<PAGE>
[Logo] MFS(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
ANNUAL REPORT O AUGUST 31, 1998
[Graphic Omitted]
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 19)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Portfolio of Investments .................................................. 7
Financial Statements ...................................................... 9
Notes to Financial Statements ............................................. 14
Independent Auditors' Report .............................................. 17
Trustees and Officers ..................................................... 21
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HIGHLIGHTS
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o THE ANNUALIZED YIELD ON AN INVESTMENT IN MFS(R) MONEY MARKET FUND FOR THE
SEVEN-DAY PERIOD ENDED AUGUST 31, 1998, WAS 5.04% VERSUS 4.95% FOR THE
SAME PERIOD ENDED AUGUST 31, 1997. FOR THE SAME PERIODS, THE ANNUALIZED
YIELD ON AN INVESTMENT IN MFS(R) GOVERNMENT MONEY MARKET FUND ROSE FROM
4.87% TO 4.88%. (PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.)
o AT PRESENT, WE BELIEVE MFS MONEY MARKET FUNDS LOOK ESPECIALLY ATTRACTIVE
CONSIDERING THE VOLATILITY IN THE DOMESTIC AND OVERSEAS MARKETS.
o THE PORTFOLIO OF MFS MONEY MARKET FUND INCLUDES ONLY THE HIGHEST-QUALITY
CORPORATE, BANK, AND GOVERNMENT SECURITIES, WHILE MFS GOVERNMENT MONEY
MARKET FUND'S PORTFOLIO INVESTS 100% OF ITS ASSETS IN 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.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
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[Photo of Jeffrey L. Shames]
- ----------------------------
Jeffrey L. Shames
Dear Shareholders,
In the coming year, MFS will celebrate its 75\t/\h/ anniversary. In 1924, our
Massachusetts Investors Trust, the nation's first mutual fund, opened to the
public and helped launch a revolution in investing that continues today. In
the 75 years since, MFS has grown with its investors not only through bear
markets, economic and political turmoil, wars, and oil shortages, but also
through long periods of growth and prosperity. We are very proud of our record
of investment management and service to shareholders throughout
our history.
One of the best ways for us to serve our shareholders is to help them understand
some of the reasons behind developments in the investment markets and, when
necessary, to take a more cautious outlook. This is particularly important
during periods of market volatility such as we are experiencing this year, when
equity prices do not follow a straight course. In light of this summer's
volatility, it is clear that equity valuations have risen to a point at which
stock prices have become vulnerable to changes in the investment environment
such as a slowing economy, earnings disappointments, and global economic and
political turmoil. While we continue to hold a favorable long-term outlook for
the equity markets, we also believe that this market correction is overdue and
could continue for several months. However, in our view, this is a healthy
near-term event that should rid the financial system of excesses that have
developed.
Currently, equity investors seem to be focused on the slowdown in corporate
earnings and, more recently, on the continuing uncertainty overseas,
particularly in Russia and some of the emerging markets. In the second
quarter, for example, average earnings growth for companies in the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock total return performance, was about 3%, well below what people were
expecting a year ago. As a result of this and continuing concerns about Asia
and emerging markets, the stock markets pulled back from the record-high
levels set in mid-July. This retreat has helped correct some -- but not all --
of the overvaluations that have been building in the markets for some time.
Prior to July, equity prices had been rising without a corresponding increase
in corporate earnings. As a result, price-to-earnings (P/E) ratios, or the
amount investors paid for stocks in relation to companies'
earnings per share, also went up. A year ago this July, the average P/E ratio
for stocks in the S&P 500 stood at approximately 23; this July, it was at
about 28, and it declined to approximately 25 by early September. If this
summer's downturn helps create more reasonable valuations, we believe it could
provide a sounder long-term foundation for the equity markets. On another
positive note, interest rates have been relatively stable for several months
as inflation has remained low. In an environment of low interest rates, stocks
become more attractive than most fixed-income investments, while low inflation
helps control companies' costs.
Internationally, the economic turmoil in Asia continues to be a concern to us,
while Russia is facing political gridlock and economic uncertainty and Latin
American economies are feeling substantial pressure. We believe the United
States has yet to see the full impact of this crisis. There have been brief
periods of improvement in a few countries but, for the most part, most of
these economies are still very weak and the situation could turn worse before
getting better. At the same time, the Asian turmoil has had the beneficial
effect of moderating U.S. growth and keeping inflation in check, which has
helped establish a favorable interest-rate environment.
