<PAGE>
[LOGO: M F S(SM) ANNUAL REPORT
INVESTMENT MANAGEMENT FOR YEAR ENDED
We invented the mutual fund(SM)] AUGUST 31, 1996
MFS(R) CASH RESERVE FUND
[Graphic Omitted: U.S. Treasury Building]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Fund Facts ................................................................. 2
Fund Manager's Overview .................................................... 3
Fund Manager's Profile ..................................................... 4
Portfolio Concentration .................................................... 4
Portfolio of Investments ................................................... 5
Financial Statements ....................................................... 6
Notes to Financial Statements ..............................................12
Independent Auditor Report .................................................16
Trustees and Officers ......................................................17
HIGHLIGHTS
* AS A RESULT OF A DECLINE IN SHORT-TERM INTEREST RATES DURING THE FIRST
SIX MONTHS OF THE FUND'S FISCAL YEAR, THE ANNUALIZED COMPOUNDED YIELD ON
AN INVESTMENT IN CLASS A SHARES OF THE FUND FOR THE SEVEN-DAY PERIOD
ENDED AUGUST 31, 1996 DECREASED FROM 5.1% TO 4.7%, WHILE THE ANNUALIZED
COMPOUNDED YIELD ON CLASS B SHARES FELL FROM 3.9% TO 3.6%. (A PORTION OF
THE MANAGEMENT FEE IS WAIVED BY THE INVESTMENT ADVISER. WITHOUT THIS
WAIVER, WHICH MAY BE RESCINDED AT ANY TIME, YIELDS FOR CLASS A AND CLASS
B SHARES WOULD HAVE BEEN 4.6% AND 3.5%, RESPECTIVELY.)
* AT THE BEGINNING OF THE FUND'S FISCAL YEAR, OUR AVERAGE MATURITIES WERE
LENGTHENED TO DEFEND AGAINST SLUMPING YIELDS. HOWEVER, AS YIELDS BEGAN TO
RISE, WE SHORTENED MATURITIES TO TAKE ADVANTAGE OF HIGHER YIELDS.
* BECAUSE OF THE NARROW YIELD SPREADS BETWEEN GOVERNMENT AGENCY OBLIGATIONS AND
COMMERCIAL PAPER, APPROXIMATELY 30% OF THE FUND'S NET ASSETS ARE INVESTED IN
COMMERCIAL PAPER, WITH THE BALANCE INVESTED IN SECURITIES ISSUED OR GUARANTEED
BY THE U.S. TREASURY OR GOVERNMENT AGENCIES OR INSTRUMENTALITIES.
<PAGE>
LETTER FROM THE CHAIRMAN
- --------------------------- Dear Shareholders:
With over half of 1996 behind us, the U.S.
economy appears to have settled into a pattern
[Photo of A. Keith Brodkin] of moderate growth and 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. Real growth in gross domestic product has surpassed
our expectations so far this year, and we now expect growth for all of 1996
could exceed 2.5%. Although the individual consumer appears 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. 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 market, persistent signs of economic weakness led to decreases
in short-term interest rates by the Federal Reserve Board in late 1995 and
early 1996. 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, the bond market was trading in a narrow
range as investors shifted between concern for the lack of a budget resolution
in Washington and hope that sluggish economic reports and low inflation might
lead to lower interest rates. Later, fixed-income markets began reacting to
conflicting signals regarding the economy's strength 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 equitably
valued.
Finally, you may notice, this shareholders' report incorporates a number of
changes which we hope you will find informative and useful. Following the Fund
Manager's Overview, we have added new information on the Fund's holdings,
including a chart illustrating the portfolio's concentration in the
investments that meet its criteria. Near the back of the report telephone
numbers and addresses are listed if you would like to contact MFS.
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
FUND FACTS
STRATEGY: THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK
AS HIGH A LEVEL OF CURRENT INCOME AS IS
CONSIDERED CONSISTENT WITH THE PRESERVATION
OF CAPITAL AND LIQUIDITY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
SIZE: $295.7 MILLION AS OF AUGUST 31, 1996
<PAGE>
FUND MANAGER'S OVERVIEW
- ------------------------------- Dear Shareholders:
Short-term interest rates declined modestly
during the first six months of the Fund's
[Photo of] Geoffrey L. Kurinsky fiscal year, then rebounded over the next
six months. As a result, the annualized
compounded yield on an investment in Class A
- ------------------------------- shares of the Fund for the seven-day period
ended August 31, 1996 decreased from 5.1% to 4.7%, while the annualized
compounded yield on Class B shares fell from 3.9% to 3.6%.
