<PAGE>
[LOGO] M F S (SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) CASH
RESERVE FUND
SEMIANNUAL REPORT o FEBRUARY 28, 1998
THE ROTH IRA IS NOW AVAILABLE (see page 19)
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
- --------------------------- On February 2, 1998, Keith Brodkin, a friend
[Photo of A. Keith Brodkin] and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful
letters to shareholders on the markets and
economy have been an integral part of MFS
shareholder reports like this one for many
- --------------------------- years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $70 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
Portfolio Manager's Overview .............................................. 4
Fund Facts ................................................................ 6
Portfolio of Investments .................................................. 7
Financial Statements ...................................................... 8
Notes to Financial Statements ............................................. 15
Roth IRA .................................................................. 19
The MFS Family of Funds(R) ................................................ 20
Trustees and Officers ..................................................... 21
HIGHLIGHTS
o IN AN ENVIRONMENT OF GENERALLY STABLE INTEREST RATES, THE ANNUALIZED YIELD
ON AN INVESTMENT IN CLASS A SHARES OF THE FUND FOR THE SEVEN-DAY PERIOD
ENDED FEBRUARY 28, 1998, FELL TO 4.69%, FROM 4.75% AT THE BEGINNING OF THE
PERIOD. THE ANNUALIZED COMPOUNDED YIELD ON AN INVESTMENT IN CLASS B SHARES
FELL FROM 3.73% TO 3.65%, WHILE THE ANNUALIZED YIELD ON CLASS C SHARES FELL
FROM 3.73% TO 3.57%.
o AS A RESULT OF STRONG ECONOMIC GROWTH, ALONG WITH LOW INFLATION AND
UNCERTAINTY ABOUT THE EFFECT ASIA'S ECONOMIC TURMOIL MAY HAVE ON THE U.S.
ECONOMY, THE FEDERAL RESERVE BOARD DID NOT ADJUST ITS MONETARY POLICY
DURING THE PAST SIX MONTHS.
o APPROXIMATELY 51% OF THE FUND'S ASSETS ARE INVESTED IN SECURITIES ISSUED OR
GUARANTEED BY THE U.S. TREASURY OR AGENCIES OR INSTRUMENTALITIES OF THE
U.S. GOVERNMENT DUE TO THE NARROW YIELD SPREADS BETWEEN GOVERNMENT-AGENCY
OBLIGATIONS AND COMMERCIAL PAPER. WE BELIEVE THIS EMPHASIS ON QUALITY
SHOULD ALLOW THE FUND TO CONTINUE TO HELP INVESTORS OBTAIN CURRENT INCOME
AND, AT THE SAME TIME, PRESERVE CAPITAL AND LIQUIDITY.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
- ----------------------------
[Photo of Jeffrey L. Shames]
- ----------------------------
Jeffrey L. Shames
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such
as the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation.
While it may be a few years before some of these countries return to solid
economic footing, and while there will probably be a relatively short-term
impact on the U.S. economy, we believe the long-term outlook for the region is
quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first several weeks of 1998,
there have been brief bouts of volatility associated with the Asian turmoil,
as well as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable,
other, unforeseen events can trigger fairly extended periods during which
prices decline or remain relatively flat. Since no one can predict market
cycles, that makes it that much more important to find companies that can keep
growing in the face of the occasional downturn and even gain market share. For
us, this means using original, bottom-up research to examine each company's
earnings potential and position as well as the overall prospects for its
industry. To that end, MFS continues to increase the research support
available to portfolio managers of MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity
and fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support 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
March 16, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD OF DIRECTORS IN 1993. MR. SHAMES WAS APPOINTED
CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY 1998.
<PAGE>
PORTFOLIO MANAGER'S OVERVIEW
- -----------------------------
[Photo of Jean O. Alessandro]
- -----------------------------
Jean O. Alessandro
Dear Shareholders:
Except for year-end pressures, short-term interest rates have remained
relatively stable over the past six months. As a result, the annualized yield
on an investment in Class A shares of the Fund for the seven-day period ended
February 28, 1998, fell to 4.69%, from 4.75% at the beginning of the period.