Countering the situation in Asia has been the growing strength of European
economies, although European equity markets have also seen some volatility
this summer. But as these countries move toward economic union, they are
benefiting from a convergence of interest rates to lower levels, a rapid
expansion of manufacturing and service businesses, and an increasingly strong
consumer sector. This has helped American exporters offset some of their Asian
losses while providing investment opportunities in developed and emerging
European markets.
Given the uncertainty arising from these conflicting developments, we believe
that it is prudent to remind investors of the need to take a long-term view and
to diversify their investments across a range of asset classes. This includes
portfolios that focus on bond and international investments as well as on the
U.S. stock market. At MFS, we also believe our decades-long commitment to
original, company-by-company research gives us an advantage by helping us find
companies that we think can keep growing or gain market share during periods of
turmoil. To help fulfill this commitment and to provide the broadest possible
coverage of industry sectors and individual companies, MFS continues to increase
its number of full-time research analysts, who thoroughly investigate each
company's earnings potential and position in its industry as well as the overall
prospects for that industry.
We also use active portfolio management on the fixed-income side, using our
extensive research and credit analysis to help reduce the potential for price
declines and enhance the opportunity for appreciation. Every year, both fixed-
income and equity managers meet with thousands of credit issuers and
companies. They also attend many presentations, closely follow sources of
industry research, and keep track of competitors.
As we have for 75 years, we will continue to apply this discipline of
thorough, bottom-up research to both the equity and fixed-income markets
because we believe it offers the best potential for providing favorable long-
term performance for our shareholders -- regardless of changes in the overall
market environment.
We appreciate your confidence 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)
September 14, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
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[Photo of Jean O. Alessandro]
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Jean O. Alessandro
Dear Shareholders,
Except for typical year-end pressures, short-term interest rates have remained
flat over the past year. As a result, the annualized yield on an investment in
MFS MONEY MARKET FUND for the seven-day period ended August 31, 1998, was
5.04%, versus 4.95% for the same period ended August 31, 1997. For the same
periods, the annualized yield on an investment in MFS GOVERNMENT MONEY MARKET
FUND rose from 4.87% to 4.88%. At present, we believe MFS money market funds
look especially attractive considering the volatility in the domestic and
overseas markets. As a comparison, two-year and five-year U.S. Treasuries are
yielding 4.90%. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.)
During the past year, the Federal Reserve Board (the Fed) did not adjust
monetary policy due to strong economic growth and low inflation offset by
worldwide economic woes. The federal funds rate, the interest rate charged by
banks to other banks in need of overnight loans, has remained at 5.50% for the
entire period, and yields on 90-day commercial paper have stayed relatively
unchanged. With continued turmoil in the world financial markets, we look for
the Fed to adopt a neutral to easing bias in the next several months; thus, we
expect short-term interest rates to remain flat or to move slightly lower.
The average maturities for MFS MONEY MARKET FUND and MFS GOVERNMENT MONEY
MARKET FUND on August 31, 1998, were 42 and 45 days, respectively, versus 39
and 41 days on August 31, 1997. Going forward, we will target the 45- to 50-
day average maturity range given our expectation of lower interest rates.
The portfolio of MFS MONEY MARKET FUND includes only the highest-quality
corporate, bank, and government securities in order to provide investors with
maximum security against credit risk. The Fund has no direct exposure to
Russia, Asia, or Latin America. In fact, on August 31, 1998, approximately 64%
of this Fund's net assets were invested in 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. At the same
time, MFS GOVERNMENT MONEY MARKET FUND'S portfolio goes further, investing
100% of its assets in 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. With such conservative
guidelines and restrictions, we believe both Funds should be well positioned
to meet their objective of current income with preservation of capital and
liquidity.
Respectfully,
/s/ Jean O. Alessandro
Jean O. Alessandro
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are 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.
