<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
ANNUAL REPORT o AUGUST 31, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Portfolio of Investments .................................................. 7
Financial Statements ...................................................... 10
Notes to Financial Statements ............................................. 14
Independent Auditors' Report .............................................. 17
MFS' Year 2000 Readiness Disclosure ....................................... 19
Trustees and Officers ..................................................... 21
MFS ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis
in Asia threatened an already weak U.S. economy. Corporate earnings were flat,
and economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low.
Many corporations are focused on improving their profitability, and investors
have been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999
will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis
has passed. In fact, Japan's economic woes seem to have reached bottom.
Although the process is in its infancy, some Japanese corporations not only
are talking about restructuring and cost cutting, they also are beginning to
take action, looking within to become more competitive and improve returns on
equity. While still lagging the United States, Europe is beginning to
restructure and consolidate. These signs of international growth have
contributed to concerns that the U.S. economy now may be too strong.
In June, and again in August, the Fed raised rates by one-quarter of a
percentage point to help ward off the specter of inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk - whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago.
We believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior
that has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is
through our continuing commitment to MFS Original Research(R) and our
fundamental investment tenet of long-term investing. Whether markets
are up or down, MFS analysts focus on analyzing industries and visiting
companies to determine the long-term winners and the prices that will make
them attractive opportunities. Because all companies will not benefit equally
from the improving international environment, bottom-up research remains
critical to identifying those that we believe are successfully restructuring,
consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at
attractive prices. For this reason, we are continuing to expand our domestic
and international capabilities to ensure that MFS has primary, in-house
research on companies worldwide. We believe that we have built the right
investment team, backed by MFS Original Research, to take advantage of those
opportunities for our shareholders.
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 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Jean O. Alessandro]
Jean O. Alessandro
Dear Shareholders,
During the past year, short-term interest rates have been quite volatile. The
annualized yield on an investment in MFS(R) MONEY MARKET FUND for the seven-
day period ended August 31, 1999, was 4.70%, versus 5.04% for the same period
ended August 31, 1998. MFS(R) GOVERNMENT MONEY MARKET FUND'S seven-day yield
was 4.51%, compared to 4.88% one year ago. For the 12 months ended August 31,
1999, MFS MONEY MARKET FUND provided a total return of 4.54%, compared to
4.43% for the average money market fund tracked by Lipper Analytical Services,
Inc., an independent firm that reports mutual fund performance. MFS GOVERNMENT
MONEY MARKET FUND'S 12-month total return ended August 31, 1999, was 4.35%,
versus 4.42% for the Lipper government money market average.
In response to global financial and economic crises, the Federal Reserve Board
(the Fed) dramatically lowered the overnight interbank lending rate -- the
federal funds rate -- from 5.50% to 4.75% from late September through mid-
November 1998. The Fed remained on hold until the summer of 1999, when it
raised that rate by 25 basis points (0.25%) on June 30 and again by 25 basis
points on August 24 to slow growth and head off inflation. These last two
interest-rate moves may be seen as reversing the effect of two of the three
reductions in the federal funds target rate last fall, as the Fed became
nervous about inflationary forces picking up steam and the global economy
strengthening. As a result of the rate decline last fall, the yields on 90-day
commercial paper and government agencies fell approximately 70 basis points
(0.70%) by January 1999. These yields remained stable until June 1999 and then
went up approximately 50 basis points (0.50%), coinciding with the Fed's rate
increase over the summer.
In September 1998, in expectation of lower rates, we extended the average
maturities of both Funds to the 60- to 65-day range, then allowed them to return
to approximately 45 days starting in December 1998 and continuing through August
of this year. The average maturities for MFS MONEY MARKET FUND and MFS
GOVERNMENT MONEY MARKET FUND on August 31, 1999, were 47 and 40 days,
respectively, versus 42 and 45 days on August 31, 1998. Given our expectation of
stable to slightly higher short-term rates, we are comfortable continuing to
target neutral average maturities in the 40- to 45-day range over the next few
months.
The portfolio of MFS MONEY MARKET FUND is limited to only the highest-quality
commercial paper, repurchase agreements, and U.S. Treasury and government-
agency securities in order to provide investors with maximum security against
credit risk. On August 31, 1999, approximately 58% of the 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, with the balance
invested in top-tier commercial paper. The large position in government-
guaranteed paper was due to the narrow yield differentials between government-
agency securities and high-quality commercial paper and to our conservative
investment guidelines, which are among the strictest in the industry. MFS
GOVERNMENT MONEY MARKET FUND goes one step 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 our emphasis on quality for both
Funds, we believe we will be well positioned to provide current income,
liquidity, and preservation of capital.
