<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) CASH
RESERVE FUND
ANNUAL REPORT o AUGUST 31, 2000
-----------------------------------
MUTUAL FUND GIFT KITS (see page 23)
-----------------------------------
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 11
Notes to Financial Statements ............................................. 17
Independent Auditors' Report .............................................. 21
Trustees and Officers ..................................................... 25
MFS ORIGINAL RESEARCH(R)
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,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company, one-
security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with
the multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of
Original Research(SM) is doing our best to project a company's future earnings
and determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed- income investments have
been early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled
but that we believe still have the potential to be market leaders. For
example, a quarterly earnings shortfall of a few cents may cause the market to
temporarily lose confidence in a company. If we believe the business remains
fundamentally strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help
performance. In fixed-income investing this means, among other things, trying
to be better than our peers at avoiding bond issuers that may default. In
equity investing, avoiding mistakes means we strive to know a company and its
industry well enough to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form
of daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without
barriers between equity and fixed-income, international and domestic, or value
and growth investment areas. We believe this allows each of our portfolio
managers -- and thus each of our investors -- to potentially benefit from any
relevant item of Original Research.
John Ballen, our President and Chief Investment Officer, has often said that
the thought he hopes each manager will have when they read the daily notes is,
"I could never perform as well at any other investment company, because
nowhere else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in
it's January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years
in the investment industry. Contributing to this continuity is our policy that
all equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the
company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group
of industries in a specific region of the globe. In pursuing their research,
our analysts and portfolio managers each year will visit more than 2,000
companies throughout the world, meet with representatives from more than 3,000
companies at one of our four worldwide offices, attend roughly 5,000 company
presentations sponsored by major Wall Street firms, and consult with over
1,000 analysts from hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on
a wide range of potential investments for all of our portfolios. In the end,
the goal of Original Research is to try to give our portfolio managers an
advantage over their peers -- to enable our managers to deliver competitive
performance, by finding opportunities before they are generally recognized by
the market and by avoiding mistakes whenever possible. Original Research does,
we believe, make a difference.
As always, we appreciate your confidence in MFS 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, 2000
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Jean O. Alessandro]
Jean O. Alessandro
Dear Shareholders,
Short-term interest rates have been quite volatile over the past 12 months. As a
result, the seven-day annualized compounded yield on an investment in Class A
shares of the fund increased from 4.62% at the beginning of the period to 5.98%
for the period ended August 31, 2000. During the same period, the seven-day
annualized compounded yield on an investment in Class B shares increased from
3.60% to 4.93%, while that on Class C shares increased from 3.64% to 4.95%.
While strong economic growth, a tight labor market, and a dramatic spike in
oil prices helped spark inflation fears, we continued to see encouraging
productivity growth in the United States and tough competitive conditions
worldwide combine to keep wages and consumer prices in check. In addition, we
have begun to see signs of moderating economic growth as consumer spending and
wage growth have slowed. In response, the Federal Reserve Board (the Fed)
refrained from raising interest rates during its August meeting, and we think
investors have become increasingly confident that the Fed may be nearing the
end of its interest rate hikes.
In light of our belief that the healthy global economic environment should
persist and inflation fears have diminished for the near term, we will target
an average maturity near the fund's neutral range of 40 to 45 days. The
portfolio continues to include only the highest-quality corporate, bank, and
government securities in order to provide investors with maximum security
against credit risk.
On August 31, 2000, approximately 85% of the fund's portfolio was invested in
top-tier 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. (Principal value and interest on Treasury securities are guaranteed
by the U.S. government if held to maturity.) We believe our investment
guidelines are among the strictest in the industry and our 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. Allessandro
Jean O. Allessandro
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. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
The portfolio is actively managed, and current holdings may be different.
Note to Shareholders: Effective October 1, 2000, Terri A. Vittozzi will be
added as a portfolio manager on the fund.
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
--------------------------------------------------------------------------------
JEAN O. ALESSANDRO IS ASSISTANT VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF THE MONEY MARKET PORTFOLIOS OF
OUR MUTUAL FUNDS AND ANNUITIES.
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 GLOBAL, ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
--------------------------------------------------------------------------------
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 all charges and expenses, for any MFS product is available from your
investment professional, or by calling MFS at 1-800-225-2606. Please read it
carefully before investing or sending money.
<PAGE>
--------------------------------------------------------------------------------
FUND FACTS
--------------------------------------------------------------------------------
OBJECTIVE: THE FUND SEEKS 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
CLASS INCEPTION: CLASS A SEPTEMBER 7, 1993
CLASS B DECEMBER 29, 1986
CLASS C APRIL 1, 1996
SIZE: $442.3 MILLION NET ASSETS AS OF AUGUST 31, 2000
INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE
FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. SEE THE PROSPECTUS
FOR DETAILS.
