<PAGE>
[LOGO: M F S(SM) ANNUAL REPORT
INVESTMENT MANAGEMENT FOR YEAR ENDED
We invented the mutual fund(SM)] AUGUST 31, 1996
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
[Graphic Omitted U.S. Treasury Building]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Fund Manager's Overview .................................................... 3
Fund Manager's Profile ..................................................... 4
Portfolio Concentration .................................................... 5
Fund Facts ................................................................. 5
Portfolio of Investments ................................................... 6
Financial Statements ....................................................... 8
Notes to Financial Statements ..............................................13
Independent Auditors' Report ...............................................15
MFS Family of Funds ........................................................16
Trustees and Officers ......................................................17
HIGHLIGHTS
* AS A RESULT OF A DECLINE IN SHORT-TERM INTEREST RATES DURING THE FIRST SIX
MONTHS OF THE FUNDS' FISCAL YEAR, THE ANNUALIZED COMPOUNDED YIELD FOR MFS
MONEY MARKET FUND FOR THE SEVEN-DAY PERIOD ENDED AUGUST 31, 1996 DECREASED
FROM 5.2% TO 4.7%. DURING THIS SAME PERIOD, THE ANNUALIZED YIELD ON AN
INVESTMENT IN MFS GOVERNMENT MONEY MARKET FUND FELL FROM 5.2% TO 4.5%.
* THE AVERAGE MATURITY OF BOTH FUNDS WAS 53 DAYS AS OF AUGUST 31, 1996,
VERSUS 41 AND 35 DAYS FOR MFS MONEY MARKET FUND AND MFS GOVERNMENT MONEY
MARKET FUND, RESPECTIVELY, ON AUGUST 31, 1995.
* ON AUGUST 31, 1996, APPROXIMATELY 42% OF MFS MONEY MARKET FUND'S NET
ASSETS WERE INVESTED IN COMMERCIAL PAPER, WITH THE BALANCE INVESTED IN
SECURITIES ISSUED OR GUARANTEED BY THE U.S. TREASURY OR AGENCIES OR
INSTRUMENTALITIES OF THE U.S. GOVERNMENT.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
With over half of 1996 behind us, the U.S. economy appears to have settled into
a pattern of fairly reasonable growth and moderate inflation -- two factors that
we think can be important contributors to a favorable long-term investment
climate. During the first quarter of 1996, real (inflation-adjusted) economic
growth was 2.3% on an annualized basis, followed by a rate of 4.7% in the second
quarter. Thus, real growth in gross domestic product has exceeded our
expectations so far this year, and we now expect that growth for all of 1996
could exceed 2.5%. Although individual consumers appear to be carrying an
excessive debt load, the consumer sector itself, which represents two-thirds of
the economy, continues to be impressive as the automobile and housing markets
remain resilient. Consumer spending has also been positively impacted by
widespread job growth. At the same time, however, the economies of Europe and
Japan continue to be in the doldrums, weakening U.S. export markets while
subduing the capital spending plans of American corporations.
In the bond markets, persistent signs of economic weakness led to decreases in
short-term interest rates by the Federal Reserve Board in late 1995 and early
1996. However, should signs of economic growth and, particularly, of higher
inflation continue, we would expect the Fed to maintain its anti-inflationary
stance. In the beginning of the year, bond markets were trading in a narrow
range as investors shifted between concern about the lack of a budget resolution
in Washington and hopes that sluggish economic reports and low inflation might
lead to lower interest rates. Later, fixed-income markets began reacting to
conflicting signals regarding the strength of the economy with more volatile
trading patterns marked by an upward bias in interest rates. Interest rates may
move even higher over the coming months, but we believe the current rise in bond
yields is reaching a point where fixed-income markets are fairly valued.
Finally, as you may have noticed, this report to shareholders incorporates a
number of changes which we believe will make it more informative and useful to
you. Following the Fund Manager's Overview, you will find new information
on the Fund's holdings, including charts illustrating the portfolio's
concentration in the different types of investments that meet its criteria. If
you would like to contact MFS, refer to the telephone numbers and addresses
listed at the back of the report.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
September 17, 1996
<PAGE>
FUND MANAGER'S OVERVIEW
[Photo of Geoffrey L. Kurinsky]
Dear Shareholders:
Short-term interest rates declined modestly during the first six months of the
Funds' fiscal year, then rebounded over the next six months. As a result, the
annualized yield on an investment in MFS MONEY MARKET FUND for the seven-day
period ended August 31, 1996 decreased from 5.2% to 4.7%. During this same
period, the annualized yield on an investment in MFS GOVERNMENT MONEY MARKET
FUND fell from 5.2% to 4.5%.