The annualized compounded yield on an investment in Class B shares declined
from 3.73% to 3.65%, while Class C shares' annualized compounded yield fell
from 3.73% to 3.57%.
As a result of strong economic growth, along with low inflation and
uncertainty about the effect Asia's economic turmoil may have on the U.S.
economy, the Federal Reserve Board (the Fed) did not adjust its monetary
policy during the past six months. 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. As a result, yields on 90-day commercial paper
have stayed relatively unchanged. In the next few months, we look for the Fed
to be locked into a neutral interest-rate posture, which should keep short-
term interest rates relatively stable.
The Fund's average maturity has been neutral over the past six months, at 45
days as of February 28, 1998, versus 39 days on August 31, 1997.
We will continue to target the 40- to 45-day average maturity range
going forward.
The portfolio continues to include only the highest-quality corporate, bank, and
government securities as we seek to provide investors with maximum security
against credit risk. On February 28, 1998, approximately 34% of the Fund's net
assets were invested in commercial paper, with the balance invested in
securities issued or guaranteed by the U.S. Treasury or agencies or
instrumentalities of the U.S. government. The large position in government-
guaranteed paper is due to the narrow yield spreads between government-agency
obligations and commercial paper and to the fact that our investment guidelines
are among the strictest in the industry. We believe this emphasis on quality
should allow the Fund to continue to help investors obtain current income and,
at the same time, preserve 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.
Note to Shareholders: Effective January 2, 1998, the Fund is being managed by
Jean O. Alessandro, who succeeds Geoffrey L. Kurinsky. A graduate of the
University of Connecticut, Ms. Alessandro began her career at MFS in 1985 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.
<PAGE>
FUND FACTS
OBJECTIVE: SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS IS
CONSISTENT WITH THE PRESERVATION OF CAPITAL AND
LIQUIDITY. INVESTMENTS 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.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 7, 1993
CLASS B DECEMBER 29, 1986
CLASS C APRIL 1, 1996
SIZE: $250.0 MILLION NET ASSETS AS OF FEBRUARY 28, 1998
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 28, 1998
<TABLE>
<CAPTION>
Commercial Paper - 33.9%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Express Credit Corp., due 6/26/98 $ 5,800 $ 5,695,006
Bank of America, FSB, due 4/17/98 7,000 6,950,102
Bankamerica Corp., due 4/01/98 2,000 1,990,597
Consolidated Natural Gas Co., due 3/23/98 3,415 3,403,626
du Pont (E.I.) de Nemours & Co., due 3/06/98 - 4/06/98 7,585 7,560,546
Duke Power Co., due 4/07/98 2,000 1,988,756
General Electric Capital Corp., due 3/17/98 5,000 4,987,822
General Motors Acceptance Corp., due 4/20/98 5,000 4,962,222
Goldman Sachs Group LP, due 4/22/98 - 4/27/98 8,150 8,082,587
Heinz (H.J.) Co., due 3/19/98 - 3/26/98 9,000 8,971,131
Hewlett-Packard Co., due 4/13/98 7,000 6,954,599
Merrill Lynch & Co., Inc., due 3/09/98 4,000 3,995,120
Morgan (J.P.) & Co., Inc., due 7/06/98 6,000 5,886,123
Nationsbank Corp., due 4/21/98 5,300 5,258,929
Procter & Gamble Co., due 4/03/98 8,000 7,960,400
- --------------------------------------------------------------------------------------------------------
Total Commercial Paper, at Amortized Cost and Value $ 84,647,566
- --------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations - 50.7%
- ---------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 4/02/98 - 5/21/98 $13,000 $ 12,879,293
Federal Home Loan Bank, due 3/13/98 - 4/08/98 25,600 25,505,483
Federal Home Loan Mortgage Corp., due 3/10/98 - 7/17/98 39,400 39,061,172
Federal National Mortgage Assn., due 3/03/98 - 7/07/98 49,700 49,357,450
- --------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost and Value $126,803,398
- --------------------------------------------------------------------------------------------------------
Repurchase Agreement - 8.0%