Respectfully,
/s/ Jean O. Alessandro
Jean O. Alessandro
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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JEAN O. ALESSANDRO IS ASSISTANT VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) CASH RESERVE FUND, MFS(R)
GOVERNMENT MONEY MARKET FUND, MFS(R) MONEY MARKET FUND, THE MONEY MARKET
SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS, AND MFS(R)
MONEY MARKET SERIES (PART OF MFS(R) VARIABLE
INSURANCE TRUST(SM)).
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 WAS NAMED INVESTMENT OFFICER IN
1993, PORTFOLIO MANAGER IN 1998, AND ASSISTANT VICE PRESIDENT IN 1999.
MS. ALESSANDRO EARNED A BACHELOR'S DEGREE FROM THE UNIVERSITY OF
CONNECTICUT.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY
AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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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 consultant, 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, 1999
MFS GOVERNMENT MONEY MARKET FUND -- $57.1 MILLION NET
ASSETS AS OF AUGUST 31, 1999
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
SEE THE PROSPECTUS FOR DETAILS.
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<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 1999
<TABLE>
<CAPTION>
MFS Money Market Fund
Commercial Paper - 61.2%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
American General Corp., due 9/29/99 $ 10,000 $ 9,960,177
Ameritech Corp., due 9/21/99 - 9/23/99 20,000 19,940,311
Associates Corp. of North America, due 9/01/99 60,000 60,000,000
AT&T Corp., due 9/29/99 10,000 9,959,167
Banc One Corp., due 9/13/99 - 9/28/99 32,500 32,421,721
Bank of America, FSB, due 9/20/99 - 10/05/99 20,000 19,922,964
Bank of Nova Scotia, due 9/30/99 10,000 9,961,172
BankAmerica Corp., due 11/02/99 10,000 9,917,161
Bellsouth Telecommunications, Inc., due 1/25/00 10,000 9,785,461
Canadian Wheat Board, due 10/19/99 10,000 9,932,133
Cargill, Inc., due 1/14/00 - 1/21/00 27,000 26,431,653
Carolina Power & Light Co., due 9/07/99 - 9/10/99 16,700 16,682,257
Caterpillar Financial Services NV, due 9/02/99 10,000 9,998,633
CIT Group Holdings, Inc., due 9/01/99 60,000 60,000,000
Coca-Cola Co., due 10/12/99 10,000 9,941,917
Disney (Walt) Co., due 9/17/99 - 11/04/99 20,000 19,893,733
Dow Chemical Co., due 9/01/99 60,000 60,000,000
Duke Power Co., due 10/12/99 10,000 9,940,778
Ford Motor Credit Corp., due 12/14/99 12,000 11,818,693
Formosa Plastics (ABN-Amro), Series A, due 10/08/99 10,000 9,946,042
General Electric Capital Corp., due 9/22/99 - 10/27/99 30,500 30,326,197
General Mills Inc., due 9/07/99 10,000 9,991,417
General Motors Acceptance Corp., due 9/01/99 10,000 10,000,000
Goldman Sachs Group LP, due 10/18/99 - 10/28/99 20,000 19,856,317
Ing America Insurance, due 9/27/99 10,000 9,962,228
Mcgraw Hill, Inc., due 11/01/99 12,000 11,895,283
Merck & Co., Inc., due 9/03/99 30,000 29,991,167
Morgan (J.P.) & Co., Inc., due 1/18/00 - 1/19/00 24,000 23,497,800
National Rural Utilities Cooperative Finance Corp.,
due 10/26/99 - 1/24/00 30,000 29,568,697
Procter & Gamble Co., due 10/22/99 10,000 9,927,325
Salomon Smith Barney Holdings, Inc., due 10/05/99 - 1/28/00 30,000 29,657,444
UBS Finance Delaware, Inc., due 12/13/99 - 12/16/99 20,000 19,697,286
- -------------------------------------------------------------------------------------------------------
Total Commercial Paper, at Amortized Cost $ 660,825,134
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U.S. Government and Agency Obligations - 57.9%
- -------------------------------------------------------------------------------------------------------
Federal Agricultural Mortgage Corp., due 10/04/99 $ 10,000 $ 9,953,617
Federal Farm Credit Bank, due 10/29/99 10,000 9,924,117
Federal Home Loan Bank, due 9/01/99 - 2/25/00 255,840 254,892,027
Federal Home Loan Mortgage Corp., due 9/08/99 - 2/29/00 248,523 244,051,851
Federal National Mortgage Assn., due 9/03/99 - 12/10/99 107,407 106,647,258
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Total U.S. Government and Agency Obligations, at
Amortized Cost $ 625,468,870
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Repurchase Agreement - 18.5%
Goldman Sachs, dated 8/31/99, due 9/1/99, total to be
received $200,030,000 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account), at Cost $200,000 $ 200,000,000
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Total Investments, at Amortized Cost and Value $1,486,294,004
Other Assets, Less Liabilities - (37.6)% (406,324,979)
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,079,969,025
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See notes to financial statements.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 1999
<TABLE>
<CAPTION>
MFS Government Money Market Fund
U.S. Government and Agency Obligations - 95.5%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Agricultural Mortgage Corp., due 9/01/99 - 10/19/99 $ 8,400 $ 8,371,965
Federal Farm Credit Bank, due 9/01/99 - 11/08/99 4,250 4,230,492
Federal Home Loan Bank, due 9/01/99 - 1/18/00 11,000 10,924,081
Federal Home Loan Mortgage, due 9/02/99 - 2/03/00 14,177 14,089,027
Federal National Mortgage Assn., due 9/07/99 - 2/07/00 8,700 8,630,808
Student Loan Marketing Assn., due 1/27/00 1,000 978,746
Tennessee Valley Authority, due 9/09/99 - 9/27/99 7,300 7,283,991
- -------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations, at Amortized Cost $54,509,110
- -------------------------------------------------------------------------------------------------------
Repurchase Agreement - 4.3%