During the past 12 months, the Federal Reserve voted to ease monetary policy
by lowering the federal funds' rate (the interest rate charged by banks to other
banks in need of overnight loans) two times. The Fed lowered the rate by 25
basis points (0.25%) on December 19, 1995, and by the same amount on January 31,
1996. As a result, yields on 90-day U.S. Treasury bills and commercial paper
fell approximately 65 basis points (0.65%) by February 1996. Since then, rates
have backed up approximately 30 basis points (0.30%) as of the end of August due
to signs of a strengthening economy. With the economy showing more signs of
acceleration, we believe short-term interest rates could experience additional
moderate increases over the next few months.
At the beginning of the Funds' fiscal year, our average maturities were
lengthened to defend against slumping yields. However, as yields began to inch
higher due to evidence of economic strength, we shortened maturities in both
portfolios to take advantage of higher yields. The average maturity of both
Funds was 53 days as of August 31, 1996, versus 41 and 35 days for MFS MONEY
MARKET FUND and MFS GOVERNMENT MONEY MARKET FUND, respectively, on August 31,
1995.
The portfolio of MFS MONEY MARKET FUND continues to hold only the
highest-quality corporate, bank and government securities in an effort to
provide investors the maximum possible security against credit risk. Investments
in the Funds are neither insured nor guaranteed by the U.S. government, and
there is no assurance that the Fund will be able to maintain a stable net asset
value. On August 31, 1996, approximately 42% of this Fund's net assets were
invested in commercial paper, with the balance invested in securities issued or
guaranteed by the U.S. Treasury or agencies or instrumentalities of the U.S.
government, because of the very narrow yield spreads between government agency
obligations and commercial paper. At the same time, the quality of MFS
GOVERNMENT MONEY MARKET FUND'S portfolio remains at the highest practical level
because its investments are limited to securities issued or guaranteed by the
U.S. Treasury or agencies or instrumentalities of the U.S. government, including
repurchase agreements collateralized by such securities. We believe this
emphasis on quality should allow these Funds to continue to help investors
obtain current income while seeking to preserve capital and liquidity.
Respectfully,
/s/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Fund Manager
FUND MANAGER'S PROFILE
GEOFFREY KURINSKY BEGAN HIS CAREER AT MFS IN 1987 IN THE FIXED INCOME
DEPARTMENT. A GRADUATE OF THE UNIVERSITY OF MASSACHUSETTS AND BOSTON
UNIVERSITY'S GRADUATE SCHOOL OF MANAGEMENT, HE WAS NAMED ASSISTANT VICE
PRESIDENT IN 1988, VICE PRESIDENT IN 1989 AND SENIOR VICE PRESIDENT IN 1993.
HE HAS MANAGED MFS MONEY MARKET FUND AND MFS GOVERNMENT MONEY MARKET FUND
SINCE 1992.
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1996.
<PAGE>
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1996
MONEY MARKET FUND
Commercial Paper 41.5%
U.S. Government & Agency Obligations 34.7%
Repurchase Agreements 23.3%
Other 0.5%
GOVERNMENT MONEY MARKET FUND
U.S. Government & Agency Obligations 80%
Repurchase Agreements 20%
FUND FACTS
STRATEGY: THE INVESTMENT OBJECTIVE OF EACH FUND IS TO SEEK AS
HIGH A LEVEL OF CURRENT INCOME AS IS CONSIDERED
CONSISTENT WITH THE PRESERVATION OF CAPITAL AND
LIQUIDITY. THE INVESTMENT OBJECTIVE OF A FUND WILL
NOT BE CHANGED WITHOUT FIRST OBTAINING SHAREHOLDER
APPROVAL FROM THE SHAREHOLDERS OF THAT FUND.