- ---------------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 2/27/98, due 3/02/98, total to be
received $20,009,400 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at cost $20,000 $ 20,000,000
- --------------------------------------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $231,450,964
Other Assets, Less Liabilities - 7.4% 18,530,238
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $249,981,202
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at amortized cost and value $231,450,964
Cash 53,369
Receivable for Fund shares sold 28,297,852
Interest receivable 6,267
Other assets 1,769
------------
Total assets $259,810,221
------------
Liabilities:
Distributions payable $ 47,197
Payable for Fund shares reacquired 9,419,138
Payable to affiliates -
Management fee 5,643
Shareholder servicing agent fee 1,411
Distribution and service fee 119,652
Administrative fee 188
Accrued expenses and other liabilities 235,790
------------
Total liabilities $ 9,829,019
------------
Net assets (represented by paid-in capital) $249,981,202
============
Shares of beneficial interest outstanding 249,981,202
===========
Class A shares:
Net asset value and offering price per share
(net assets of $32,606,367 / 32,606,367 shares of
beneficial interest outstanding) $1.00
=====
Class B shares:
Net asset value and offering price per share
(net assets of $190,682,354 / 190,682,354 shares of
beneficial interest outstanding) $1.00
=====
Class C shares:
Net asset value and offering price per share
(net assets of $26,692,481 / 26,692,481 shares of
beneficial interest outstanding) $1.00
=====
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
Net investment income:
Interest income $7,487,211
----------
Expenses -
Management fee $ 734,413
Trustees' compensation 19,942
Shareholder servicing agent fee 166,044
Distribution and service fee (Class B) 1,056,792
Distribution and service fee (Class C) 90,669
Administrative fee 17,478
Postage 69,680
Custodian fee 51,876
Printing 20,066
Auditing fees 7,690
Miscellaneous 263,788
----------
Total expenses $2,498,438
Fees paid indirectly (11,595)
Preliminary reduction of expenses by investment adviser (134,391)
----------
Net expenses $2,352,452
----------
Net investment income $5,134,759
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED
1998 AUGUST 31,
(UNAUDITED) 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 5,134,759 $ 10,029,166
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (875,065) $ (1,559,182)
From net investment income (Class B) (3,922,453) (8,040,982)
From net investment income (Class C) (337,241) (429,002)
-------------- --------------
Total distributions declared to shareholders $ (5,134,759) $ (10,029,166)
-------------- --------------
Fund share (principal) transactions at net asset value
of $1.00 per share -
Net proceeds from sale of shares $1,500,651,504 $2,376,194,909
Net asset value of shares issued to shareholders in
reinvestment of distributions 3,888,346 7,800,528
Cost of shares reacquired (1,560,355,000) (2,373,905,725)
-------------- --------------
Total increase (decrease) in net assets $ (55,815,150) $ 10,089,712
Net assets:
At beginning of period 305,796,352 295,706,640
-------------- --------------
At end of period $ 249,981,202 $ 305,796,352
============== ==============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX NINE
MONTHS MONTHS YEAR
ENDED YEAR ENDED AUGUST 31, ENDED ENDED
FEBRUARY 28, ------------------------------------ AUGUST 31, NOVEMBER 30,
1998 1997 1996 1995 1994 1993*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<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) $ 0.02 $ 0.05 $ 0.04 $ 0.05 $ 0.02 $ 0.01
Less distributions declared to
shareholders from net
investment income (0.02) (0.05) (0.04) (0.05) (0.02) (0.01)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return 4.78%+ 4.64% 4.75% 4.91% 2.89%+ 2.28%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.91%+ 0.93% 0.84% 0.90% 0.86%+ 0.92%+
Net investment income 4.69%+ 4.54% 4.62% 4.94% 3.11%+ 2.26%+
Net assets at end of period
(000 omitted) $32,606 $45,007 $37,872 $10,852 $2,156 $49
* For the period from the inception of Class A, September 7, 1993, through November 30, 1993.