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Goldman Sachs, dated 8/31/99, due 9/1/99, total to be
received $2,472,371 (secured by various U.S. Treasury
and Federal Agency obligations), at Cost $ 2,472 $ 2,472,000
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Total Investments, at Amortized Cost and Value $56,981,110
Other Assets, Less Liabilities - 0.2% 92,675
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $57,073,785
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- ------------------------------------------------------------------------------------------------------------
MFS MONEY MFS GOVERNMENT
AUGUST 31, 1999 MARKET FUND MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at amortized cost and value $1,286,294,004 $54,509,110
Repurchase agreements, at cost and value 200,000,000 2,472,000
-------------- -----------
Total investments, at amortized cost and value $1,486,294,004 $56,981,110
Cash 6,967 1,059
Receivable for Fund shares sold 19,572,344 157,091
Interest receivable 30,000 371
Other assets 47,267 520
-------------- -----------
Total assets $1,505,950,582 $57,140,151
============== ===========
Liabilities:
Distributions payable $ 636,150 $ 6,642
Payable for Fund shares reacquired 425,050,698 29,412
Payable to affiliates -
Management fee 51,176 2,317
Shareholder servicing agent fee 11,775 463
Administrative fee 1,676 70
Accrued expenses and other liabilities 230,082 27,462
-------------- -----------
Total liabilities $ 425,981,557 $ 66,366
============== ===========
Net assets (represented by paid-in capital) $1,079,969,025 $57,073,785
============== ===========
Shares of beneficial interest outstanding 1,079,969,025 57,073,785
============== ===========
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, 1999
- --------------------------------------------------------------------------------
Net investment income:
Interest income $51,290,961
-----------
Expenses -
Management fee $ 4,563,031
Trustees' compensation 54,854
Shareholder servicing agent fee 1,084,990
Administrative fee 131,831
Custodian fee 293,011
Printing 46,608
Postage 183,362
Auditing fees 18,960
Legal fees 6,009
Miscellaneous 670,477
-----------
Total expenses $ 7,053,133
Fees paid indirectly (250,435)
-----------
Net expenses $ 6,802,698
-----------
Net investment income $44,488,263
===========
MFS Government Money Market Fund
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YEAR ENDED AUGUST 31, 1999
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Net investment income:
Interest income $2,493,197
----------
Expenses -
Management fee $ 248,853
Trustees' compensation 8,409
Shareholder servicing agent fee 53,118
Administrative fee 6,388
Custodian fee 21,446
Printing 3,019
Postage 6,674
Auditing fees 19,060
Legal fees 702
Miscellaneous 18,367
----------
Total expenses $ 386,036
Fees paid indirectly (15,428)
----------
Net expenses $ 370,608
----------
Net investment income $2,122,589
==========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
MFS Money Market Fund
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YEAR ENDED AUGUST 31, 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income, declared as distributions to
shareholders $ 44,488,263 $ 34,084,999
---------------- ----------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 27,617,655,370 $ 17,538,171,079
Shares issued in reinvestment of distributions 32,902,497 24,382,673
Shares reacquired (27,641,701,422) (17,125,681,103)
---------------- ----------------
Net increase in net assets from Fund share
transactions $ 8,856,445 $ 436,872,649
Net assets:
At beginning of period 1,071,112,580 634,239,931
---------------- ----------------
At end of period $ 1,079,969,025 $ 1,071,112,580
================ ================
<CAPTION>
MFS Government Money Market Fund
- -------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income, declared as distributions to
shareholders $ 2,122,589 $ 2,240,221
-------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 163,409,640 $ 669,593,096
Shares issued in reinvestment of distributions 2,010,227 1,902,955
Shares reacquired (153,189,219) (665,039,431)
-------------- --------------
Net increase in net assets from Fund share
transactions $ 12,230,648 $ 6,456,620
Net assets:
At beginning of period 44,843,137 38,386,517
-------------- --------------
At end of period $ 57,073,785 $ 44,843,137
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
MFS Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<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 $ 0.04 $ 0.05 $ 0.05 $ 0.05 $ 0.05
Less distributions declared to
shareholders from net investment
income (0.04) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.54% 5.03% 4.61% 4.86% 5.04%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.69% 0.74% 0.80% 0.79% 0.76%
Net investment income 4.38% 4.88% 4.71% 4.78% 4.92%
Net assets at end of period (000,000
omitted) $1,080 $1,071 $634 $644 $411
<CAPTION>
MFS Government Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<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 $ 0.04 $ 0.05 $ 0.05 $ 0.05 $ 0.05
Less distributions declared to shareholders --
From net investment income (0.04) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.35% 4.85% 4.81% 4.73% 4.92%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.78% 0.88% 0.85% 0.89% 0.84%
Net investment income 4.26% 4.70% 4.02% 4.64% 4.82%
Net assets at end of period (000 omitted) $57,074 $44,843 $38,387 $42,499 $38,440
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
See notes to financial statements.