During the past 12 months, the Federal Reserve Board 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) twice. 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,
with signs of a strengthening economy, rates have backed up approximately 30
basis points (0.30%) as of the end of August. Furthermore, with the economy's
signs of acceleration, we believe short-term interest rates could experience
additional moderate increases over the next few months.
At the beginning of the Fund's 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 to take
advantage of higher yields. The average maturity of the Fund was 50 days on
August 31, 1996, versus 41 days on August 31, 1995.
The portfolio 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. Because of the very narrow yield
spreads between government agency obligations and commercial paper,
approximately 30% of the Fund's net assets were invested in commercial paper
as of August 31, 1996, with the balance invested in securities issued or
guaranteed by the U.S. Treasury or agencies or instrumentalities of the U.S.
government. Investments in the Fund 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. We believe this emphasis on quality should
allow the Fund 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
<PAGE>
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 CASH RESERVE FUND SINCE 1987.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1996
LARGEST SECTORS
Commercial Paper ............................... 30%
U.S. Gov't and Agency Obligations .............. 45%
Other Assets ................................... 1.3%
Repurchase Agreements .......................... 23.7%
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 OF INVESTMENTS - August 31, 1996
Commercial Paper - 30.0%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Disney (Walt) Co., due 12/20/96 $ 6,000 $ 5,903,567
du Pont (E.I.) de Nemours & Co., due
9/24/96 9,500 9,468,257
Duke Power Co., due 9/12/96 5,200 5,191,642
Ford Motor Credit Corp., due 2/19/97 5,700 5,555,149
General Motors Acceptance Corp., due
9/03/96 5,100 5,098,484
Hewlett Packard Co., due 9/23/96 5,000 4,983,714
Knight Ridder, Inc., due 10/28/96 5,000 4,958,200
PepsiCo, due 9/04/96 8,000 7,996,520
Raytheon Co., due 9/13/96 7,400 7,386,976
Sara Lee Corp., due 9/26/96 5,000 4,981,389
Toys "R" Us, Inc., due 9/27/96 8,000 7,969,551
Transamerica Corp., due 9/19/96 7,000 6,981,520
Warner-Lambert Co., due 11/07/96 8,200 8,119,574
Weyerhaeuser Co., due 9/03/96 4,000 3,998,807
- -----------------------------------------------------------------------------
Total Commercial Paper $ 88,593,350
- -----------------------------------------------------------------------------
U.S. Government and Agency Obligations - 45.0%
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 10/23/96
- 2/13/97 $40,645 $ 40,097,474
Federal Home Loan Mortgage Corp.,
due 9/03/96 - 11/06/96 33,950 33,809,430
Federal National Mortgage Assn.,
due 9/06/96 - 1/09/97 50,200 49,764,708
Student Loan Marketing Assn.,
due 9/25/96 9,400 9,366,975
- -----------------------------------------------------------------------------
Total U.S. Government and Agency Obligations $133,038,587
- -----------------------------------------------------------------------------
Repurchase Agreement - 23.7%
- -----------------------------------------------------------------------------
Goldman Sachs, dated 8/31/96, due
9/03/96, total to be received
$70,041,067 (secured by various
U.S. Treasury and federal agency
obligations in a jointly traded
account), at Amortized Cost $70,000 $ 70,000,000
- -----------------------------------------------------------------------------
Total Investments, at Amortized Cost $291,631,937
Other Assets, Less Liabilities - 1.3% 4,074,703
- -----------------------------------------------------------------------------
Net Assets - 100.0% $295,706,640
- -----------------------------------------------------------------------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
Assets:
Investments, at amortized cost and value $291,631,937
Cash 222,066
Receivable for Fund shares sold 4,436,450
Interest receivable 20,533
Other assets 1,841
------------
Total assets $296,312,827
------------
Liabilities:
Distributions payable $ 23,879
Payable for Fund shares reacquired 378,431
Payable to affiliates -
Management fee 6,526
Shareholder servicing agent fee 3,043
Distribution fee 131,745
Accrued expenses and other liabilities 62,563
------------
Total liabilities $ 606,187
------------
Net assets (represented by paid-in capital) $295,706,640
============
Shares of beneficial interest outstanding 295,706,640
============
Class A shares:
Net asset value, redemption price and offering price per share
(net assets of $37,872,178 / 37,872,178 shares of beneficial
interest outstanding) $1.00
=====
Class B shares:
Net asset value and offering price per share
(net assets of $251,192,440 / 251,192,440 shares of beneficial
interest outstanding) $1.00
=====
Class C shares:
Net asset value and offering price per share
(net assets of $6,642,022 / 6,642,022 shares of beneficial
interest outstanding) $1.00
=====