+ 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 voluntarily waived 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 the ratios would have been:
Net investment income $ 0.02 $ 0.04 $ 0.04 $ 0.05 $ 0.02 $ 0.01
Ratios (to average net assets):
Expenses## 1.01%+ 1.03% 0.94% 1.00% 0.96%+ 1.02%+
Net investment income 4.59%+ 4.44% 4.52% 4.84% 3.01%+ 2.16%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX NINE
MONTHS MONTHS
ENDED YEAR ENDED AUGUST 31, ENDED
FEBRUARY 28, -------------------------------------------- AUGUST 31,
1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
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) $ 0.02 $ 0.03 $ 0.04 $ 0.04 $ 0.01
Less distributions declared to
shareholders from net investment income (0.02) (0.03) (0.04) (0.04) (0.01)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 3.75%+ 3.58% 3.64% 3.81% 1.79%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.91%+ 1.95% 1.92% 1.93% 1.94%+
Net investment income 3.71%+ 3.53% 3.58% 3.69% 1.88%+
Net assets at end of period
(000 omitted) $190,682 $244,416 $251,192 $166,519 $213,635
+ Annualized.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(S) The investment adviser voluntarily waived 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 the ratios would have been:
Net investment income $ 0.02 $ 0.03 $ 0.04 $ 0.04 $ 0.01
Ratios (to average net assets):
Expenses## 2.01%+ 2.05% 2.02% 2.03% 2.04%+
Net investment income 3.61%+ 3.43% 3.48% 3.59% 1.78%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987**
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 1.00
------ ------ ------ ------ ------ ------ ------
Net investment
income(S) $ 0.01 $ 0.02 $ 0.04 $ 0.06 $ 0.07 $ 0.06 $ 0.04
Less distributions
declared to share-
holders from net
investment income (0.01) (0.02) (0.04) (0.06) (0.07) (0.06) (0.04)
------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
Total return 1.16% 1.79% 4.56% 6.12% 7.34% 5.85% 4.42%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses 2.00% 2.22% 2.04% 2.23% 2.24% 2.06% 2.06%+
Net investment
income 1.19% 1.83% 4.53% 6.06% 7.10% 5.59% 5.59%+
Net assets at end
of period
(000 omitted) $155,274 $125,439 $161,040 $203,314 $146,885 $139,518 $83,845
** For the period from the commencement of the Fund's investment operations, December 29, 1986, through November 30, 1987.
+ Annualized.
(S) The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If this fee
had been incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income
$ 0.01 $ 0.02 $ 0.04 $ -- $ -- $ -- $ --
Ratios (to average net assets):
Expenses 2.10% 2.32% 2.13% -- -- -- --
Net investment
income 1.09% 1.73% 4.44% -- -- -- --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, --------------------------------
1998 1997 1996***
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------
Net investment income(S) $ 0.02 $ 0.03 $ 0.01
Less distributions declared to shareholders from
net investment income (0.02) (0.03) (0.01)
------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00
====== ====== ======
Total return 3.73%+ 3.60% 3.67%+
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.91%+ 1.95% 1.79%+
Net investment income 3.73%+ 3.57% 3.60%+
Net assets at end of period (000 omitted) $26,692 $16,373 $6,642
*** For the period from the inception of Class C, April 1, 1996, through August 31, 1996.
+ 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 voluntarily waived 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 the ratios would have been:
Net investment income $ 0.02 $ 0.03 $ 0.01
Ratios (to average net assets):
Expenses## 2.01%+ 2.05% 1.89%+
Net investment income 3.63%+ 3.47% 3.50%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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
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 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 is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits 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.