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PORTFOLIO MANAGER'S PROFILE
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JEAN O. ALESSANDRO IS A PORTFOLIO MANAGER AT MFS INVESTMENT
MANAGEMENT(R). SHE MANAGES MFS(R) CASH RESERVE FUND, MFS(R) GOVERNMENT
MONEY MARKET FUND, MFS(R) MONEY MARKET FUND, MFS(R) MERIDIAN(SM) MONEY
MARKET FUND, THE MONEY MARKET SERIES OFFERED THROUGH MFS(R)/SUN LIFE
ANNUITY PRODUCTS AND MFS(R) VARIABLE INSURANCE TRUST.
MS. ALESSANDRO JOINED MFS IN 1986 AS A FIXED-INCOME TRADING ASSISTANT.
FROM 1986 TO 1990, SHE WAS A MONEY MARKET TRADER AND, FROM 1990 TO 1993,
A SENIOR MONEY MARKET SPECIALIST. SHE HAS BEEN AN INVESTMENT OFFICER
SINCE 1993.
MS. ALESSANDRO EARNED A BACHELOR'S DEGREE FROM THE UNIVERSITY OF
CONNECTICUT.
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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 adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: THE FUNDS SEEK AS HIGH A LEVEL OF CURRENT INCOME AS
IS CONSIDERED CONSISTENT WITH THE PRESERVATION OF
CAPITAL AND LIQUIDITY.
COMMENCEMENT OF INVESTMENT OPERATIONS: MFS MONEY MARKET FUND --
DECEMBER 19, 1975 MFS GOVERNMENT MONEY MARKET FUND --
FEBRUARY 26, 1982
SIZE: MFS MONEY MARKET FUND -- $1.1 BILLION NET ASSETS AS
OF AUGUST 31, 1998 MFS GOVERNMENT MONEY MARKET FUND
-- $44.8 MILLION NET ASSETS AS OF AUGUST 31, 1998
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE.
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<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- August 31, 1998
MFS Money Market Fund
Commercial Paper - 38.7%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Archer Daniels Midland Co., due 10/13/98 - 12/08/98 $ 21,000 $ 20,806,695
Associates Corp. of North America, due 9/01/98 50,000 50,000,000
BankAmerica Corp., due 9/14/98 10,000 9,980,139
Bellsouth Telecomm, Inc., due 9/03/98 7,900 7,897,591
Carolina Power & Light Co., due 9/25/98 - 10/05/98 15,000 14,937,133
Caterpillar Financial Services NV, due 9/11/98 10,000 9,984,722
Coca-Cola Co., due 10/19/98 12,000 11,912,480
Consolidated Natural Gas Co., due 10/01/98 10,000 9,954,250
Du Pont (E.I.) de Nemours & Co., due 9/02/98 - 10/28/98 11,200 11,159,081
Duke Power Co., due 10/16/98 - 11/24/98 20,100 19,903,289
Ford Motor Credit Corp., due 9/03/98 - 2/16/99 20,000 19,742,611
General Electric Capital Corp., due 9/01/98 - 12/28/98 50,000 49,740,005
General Motors Acceptance Corp., due 9/16/98 - 11/16/98 20,100 19,941,935
General Re Corp., due 10/14/98 8,118 8,064,669
Goldman Sachs Group LP, due 9/08/98 - 9/10/98 20,000 19,974,945
Lucent Tech, Inc., due 9/28/98 - 10/28/98 22,000 21,854,325
Merrill Lynch & Co., Inc., due 9/09/98 - 9/22/98 20,000 19,955,358
Minnesota Mining & Manufacturing Co., due 10/20/98 - 11/19/98 15,000 14,865,393
Morgan (J.P.) & Co., Inc., due 10/15/98 - 12/11/98 19,390 19,204,389
Nationsbank Corp., due 10/08/98 - 1/14/99 26,000 25,729,987
Sheffield Receivables Corp., due 10/08/98 10,000 9,943,370
Wachovia Corp., due 9/21/98 - 9/23/98 18,800 18,739,757
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Total Commercial Paper, at Amortized Cost $ 414,292,124
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U.S. Government and Agency Obligations - 47.6%
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Federal Home Loan Bank, due 9/01/98 - 2/25/99 $254,604 $ 252,404,522
Federal Home Loan Mortgage, due 9/01/98 - 12/07/98 134,900 134,288,504
Federal National Mortgage Assn., due 9/24/98 - 2/11/99 124,561 122,887,536
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Total U.S. Government and Agency Obligations, at Amortized Cost $ 509,580,562
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Repurchase Agreement - 16.8%
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Goldman Sachs, dated 8/31/98, due 9/01/98, total to
be received $180,028,850 (secured by various U.S.