COMMENCEMENT OF
INVESTMENT OPERATIONS: MFS MONEY MARKET FUND - 12/19/75
MFS GOVERNMENT MONEY MARKET FUND - 2/26/82
SIZE: MFS MONEY MARKET FUND - $644.2 MILLION AS OF
AUGUST 31, 1996
MFS GOVERNMENT MONEY MARKET FUND - $42.5 MILLION
AS OF AUGUST 31, 1996
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS Money Market Fund
Commercial Paper - 41.5%
- ---------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
AT&T Corp., due 12/23/96 - 12/24/96 $ 15,200 $ 14,946,912
Abbot Labs, due 9/17/96 8,600 8,579,589
Disney (Walt) Co., due 12/20/96 8,000 7,871,422
Dow Chemical Co., due 9/30/96 10,000 9,957,306
du Pont (E.I.) de Nemours & Co., due 12/19/96 12,000 11,808,160
Duke Power Co., due 9/12/96 14,800 14,776,213
Ford Motor Credit Corp., due 10/02/96
- 10/21/96 22,300 22,178,776
General Electric Capital Corp., due
2/14/96 - 2/20/97 18,900 18,426,124
General Motors Acceptance Corp.,
due 9/03/96 - 2/19/97 21,400 21,265,269
Hershey Foods Corp., due 9/20/96 10,000 9,972,239
Hewlett Packard Co., due 9/27/96 13,400 13,348,127
Kellogg Co., due 9/16/96 1,875 1,870,781
Knight Ridder, Inc., due 10/30/96 8,000 7,930,511
PepsiCo, due 9/06/96 7,300 7,294,657
Philip Morris Co., due 10/21/96 - 10/31/96 20,000 19,838,722
Raytheon Co., due 10/16/96 12,000 11,920,500
Sara Lee Corp., due 9/26/96 17,600 17,534,489
Transamerica Corp., due 9/09/96 - 9/10/96 21,300 21,273,947
Warner-Lambert Co., due 11/07/96 15,000 14,852,879
Weyerhaeuser Co., due 10/18/96 12,000 11,917,437
- ---------------------------------------------------------------------------
Total Commercial Paper, at Amortized Cost $267,564,060
- ---------------------------------------------------------------------------
U.S. Government and Agency Obligations - 34.7%
- ---------------------------------------------------------------------------
Federal Home Loan Bank, due 9/23/96 - 1/09/97 $ 41,300 $ 40,959,748
Federal Home Loan Mortgage Corp.,
due 9/12/96 - 11/29/96 97,400 96,890,088
Federal National Mortgage Assn.,
due 9/05/96 - 1/30/97 82,960 82,229,179
Student Loan Marketing Assn., due 9/25/96 3,700 3,687,001
- ---------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost $223,766,016
- ---------------------------------------------------------------------------
Repurchase Agreement - 23.3%
- ---------------------------------------------------------------------------
Goldman Sachs, dated 8/30/96, due 9/
03/96, total to be received
$150,088,000 (secured by various
U.S. Treasury and federal agency
obligations in a jointly traded
account), at Cost $150,000 $150,000,000
- ---------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $641,330,076
Other Assets, Less Liabilities - 0.5% 2,874,846
- ---------------------------------------------------------------------------
Net Assets - 100.0% $644,204,922
- ---------------------------------------------------------------------------
See notes to financial statements
<PAGE>
MFS Government Money Market Fund
U.S. Government and Agency Obligations - 80.0%
- ---------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
Federal Farm Credit Bank, due 9/04/96
- 10/07/96 $3,700 $ 3,690,290
Federal Home Loan Bank, due 9/24/96 -
2/13/97 9,600 9,499,185
Federal Home Loan Mortgage Corp.,
due 9/12/96 - 9/27/96 8,150 8,130,360
Federal National Mortgage Assn.,
due 9/06/96 - 1/14/97 7,600 7,540,366
Student Loan Marketing Assn.,
due 9/18/96 - 9/30/96 2,140 2,130,940
Tennessee Valley Authority,
due 9/03/96 - 9/12/96 3,000 2,997,832
- ---------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost $33,988,973
- ---------------------------------------------------------------------------
Repurchase Agreement - 20.6%
- ---------------------------------------------------------------------------
Goldman Sachs, dated 8/30/96, due 9/
03/96, total to be received
$8,750,130 (secured by various U.S.