A contingent deferred sales charge may be imposed on redemptions of Class B
and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended August 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Interest $11,858,321
-----------
Expenses -
Management fee $ 1,191,151
Trustees' compensation 35,588
Shareholder servicing agent fee (Class A) 31,034
Shareholder servicing agent fee (Class B) 427,970
Shareholder servicing agent fee (Class C) 2,283
Distribution and service fee (Class B) 1,945,319
Distribution and service fee (Class C) 15,180
Custodian fee 93,779
Postage 74,434
Auditing fees 16,825
Printing 15,585
Legal fees 5,169
Miscellaneous 285,043
-----------
Total expenses $ 4,139,360
Reduction of expenses by investment adviser (215,813)
Fees paid indirectly (22,612)
-----------
Net expenses $ 3,900,935
-----------
Net investment income $ 7,957,386
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended August 31, 1996 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,957,386 $ 7,668,804
-------------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (952,277) $ (234,719)
From net investment income (Class B) (6,950,327) (7,434,085)
From net investment income (Class C) (54,782) --
-------------- ------------
Total distributions declared to
shareholders $ (7,957,386) $ (7,668,804)
-------------- ------------
Fund share (principal) transactions at net
asset value of $1.00 per share -
Net proceeds from sale of shares $1,510,970,601 $836,765,789
Net asset value of shares issued to
shareholders in reinvestment
of distributions 6,339,137 6,352,846
Cost of shares reacquired (1,398,974,685) (881,538,348)
-------------- ------------
Total increase (decrease) in net assets $ 118,335,053 $(38,419,713)
Net assets:
At beginning of period 177,371,587 215,791,300
-------------- ------------
At end of period $ 295,706,640 $177,371,587
============== ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Nine
Year Ended August 31, Months Ended Year Ended
--------------------- August 31, November 30,
1996 1995 1994 1993*
- --------------------------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------
Net investment income(S) $ 0.04 $ 0.05 $ 0.02 $ 0.01
Less distributions declared to shareholders from net investment income (0.04) (0.05) (0.02) (0.01)
------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total return 4.75% 4.91% 2.89%+ 2.28%+
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.84% 0.90% 0.86%+ 0.92%+
Net investment income 4.62% 4.94% 3.11%+ 2.26%+
Net assets at
end of
period (000
omitted) $37,872 $10,852 $2,156 $ 49
+ Annualized.
* For the period from the commencement of offering of Class A shares, September 7, 1993 to November 30, 1993.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been incurred
by the Fund, the net investment income per share and ratios would have been:
Net investment income $ 0.04 $ 0.05 $ 0.02 $ 0.01
Ratios (to average net assets):
Expenses 0.94% 1.00% 0.96%+ 1.02%+
Net investment income 4.52% 4.84% 3.01%+ 2.16%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Nine
Year Ended August 31, Months Ended Year Ended November 30,
----------------------- August 31, ---------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------------------------------
<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
------ ------ ------ ------ ------
Net investment income(S) $ 0.04 $ 0.04 $ 0.01 $ 0.01 $ 0.02
Less distributions declared to shareholders
from net investment income (0.04) (0.04) (0.01) (0.01) (0.02)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 3.64% 3.81% 1.79%+ 1.16% 1.79%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.92% 1.93% 1.94%+ 2.00% 2.22%
Net investment income 3.58% 3.69% 1.88%+ 1.19% 1.83%
Net assets at end of period (000 omitted) $251,192 $166,519 $213,635 $155,274 $125,439
+ Annualized.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been incurred
by the Fund, the net investment income per share and ratios would have been:
Net investment income $ 0.04 $ 0.04 $ 0.01 $ 0.01 $ 0.02
Ratios (to average net assets):
Expenses 2.02% 2.03% 2.04%+ 2.10% 2.32%
Net investment income 3.48% 3.59% 1.78%+ 1.09% 1.73%
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended
Year Ended November 30, August 31,
---------------------------------------------------------------- ------------
1991 1990 1989 1988 1987** 1996***
- ----------------------------------------------------------------------------------------------------------------------------------
Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
<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
------ ------ ------ ------ ------ ------
Net investment income(S) $ 0.04 $ 0.06 $ 0.07 $ 0.06 $ 0.04 $ 0.01
Less distributions declared
to shareholders from net
investment income (0.04) (0.06) (0.07) (0.06) (0.04) (0.01)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 4.56% 6.12% 7.34% 5.85% 4.42%+ 3.67%+
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.04% 2.23% 2.24% 2.06% 2.06%+ 1.79%+
Net investment income 4.53% 6.06% 7.10% 5.59% 5.59%+ 3.60%+
Net assets at end of period (000 omitted) $161,040 $203,314 $146,885 $139,518 $83,845 $6,642
+ Annualized.