Treasury and Federal Agency obligations held in a
jointly traded account),
at Cost $180,000 $ 180,000,000
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Total Investments, at Amortized Cost and Value $1,103,872,686
Other Assets, Less Liabilities - (3.1)% (32,760,106)
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Net Assets - 100.0% $1,071,112,580
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See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- August 31, 1998
MFS Government Money Market Fund
U.S. Government and Agency Obligations - 89.9%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Farm Credit Bank, due 9/09/98 - 11/09/98 $ 9,800 $ 9,752,148
Federal Home Loan Bank, due 9/02/98 - 10/21/98 9,100 9,066,763
Federal Home Loan Mortgage, due 9/17/98 - 12/09/98 6,400 6,348,190
Federal National Mortgage Assn., due 9/15/98 - 1/19/99 13,302 13,157,368
Tennessee Valley Authority, due 9/24/98 - 10/29/98 2,000 1,987,863
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Total U.S. Government and Agency Obligations, at Amortized Cost $40,312,332
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Repurchase Agreement - 8.3%
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Goldman Sachs, dated 8/31/98, due 9/01/98, total to be
received $3,740,599 (secured by various U.S. Treasury
and Federal Agency obligations held in a jointly
traded account), at Cost $ 3,740 $ 3,740,000
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Total Investments, at Amortized Cost and Value $44,052,332
Other Assets, Less Liabilities - 1.8% 790,805
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Net Assets - 100.0% $44,843,137
- ------------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
<CAPTION>
- ------------------------------------------------------------------------------------------------
MFS MONEY MFS GOVERNMENT
AUGUST 31, 1998 MARKET FUND MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at amortized cost and value $ 923,872,686 $40,312,332
Repurchase agreements, at cost and value 180,000,000 3,740,000
-------------- -----------
Total investments, at amortized cost and value $1,103,872,686 $44,052,332
Cash 80,913 363
Receivable for Fund shares sold 19,568,530 893,030
Interest receivable 28,850 599
Other assets 3,397 262
-------------- -----------
Total assets $1,123,554,376 $44,946,586
-------------- -----------
Liabilities:
Distributions payable $ 408,655 $ 4,641
Payable for Fund shares reacquired 51,737,586 44,354
Payable to affiliates -
Management fee 40,077 1,800
Shareholder servicing agent fee 10,116 405
Administrative fee 1,329 54
Accrued expenses and other liabilities 244,033 52,195
-------------- -----------
Total liabilities $ 52,441,796 $ 103,449
-------------- -----------
Net assets (represented by paid-in capital) $1,071,112,580 $44,843,137
============== ===========
Shares of beneficial interest outstanding 1,071,112,580 44,843,137
============= ==========
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
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
Statements of Operations
MFS Money Market Fund
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YEAR ENDED AUGUST 31, 1998
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Net investment income:
Interest income $39,060,435
-----------
Expenses -
Management fee $ 3,293,238
Trustees' compensation 55,781
Shareholder servicing agent fee 822,465
Administrative fee 98,748
Transfer agent fee 286,560
Custodian fee 223,989
Printing 32,301
Postage 156,420
Auditing fees 14,090
Legal fees 2,195
Miscellaneous 172,136
-----------
Total expenses $ 5,157,923
Fees paid indirectly (182,487)
-----------
Net expenses $ 4,975,436
-----------
Net investment income $34,084,999
===========
MFS Government Money Market Fund
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YEAR ENDED AUGUST 31, 1998
- -------------------------------------------------------------------------------
Net investment income:
Interest income $2,645,073
----------
Expenses -
Management fee $ 238,557
Trustees' compensation 6,899
Shareholder servicing agent fee 56,337
Administrative fee 6,702
Transfer agent fee 12,684
Custodian fee 19,420
Printing 1,744
Postage 6,675
Auditing fees 14,490
Legal fees 1,318
Miscellaneous 55,629
----------
Total expenses $ 420,455
Fees paid indirectly (15,603)
----------
Net expenses $ 404,852
----------
Net investment income $2,240,221
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets
MFS Money Market Fund
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YEAR ENDED AUGUST 31, 1998 1997
- -------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income, declared as
distributions to shareholders $ 34,084,999 $ 27,586,652
-------------- ------------
Total increase (decrease) in net
assets from Fund share transactions $ 436,872,649 $ (9,964,991)
Net assets:
At beginning of period 634,239,931 644,204,922
-------------- ------------
At end of period $1,071,112,580 $634,239,931
============== ============
MFS Government Money Market Fund
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YEAR ENDED AUGUST 31, 1998 1997
- -------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income, declared as
distributions to shareholders $ 2,240,221 $ 1,692,545
----------- -----------
Total increase (decrease) in net