At August 31, 1997, the Fund, for federal income tax purposes, had a capital
loss carryforward of $2,141 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on August 31, 1999, ($1,587) and August 31, 2003, ($554).
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective
distribution and service fees. All shareholders bear the common expenses of
the Fund based on the settled shares outstanding 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 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 has
voluntarily agreed to waive a portion of its fee, which is reflected as a
preliminary reduction of expenses in the Statement of Operations.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets,
provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 $5,492 for the
period ended February 28, 1998.
Distributor - The Trustees have adopted a distribution plan for Class A, Class
B, and Class C shares pursuant to Rule 12b-1 of the Investment Company Act of
1940 as follows:
The Fund's 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 that 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. Payment of the
0.10% per annum Class A distribution fee and payment of the 0.25% per annum
service fee will commence on such date as the Trustees of the Fund
may determine.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee up to 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 that 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. 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 $16,145 and $22 for Class B and Class C shares, respectively,
for the period ended February 28, 1998. Fees incurred under the distribution
plan during the period ended February 28, 1998, were 1.00% and 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis, respectively.
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. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the period ended February 28,
1998, were $0, $501,528, and $11,803 for Class A, 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. Effective January 1,
1998, the fee is calculated as a percentage of the 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 Fund's average daily net assets 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, aggregated $5,490,346,268 and $5,557,724,218,
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, $1.00 per share).
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
period ended February 28, 1998 was $606.
--------------------------------------------
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 SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991), MFS
Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School INVESTOR INFORMATION
For MFS stock and bond market outlooks,
The Hon. Sir J. David Gibbons, KBE - Chief call toll free: 1-800-637-4458 anytime from
Executive Officer, Edmund Gibbons Ltd. a touch-tone telephone.
Abby M. O'Neill - Private Investor For information on MFS mutual funds, call your
financial adviser or, for an information kit,
Walter E. Robb, III - President and Treasurer, call toll free: 1-800-637-2929 any business day
Benchmark Advisors, Inc. (corporate financial from 9 a.m. to 5 p.m. Eastern time (or leave a
consultants); President, Benchmark Consulting message anytime).
Group, Inc. (office services)
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief For general information, call toll free:
Executive Officer, and Director, 1-800-225-2606 any business day from
MFS Investment Management 8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight For service to speech- or hearing-impaired,
Resources, Inc. (acquisition planning call toll free: 1-800-637-6576 any business day
specialists) from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
Ward Smith - Former Chairman (until 1994), a Telecommunications Device for the Deaf.) For
NACCO Industries (holding company) share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
INVESTMENT ADVISER anytime from a touch-tone telephone.
Massachusetts Financial Services Company
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741 www.mfs.com
DISTRIBUTOR [Dalbar Logo] For the fourth year in a row, MFS
MFS Fund Distributors, Inc. earned a #1 ranking in the DALBAR, Inc.
500 Boylston Street Broker/Dealer Survey, Main Office Operations
Boston, MA 02116-3741 Service Quality Category. The firm achieved a
3.42 overall score on a scale of 1 to 4 in the
PORTFOLIO MANAGER 1997 survey. A total of 111 firms responded,
Jean O. Alessandro* offering input on the quality of service they
received from 29 mutual fund companies
TREASURER nationwide. The survey contained questions
W. Thomas London* about service quality in 11 categories,
including "knowledge of operations contact,"
ASSISTANT TREASURERS "keeping you informed," and "ease of doing
Mark E. Bradley* business" with the firm.
Ellen Moynihan*
James O. Yost*
</TABLE>
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) CASH RESERVE FUND ----------------
Bulk Rate
U.S. Postage
Paid
MFS
----------------
[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MCR-3 4/98 38M 01/201/301