** For the period from the commencement of investment operations, December 29, 1986 to November 30, 1987.
*** For the period from the commencement of offering of Class C shares, April 1, 1996 to August 31, 1996.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been incurred
by the Fund, the net investment income per share and ratios would have been:
Net investment income $ 0.04 -- -- -- -- $ 0.01
Ratios (to average net assets):
Expenses 2.13% -- -- -- -- 1.89%+
Net investment income 4.44% -- -- -- -- 3.50%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Cash Reserve Fund (the Fund) is a diversified series of MFS Series Trust I
(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
Fund's use of amortized cost is subject to the Fund's compliance with certain
conditions as specified under Rule 2a-7 of the Investment Company Act of 1940.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Fund requires
that the securities purchased in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The Fund
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 Fund under each such
repurchase agreement. The Fund, 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 Fund's custodian bank calculates its fee based on
the Fund's 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
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files 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 Fund's tax return 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the
average daily net assets of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55%
of average daily net assets. The investment adviser did not impose a portion
of its fee, which is reflected as a reduction of expenses in the Statement of
Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all its independent Trustees and Mr. Bailey. Included
in Trustees' compensation is a net periodic pension expense of $3,313 for the
year ended August 31, 1996.
Distributor - The Trustees have adopted separate distribution plans for Class
A, Class B and Class C shares pursuant to Rule 12b-1 of the Investment Company
Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer who enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. Payments of up to
0.25% of the per annum service fee will commence under the distribution plan
when the value of the net assets of the Fund attributable to Class A shares
first equals or exceeds $40 million. Payment of the 0.10% per annum
distribution fee will commence on such date as the Trustees of the Trust may
determine.
The Class B and Class C distribution plans provide that the Fund will pay MFD
a distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers who enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares and retains the distribution
fee attributable to Class B shares. The service fee is intended to be
additional consideration for services rendered by the dealer with respect to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $38,810 and $6 for
Class B and Class C shares, respectively, for the year ended August 31, 1996.
Fees incurred under the distribution plans during the year ended August 31,
1996 were 1.00% of average daily net assets attributable to Class B and Class
C shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
12 months of purchases made on or after April 1, 1996. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended August 31, 1996 were $793,596 and $2,440 for Class B and
Class C shares, respectively.
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 class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, aggregated $3,636,576,943 and
$3,606,462,619, respectively.
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares at net asset value of $1.00 per share,
were as follows:
Class A Shares
Year Ended Year Ended
August 31, 1996 August 31, 1995
- -----------------------------------------------------------------------------
Shares sold 245,119,340 21,839,588
Shares issued to shareholders in
reinvestment of distributions 783,890 211,125
Shares reacquired (218,883,250) (13,354,949)
------------ -----------
Net increase 27,019,980 8,695,764
============ ===========
Class B Shares
Year Ended Year Ended
August 31, 1996 August 31, 1995
- -----------------------------------------------------------------------------
Shares sold 1,241,524,357 814,926,201
Shares issued to shareholders in
reinvestment of distributions 5,508,091 6,141,721
Shares reacquired (1,162,359,397) (868,183,399)
-------------- ------------
Net increase (decrease) 84,673,051 (47,115,477)
============ ===========
Class C Shares
Year Ended
August 31, 1996*
- -----------------------------------------------------------------------------
Shares sold 24,326,904
Shares issued to shareholders in
reinvestment of distributions 47,156
Shares reacquired (17,732,038)
-----------
Net increase 6,642,022
===========
*For the period from the commencement of offering of Class C shares, April 1,
1996 to August 31, 1996.