assets from Fund share transactions $ 6,456,620 $(4,112,930)
Net assets:
At beginning of period 38,386,517 42,499,447
----------- -----------
At end of period $44,843,137 $38,386,517
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
MFS Money Market Fund
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TEN MONTHS
YEAR ENDED AUGUST 31, ENDED YEAR ENDED
--------------------------------------------------- AUGUST 31, OCTOBER 31,
1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<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 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.02 $ 0.02
Less distributions declared
to shareholders from net
investment income (0.05) (0.05) (0.05) (0.05) (0.02) (0.02)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 5.03% 4.61% 4.86% 5.04% 2.91%+ 2.39%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.74% 0.80% 0.79% 0.76% 0.78%+ 0.83%
Net investment income 4.88% 4.71% 4.78% 4.92% 2.95%+ 2.39%
Net assets at end of period
(000 omitted) $1,071,113 $634,240 $644,205 $410,798 $435,780 $350,316
+Annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
<TABLE>
MFS Money Market Fund
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.03 $ 0.06 $ 0.07 $ 0.08 $ 0.07
Less distributions declared to shareholders
from net investment income (0.03) (0.06) (0.07) (0.08) (0.07)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 3.35% 6.07% 7.99% 8.84% 7.12%
Ratios (to average net assets)/Supplemental data:
Expenses 0.87% 0.82% 0.76% 0.83% 0.83%
Net investment income 3.36% 5.94% 7.60% 8.45% 6.72%
Net assets at end of period (000 omitted) $448,825 $541,945 $677,164 $676,382 $664,895
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
MFS Government Money Market Fund
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TEN MONTHS
YEAR ENDED AUGUST 31, ENDED YEAR ENDED
--------------------------------------------------- AUGUST 31, OCTOBER 31,
1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<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 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.02 $ 0.02
Less distributions declared to
shareholders from net investment
income (0.05) (0.05) (0.05) (0.05) (0.02) (0.02)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 4.85% 4.81% 4.73% 4.92% 2.64%+ 2.33%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.88% 0.85% 0.89% 0.84% 1.05%+ 0.99%
Net investment income 4.70% 4.02% 4.64% 4.82% 2.64%+ 2.20%
Net assets at end of period
(000 omitted) $44,843 $38,387 $42,499 $38,440 $38,347 $35,576
+Annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
<TABLE>
MFS Government Money Market Fund
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.03 $ 0.06 $ 0.07 $ 0.08 $ 0.06
Less distributions declared to shareholders
from net investment income (0.03) (0.06) (0.07) (0.08) (0.06)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 3.27% 5.68% 7.55% 8.61% 6.47%
Ratios (to average net assets)/Supplemental data:
Expenses 0.87% 0.83% 0.80% 0.85% 0.74%
Net investment income 3.28% 5.53% 7.34% 8.29% 6.29%
Net assets at end of period (000 omitted) $47,629 $50,655 $53,701 $51,619 $50,343
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
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 approximates market 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 Funds may enter into repurchase agreements with
institutions that the Funds' investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Funds require that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Funds to obtain those securities
in the event of a default under the repurchase agreement. The Funds monitor, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the Funds under each such
repurchase agreement. The Funds, 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
is amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations.
Fees Paid Indirectly - The Funds' custody fee is calculated as a percentage of
the Funds' month end net assets. The fees are reduced according to fee
arrangements that measure the value of cash deposited with the custodian by
the Funds. These amounts are shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - The Funds' 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 their taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Funds file a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Funds' tax returns
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
Distributions to shareholders are recorded on the ex-dividend date. The Funds
distinguish between distributions on a tax basis and a financial reporting
basis and require that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Funds have 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 and paid monthly at the following annual rates:
BASED ON AVERAGE NET ASSETS
---------------------------
First $300 million 0.500%
Next $400 million 0.450%
Next $300 million 0.400%
In excess of $1 billion 0.350%
The Funds pay 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 Funds from MFS. Certain officers and Trustees of the
Funds are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Funds have an unfunded defined benefit plan
for all of 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 $18,161 and $2,524, respectively for the year
ended August 31, 1998.