</TABLE>
<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 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 Fund
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 discount is
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
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
Statements 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.
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 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 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 daily and paid monthly at the following annual
rates:
First $300 million of average net assets 0.50%
Next $400 million of average net assets 0.45%
Next $300 million of average net assets 0.40%
Average net assets in excess of $1 billion 0.35%
The Funds pay no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Funds, 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, and MFS Service
Center, Inc. (MFSC). The Funds have an unfunded defined benefit plan for all
of their 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 $19,444 and $3,202, respectively, for the
year ended August 31, 1999.
Administrator - The Funds have an administrative services agreement with MFS
to provide the Funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Funds pay MFS an administrative fee
at the following annual percentages of each 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 each Fund's average daily net assets at an effective annual
rate of 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage
of each Fund's average daily net assets at an effective annual rate of
0.1125%.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements for MFS Money Market Fund, aggregated
$50,496,280,572 and $50,178,589,000, respectively.
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements for MFS Government Money Market Fund,
aggregated $332,355,605 and $320,498,750, respectively.
(5) Shares of Beneficial Interest
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($1.00 par value).
(6) Line of Credit
The Funds 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 fees allocated to
MFS Money Market Fund and MFS Government Money Market Fund for the year ended
August 31, 1999, were $7,394 and $361, 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, 1999, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended August 31, 1999 and 1998,
and the financial highlights for each of the years in the five-year period ended
August 31, 1999. 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, 1999 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 position of MFS Money Market
Fund and MFS Government Money Market Fund at August 31, 1999, 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 7, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1999.
- --------------------------------------------------------------------------------
<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,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking
steps to ascertain the Y2K readiness of MFS' internal systems and is working
with our external systems vendors to determine whether they expect their
systems to be ready.
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. Each year, MFS' research analysts and portfolio managers
conduct more than 1,000 on-site meetings with companies whose securities are,
or may be, held in fund and client portfolios, and host an additional 1,500
meetings at MFS' headquarters. When assessing the Y2K readiness of these
companies, MFS' research analysts and portfolio managers may rely upon
discussions at these meetings as well as SEC disclosure documents and third-
party reports.
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, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact 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>
<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.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified services CUSTODIAN
company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway AUDITORS
& Barnes (attorneys) Deloitte & Touche LLP
William J. Poorvu - Adjunct Professor, Harvard INVESTOR INFORMATION
University Graduate School of Business For MFS stock and bond market outlooks, call toll
Administration free: 1-800-637-4458 anytime from a touch-tone
telephone.
Charles W. Schmidt - Private Investor
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive financial consultant or, for an informa- tion kit,
Vice President, Director, and Secretary, call toll free: 1-800-637-2929 any business day
MFS Investment Management from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* - Chairman, Chief
Executive Officer, and Director, INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman and Director, For general information, call toll free:
North American Management Corp. 1-800-225-2606 any business day from
(investment advisers) 8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER For service to speech- or hearing-impaired, call
Massachusetts Financial Services Company toll free: 1-800-637-6576 any business day from
500 Boylston Street 9 a.m. to 5 p.m. Eastern time. (To use this
Boston, MA 02116-3741 service, your phone must be equipped with a
Telecommunications Device for the Deaf.)
DISTRIBUTOR
MFS Fund Distributors, Inc. For share prices, account balances, and exchanges,
500 Boylston Street call toll free: 1-800-MFS-TALK (1-800-637-8255)
Boston, MA 02116-3741 anytime from a touch-tone telephone.
CHAIRMAN AND PRESIDENT WORLD WIDE WEB
Jeffrey L. Shames* www.mfs.com
PORTFOLIO MANAGER
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] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MCM-2 10/99 62M 10/310/22