(6) Line of Credit
The Fund 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 Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the year ended August
31, 1996 was $2,736.
<PAGE>
INDEPENDENT AUDITOR REPORT
To the Trustees of MFS Series Trust I and Shareholders of MFS Cash Reserve Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Cash Reserve Fund (one of the
series constituting MFS Series Trust I) as of August 31, 1996, the related
statement of operations for the year then ended, the statement 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 nine months ended
August 31, 1994 and for each of the years in the seven-year period ended
November 30, 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 financial position of MFS Cash Reserve
Fund at August 31, 1996, the results of its operations, the changes in its net
assets, and its 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>
MFS(R) CASH RESERVE FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT SECRETARY
A. Keith Brodkin* - Chairman and President James R. Bordewick, Jr.*
Richard B. Bailey* - Private Investor; CUSTODIAN
Former Chairman and Director (until 1991), State Street Bank & Trust Company
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, AUDITOR
Cambridge Trust Company Deloitte & Touche LLP
Marshall N. Cohan - Private Investor INVESTOR INFORMATION
For MFS stock and bond market outlooks,
Lawrence H. Cohn, M.D. - Chief of Cardiac call toll free: 1-800-637-4458 anytime from
Surgery, Brigham and Women's Hospital; a touch-tone telephone.
Professor of Surgery, Harvard Medical School For information on MFS mutual funds,
call your financial adviser or, for an
The Hon. Sir J. David Gibbons, KBE - Chief information kit, call toll free:
Executive Officer, Edmund Gibbons Ltd.; 1-800-637-2929 any business day from
Chairman, Bank of N.T. Butterfield & Son Ltd. 9 a.m. to 5 p.m. Eastern time (or leave
a message anytime).
Abby M. O'Neill - Private Investor;
Director, Rockefeller Financial Services, Inc. INVESTOR SERVICE
(investment advisers) MFS Service Center, Inc.
P.O. Box 2281
Walter E. Robb, III - President and Treasurer, Boston, MA 02107-9906
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting Group, For general information, call toll free:
Inc. (office services); Trustee, Landmark Funds (mutual 1-800-225-2606 any business day from
funds) 8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive For service to speech- or hearing-impaired,
Vice President, Director and Secretary, call toll free: 1-800-637-6576 any business
Massachusetts Financial Services Company day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be equipped
Jeffrey L. Shames* - President and Director, with a Telecommunications Device for the Deaf.)
Massachusetts Financial Services Company
For share prices, account balances, and
J. Dale Sherratt - President, exchanges, call toll free: 1-800-MFS-TALK
Insight Resources, Inc. (1-800-637-8255) anytime from a touch-tone telephone.
(acquisition planning specialists)
WEB SITE
Ward Smith - Former Chairman (until 1994), http://www.mfs.com
NACCO Industries; Director, Sundstrand
Corporation
------------------------------------------------------
INVESTMENT ADVISER
Massachusetts Financial Services Company TOP RATED SERVICE
500 Boylston Street For the second year in a row, MFS earned
Boston, MA 02116-3741 [DALBAR a #1 ranking in DALBAR, Inc.'s
LOGO] Broker/Dealer Survey, Main Office
DISTRIBUTOR Operations Service Quality category.
MFS Fund Distributors, Inc. The firm achieved a 3.49 overall
500 Boylston Street score - on a scale of 1 to 4 - in the 1995 survey. A
Boston, MA 02116-3741 total of 71 firms responded, offering input on the
quality of service they receive from 36 mutual fund
FUND MANAGER companies nationwide. The survey contained questions
Geoffrey L. Kurinsky* about service quality in 17 categories, including
"knowledge of phone service contacts," "accuracy of
TREASURER transaction processing," and "overall ease of doing
W. Thomas London* business with the firm." The 1996 survey results were
not available at the time of this printing.
ASSISTANT TREASURER
James O. Yost* -------------------------------------------------------
SECRETARY
Stephen E. Cavan*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-------------
MFS(R) CASH [DALBAR LOGO: #1 BULK RATE
RESERVE FUND TOP RATED SERVICE] U.S. POSTAGE
PAID
500 Boylston Street PERMIT #55638
Boston, MA 02116 BOSTON, MA
-------------
[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
MCR-2 10/96 27M 01/201/301