Treasury and federal agency
obligations in a jointly traded
account), at Cost $8,745 $ 8,745,000
- ---------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $42,733,973
Other Assets, Less Liabilities - (0.6)% (234,526)
- ---------------------------------------------------------------------------
Net Assets - 100.0% $42,499,447
- ---------------------------------------------------------------------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
- ------------------------------------------------------------------------------
MFS Money MFS Government
August 31, 1996 Market Fund Money Market Fund
- ------------------------------------------------------------------------------
Assets:
Investments, at amortized cost and value $491,330,076 $33,988,973
Repurchase agreements, at amortized cost
and value 150,000,000 8,745,000
------------ -----------
Total investments, at amortized cost
and value $641,330,076 $42,733,973
Cash 645,322 558
Receivable for Fund shares sold 11,998,842 8,184
Interest receivable 44,000 2,565
Other assets 4,757 604
------------ -----------
Total assets $654,022,997 $42,745,884
------------ -----------
Liabilities:
Distributions payable $ 105,993 $ 6,826
Payable for Fund shares reacquired 9,594,175 189,875
Payable to affiliates -
Management fee 13,770 984
Shareholder servicing agent fee 4,276 295
Accrued expenses and other liabilities 99,861 48,457
------------ -----------
Total liabilities $ 9,818,075 $ 246,437
------------ -----------
Net assets (represented by paid-in capital) $644,204,922 $42,499,447
============ ===========
Shares of beneficial interest outstanding 644,204,922 42,499,447
============ ===========
Net asset value, offering price and
redemption price per share
(net assets / shares of beneficial
interest outstanding) $1.00 $1.00
===== =====
See notes to financial statements
<PAGE>
Statements of Operations
- ------------------------------------------------------------------------------
Year Ended
MFS Money Market Fund August 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Interest income $27,082,077
-----------
Expenses -
Management fee $ 2,374,567
Trustees' compensation 30,813
Shareholder servicing agent fee 741,346
Custodian fee 210,923
Postage 124,193
Printing 42,684
Auditing fees 16,600
Legal fees 2,103
Miscellaneous 342,432
-----------
Total expenses $ 3,885,661
Fees paid indirectly (169,392)
-----------
Net expenses $ 3,716,269
-----------
Net investment income $23,365,808
===========
Year Ended
MFS Government Money Market Fund August 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 2,243,802
-----------
Expenses -
Management fee $ 205,023
Trustees' compensation 7,285
Shareholder servicing agent fee 61,507
Custodian fee 20,175
Auditing fees 16,915
Postage 6,717
Printing 3,013
Legal fees 2,051
Miscellaneous 42,681
-----------
Total expenses $ 365,367
Fees paid indirectly (17,786)
-----------
Net expenses $ 347,581
-----------
Net investment income $ 1,896,221
===========
See notes to financial statements
<PAGE>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended Year Ended
MFS Money Market Fund August 31, 1996 August 31, 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income, declared as
distributions to shareholders $ 23,365,808 $ 22,705,875
-------------- --------------
Fund share (principal) transactions
at net asset value of $1.00 per share -
Net proceeds from sale of shares $5,311,229,990 $2,481,903,487
Net asset value of shares issued to
shareholders in reinvestment
of distributions 18,551,363 19,523,795
Cost of shares reacquired (5,096,374,350) (2,526,408,894)
-------------- --------------
Total increase (decrease) in net assets $ 233,407,003 $ (24,981,612)
Net assets:
At beginning of period 410,797,919 435,779,531
-------------- --------------
At end of period $ 644,204,922 $ 410,797,919
============== ==============
Year Ended Year Ended
MFS Government Money Market Fund August 31, 1996 August 31, 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income, declared as
distributions to shareholders $ 1,896,221 $ 1,862,594
-------------- --------------
Fund share (principal) transactions
at net asset value of $1.00 per share -
Net proceeds from sale of shares $ 476,964,289 $ 130,386,802
Net asset value of shares issued to
shareholders in reinvestment
of distributions 1,585,296 1,692,388
Cost of shares reacquired (474,489,920) (131,986,405)
-------------- --------------
Total increase in net assets $ 4,059,665 $ 92,785
Net assets:
At beginning of period 38,439,782 38,346,997
-------------- --------------
At end of period $ 42,499,447 $ 38,439,782
============== ==============
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------
Ten
Months
Year Ended August 31, Ended Year Ended October 31,
----------------------- August 31, -------------------------
