents. 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 $19,997,107. These
loans were collateralized by cash of $20,705,100, which was invested in the
following short-term obligation:
AMORTIZED COST
SHARES AND VALUE
- -------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 20,705,100 $20,705,100
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. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's 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 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.
(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. Through October 31, 1999, the
investment adviser voluntarily agreed to pay the Fund's operating expenses,
exclusive of management fees, such that the Fund's aggregate expenses did 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 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 U.S. government securities and
short-term obligations, aggregated $65,853,238 and $53,630,441, respectively.
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 $78,978,247
-----------
Gross unrealized appreciation $27,970,768
Gross unrealized depreciation (3,915,306)
-----------
Net unrealized appreciation $24,055,462
===========
(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 600,127 $10,006,445 591,135 $ 8,860,303
Shares issued to shareholders in
reinvestment of distributions 515,866 10,657,807 366,582 4,904,864
Shares reacquired (82,828) (1,595,554) (409,523) (5,976,914)
--------- ----------- -------- ------------
Net increase 1,033,165 $19,068,698 548,194 $ 7,788,253
========= =========== ======== ============
</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 $317. The Fund had
no significant 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
IMC-3 02/00 200