Administrator - The Funds have an administrative services agreement with MFS
to provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As partial reimbursement for
the cost of providing these services, the Funds pay MFS an administrative fee
at the following annual percentages of the Funds' 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 each Fund's average daily net assets at an effective annual rate
of 0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of
the average daily net assets of each Fund at an effective annual rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements for MFS Money Market Fund, aggregated
$20,677,890,755 and $20,321,880,866, respectively.
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements for MFS Government Money Market Fund,
aggregated $820,619,323 and $822,950,112, 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 ($1.00 par value).
Transactions in Fund shares were as follows:
<TABLE>
MFS Money Market Fund
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 17,538,171,079 8,979,377,073
Shares issued to shareholders in reinvestment of
distributions 24,382,673 21,300,694
Shares reacquired (17,125,681,103) (9,010,642,758)
--------------- ---------------
Net increase (decrease) 436,872,649 (9,964,991)
=============== ===============
</TABLE>
<TABLE>
MFS Government Money Market Fund
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 669,593,096 118,706,075
Shares issued to shareholders in reinvestment of
distributions 1,902,955 1,548,739
Shares reacquired (665,039,431) (124,367,744)
------------ ------------
Net increase (decrease) 6,456,620 (4,112,930)
============ ============
</TABLE>
(6) Line of Credit
The Funds and other affiliated funds participate in a $805 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 fees allocated
to MFS Money Market Fund and MFS Government Money Market Fund for the year
ended August 31, 1998, were $4,175 and $300, respectively.
<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, 1998, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended August 31, 1998 and
1997, and the financial highlights for each of the years in the four-year period
ended August 31, 1998, the ten months ended August 31, 1994 and for each of the
years in the six-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, 1998 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 financial positions of MFS Money Market
Fund and MFS Government Money Market Fund at August 31, 1998, 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 9, 1998
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1998.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Peter G. Harwood - Private Investor
CUSTODIAN
J. Atwood Ives - Chairman and Chief Executive State Street Bank and Trust Company
Officer, Eastern Enterprises (diversified
services company) AUDITORS
Deloitte & Touche LLP
Lawrence T. Perera - Partner, Hemenway
& Barnes (attorneys) INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll
William J. Poorvu - Adjunct Professor, Harvard free: 1-800-637-4458 anytime from a touch-tone
University Graduate School of Business telephone.
Administration
For information on MFS mutual funds, call your
Charles W. Schmidt - Private Investor financial adviser or, for an information kit,
call toll free: 1-800-637-2929 any business day
Arnold D. Scott* - Senior Executive from 9 a.m. to 5 p.m. Eastern time (or leave a
Vice President, Director, and Secretary, message anytime).
MFS Investment Management
INVESTOR SERVICE
Jeffrey L. Shames* - Chairman, Chief MFS Service Center, Inc.
Executive Officer, and Director, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Elaine R. Smith - Independent Consultant For general information, call toll free:
1-800-225-2606 any business day from
David B. Stone - Chairman and Director, 8 a.m. to 8 p.m. Eastern time.
North American Management Corp.
(investment advisers) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from
INVESTMENT ADVISER 9 a.m. to 5 p.m. Eastern time. (To use this
Massachusetts Financial Services Company service, your phone must be equipped with a
500 Boylston Street Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, and
DISTRIBUTOR exchanges, call toll free: 1-800-MFS-TALK
MFS Fund Distributors, Inc. (1-800-637-8255) anytime from a touch-tone
500 Boylston Street telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
PORTFOLIO MANAGER www.mfs.com
Jean O. Alessandro*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) MONEY MARKET FUND ------------------
MFS(R) GOVERNMENT MONEY MARKET FUND Bulk Rate
U.S. Postage
[Logo] MFS(R) Paid
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------------
500 Boylston Street
Boston, MA 02116-3741
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MCM-2 10/98 55M 10/310/22