MFS Money Market Fund 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.05 $ 0.05 $ 0.02 $ 0.02 $ 0.03
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net investment income $(0.05) $(0.05) $(0.02) $(0.02) $(0.03)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.86% 5.04% 2.91%+ 2.39% 3.35%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.79% 0.76% 0.78%+ 0.83% 0.87%
Net investment income 4.78% 4.92% 2.95%+ 2.39% 3.36%
Net assets at end of period (000 omitted) $644,205 $410,798 $435,780 $350,316 $448,825
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------------------------------
MFS Money Market Fund 1991 1990 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.06 $ 0.07 $ 0.08 $ 0.07 $ 0.06 $ 0.06
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net investment
income $(0.06) $(0.07) $(0.08) $(0.07) $(0.06) $(0.06)
------ ------ ------ ------ ------ ------
Net asset value - end of $ 1.00
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 6.07% 7.99% 8.84% 7.12% 6.06% 6.80%
Ratios (to average net assets)/
Supplemental data:
Expenses 0.82% 0.76% 0.83% 0.83% 0.82% 0.78%
Net investment income 5.94% 7.60% 8.45% 6.72% 5.77% 6.53%
Net assets at end of period
(000 omitted) $541,945 $677,164 $676,382 $664,895 $716,528 $623,568
<FN>
+Annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Ten
Months
Year Ended August 31, Ended Year Ended October 31,
----------------------- August 31, -------------------------
MFS Government Money Market Fund 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.05 $ 0.05 $ 0.02 $ 0.02 $ 0.03
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net investment income $(0.05) $(0.05) $(0.02) $(0.02) $(0.03)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.73% 4.92% 2.64%+ 2.33% 3.27%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.89% 0.84% 1.05%+ 0.99% 0.87%
Net investment income 4.64% 4.82% 2.64%+ 2.20% 3.28%
Net assets at end of period (000 omitted) $42,499 $38,440 $38,347 $35,576 $47,629
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------------------------------
MFS Government Money Market Fund 1991 1990 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.06 $ 0.07 $ 0.08 $ 0.06 $ 0.05 $ 0.06
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net investment
income $(0.06) $(0.07) $(0.08) $(0.06) $(0.05) $(0.06)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 5.68% 7.55% 8.61% 6.47% 5.73% 6.33%
Ratios (to average net assets)/
Supplemental data:
Expenses 0.83% 0.80% 0.85% 0.74% 0.59% 0.66%
Net investment income 5.53% 7.34% 8.29% 6.29% 5.63% 6.07%
Net assets at end of period
(000 omitted) $50,655 $53,701 $51,619 $50,343 $59,875 $63,331
<FN>
+Annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Money Market Fund and MFS Government Money Market Fund (the Funds) are each
a separate, diversified series of MFS Series Trust IV (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 - Money market instruments are valued at amortized cost,
which the Trustees have determined in good faith constitutes fair value. The
Trust's use of amortized cost is subject to the Trust's compliance with certain
conditions as specified under Rule 2a-7 of the Investment Company Act of 1940.
Repurchase Agreements - The Trust may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Trust requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Trust to obtain those securities
in the event of a default under the repurchase agreement. The Trust monitors, on
a daily basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Trust under each such repurchase agreement. The
Trust, along with other affiliated entities of Massachusetts Financial Services
Company (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Funds' custodian bank calculates its fee based on the
Funds' average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Funds. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Distributions to
shareholders are recorded on the ex-dividend date.
(3) Transactions with Affiliates
Investment Adviser - The Funds each have a separate 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 0.48%
and 0.50% of average daily net assets for MFS Money Market Fund and MFS
Government Money Market Fund, respectively.
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the officers
and Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has an
unfunded defined benefit plan for all its independent Trustees and Mr. Bailey.
Included in Trustees' compensation for MFS Money Market Fund and MFS Government
Money Market Fund are net periodic pension expenses of $9,826 and $2,472,
respectively, for the year ended August 31, 1996.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each Fund at an annual rate of
0.15%.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities subject
to repurchase agreements for MFS Money Market Fund, aggregated $5,426,807,189
and $5,353,737,252, respectively.
Purchases and sales of money market investments, exclusive of securities subject
to repurchase agreements for MFS Government Money Market Fund, aggregated
$250,923,527 and $288,277,827, respectively.
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value)
of each Fund.
(6) Line of Credit
The Trust entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Trust 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 fees allocated to MFS Money Market Fund and MFS
Government Money Market Fund were $5,309 and $450, respectively, for the year
ended August 31, 1996.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IV and Shareholders of MFS Money Market Fund
and MFS Government Money Market Fund:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of MFS Money Market Fund and MFS Government Money
Market Fund (two of the Series constituting MFS Series Trust IV) as of August
31, 1996, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended August 31, 1996 and
1995, and the financial highlights for the years ended August 31, 1996 and 1995,
the ten months ended August 31, 1994 and for each of the years in the eight-year
period ended October 31, 1993. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the respective financial positions of MFS
Money Market Fund and MFS Government Money Market Fund at August 31, 1996, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 1996
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
<TABLE>
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
<C> <C>
TRUSTEES AUDITORS
A. Keith Brodkin* - Chairman and President Deloitte & Touche LLP
Richard B. Bailey* - Private Investor; INVESTOR INFORMATION
Former Chairman and Director (until 1991), For MFS stock and bond market outlooks,
Massachusetts Financial Services Company; call toll free: 1-800-637-4458 anytime from
Director, Cambridge Bancorp; Director, a touch-tone telephone.
Cambridge Trust Company
For information on MFS mutual funds,
Peter G. Harwood - Private Investor call your financial adviser or, for an
information kit, call toll free:
J. Atwood Ives - Chairman and Chief 1-800-637-2929 any business day from
Executive Officer, Eastern Enterprises 9 a.m. to 5 p.m. Eastern time (or leave
a message anytime).
Lawrence T. Perera - Partner,
Hemenway & Barnes INVESTOR SERVICE
MFS Service Center, Inc.
William J. Poorvu - Adjunct Professor, P.O. Box 2281
Harvard University Graduate School of Boston, MA 02107-9906
Business Administration
For general information, call toll free:
Charles W. Schmidt - Private Investor 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive
Vice President, Director and Secretary, For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
Jeffrey L. Shames* - President and Director, (To use this service, your phone must be equipped with
Massachusetts Financial Services Company a Telecommunications Device for the Deaf.)
Elaine R. Smith - Independent Consultant For share prices, account balances and
exchanges, call toll free: 1-800-MFS-TALK
David B. Stone - Chairman, North American (1-800-637-8255) anytime from a touch-tone telephone.
Management Corp. (investment advisers)
WEB SITE
INVESTMENT ADVISER http://www.mfs.com
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741 --------------------------------------------
FUND MANAGER [DALBAR For the second year in a row,
Geoffrey L. Kurinsky* LOGO] MFS earned a #1 ranking in
TOP RATED DALBAR, Inc.'s Broker/Dealer
TREASURER SERVICE Survey, Main Office Operations
W. Thomas London* Service Quality category. The
firm achieved a 3.49 overall score - on a
ASSISTANT TREASURER scale of 1 to 4 - in the 1995 survey. A total
James O. Yost* of 71 firms responded, offering input on the
quality of service they receive from 36
SECRETARY mutual fund companies nationwide. The survey
Stephen E. Cavan* contained questions about service quality in
17 categories, including "knowledge of phone
ASSISTANT SECRETARY service contacts," "accuracy of transaction
James R. Bordewick, Jr.* processing," and "overall ease of doing
business with the firm." The 1996 survey
CUSTODIAN results were not available at the time of
State Street Bank and Trust Company this printing.
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-------------
MFS(R) MONEY [DALBAR LOGO: #1 BULK RATE
MARKET FUND TOP RATED SERVICE] U.S. POSTAGE
PAID
MFS(R) PERMIT #55638
GOVERNMENT BOSTON, MA
MONEY MARKET -------------
FUND
500 Boylston Street
Boston, MA 02116
[LOGO: M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)]
(C)1996 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
MCM-2 10/96 45M 10/310/22