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
Commercial Paper - 97.5%
<CAPTION>
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alpine Securitization Corp., due 10/10/00 $15,000 $ 14,894,375
American General Finance Corp., due 10/12/00 - 11/03/00 10,000 9,906,256
Archer Daniels Midland Co., due 9/19/00 5,000 4,983,575
AT&T Corp., due 12/01/00 15,000 14,754,679
Bayerische Vereinsbank AG, due 9/13/00 10,000 9,978,033
Bell Atlantic Financial Services, due 9/11/00 7,000 6,987,380
Bellsouth Telecommunications, Inc., due 9/27/00 9,600 9,555,072
Campbell Soup Co., due 9/15/00 20,000 19,949,056
Cemex SA (Bayer Hypo Vereinsbank), due 9/21/00 5,000 4,981,889
Chase Manhattan Corp., due 10/05/00 - 11/16/00 19,700 19,541,603
Credit Suisse First Boston, Inc., due 9/01/00 9,000 9,000,000
Dow Chemical Co., due 9/01/00 15,900 15,900,000
Du Pont (E.I.) de Nemours & Co., due 10/11/00 14,400 14,296,480
Duke Power Co., due 10/26/00 10,500 10,395,569
Emerson Electric Co., due 9/05/00 8,000 7,994,231
Ford Motor Credit Corp., due 9/25/00 190 189,174
Gannett, Inc., due 10/20/00 - 11/21/00 19,100 18,879,191
General Electric Capital Corp., due 9/01/00 10,400 10,400,000
General Motors Acceptance Corp., due 9/01/00 20,000 20,000,000
Goldman Sachs Group LP, due 11/20/00 15,000 14,784,000
Halliburton Corp., due 9/21/00 - 11/27/00 20,000 19,806,900
IBM Credit Corp., due 10/18/00 - 10/20/00 13,000 12,887,674
ING America Insurance Holdings, due 10/13/00 10,000 9,924,167
Lucent Technologies, Inc., due 10/27/00 10,000 9,899,356
May Department Stores Co., due 10/26/00 5,000 4,950,347
Metropolitan Life Funding, Inc., due 9/06/00 - 9/25/00 19,454 19,396,145
Morgan Stanley Dean Witter, due 9/14/00 2,250 2,244,637
National Rural Utilities Cooperative Finance Corp.,
due 9/18/00 - 11/13/00 20,000 19,805,009
Old Line Funding Corp. (Royal Bank Canada),
due 9/15/00 - 10/12/00 19,788 19,702,651
Pfizer, Inc., due 9/18/00 14,900 14,854,476
Salomon Smith Barney Holdings, Inc., due 9/12/00 - 11/10/00 21,000 20,879,412
SBC Communications, Inc., due 10/19/00 - 10/20/00 20,100 19,924,896
Societe General, due 9/08/00 10,000 9,987,361
United Technologies Corp., due 9/21/00 2,600 2,590,611
Verizon Network Funding, due 9/29/00 6,990 6,954,770
------------------------------------------------------------------------------------------------------
Total Commercial Paper, at Amortized Cost and Value $431,178,975
------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations - 6.0%
------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/26/00 - 3/29/01 $16,800 $ 16,455,128
Federal National Mortgage Assn., due 10/26/00 10,000 9,902,222
------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost and Value $ 26,357,350
------------------------------------------------------------------------------------------------------
Repurchase Agreement - 11.3%
------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 8/31/00, due 9/01/00, total to be
received $50,009,208 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost and Value $50,000 $ 50,000,000
------------------------------------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $507,536,325
Other Assets, Less Liabilities - (14.8)% (65,265,710)
------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $442,270,615
------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
AUGUST 31, 2000
--------------------------------------------------------------------------------
Assets:
Investments, at amortized cost and value $457,536,325
Repurchase agreement, at cost and value 50,000,000
------------
Total investments, at amortized cost and value $507,536,325
Cash 88,097
Receivable for fund shares sold 5,268,494
Interest receivable 9,208
Other assets 76,948
------------
Total assets $512,979,072
------------
Liabilities:
Distributions payable $ 174,560
Payable for fund shares reacquired 70,145,539
Payable to affiliates -
Management fee 6,130
Shareholder servicing agent fee 1,362
Distribution and service fee 10,341
Administrative fee 238
Accrued expenses and other liabilities 370,287
------------
Total liabilities $ 70,708,457
------------
Net assets (represented by paid-in capital) $442,270,615
============
Shares of beneficial interest outstanding 442,270,615
============
Class A shares:
Net asset value and offering price per share
(net assets of $76,062,279 / 76,062,279 shares of
beneficial interest outstanding) $1.00
=====
Class B shares:
Net asset value and offering price per share
(net assets of $313,782,070 / 313,782,070 shares of
beneficial interest outstanding) $1.00
=====
Class C shares:
Net asset value and offering price per share
(net assets of $52,426,266 / 52,426,266 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
--------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000
--------------------------------------------------------------------------------
Net investment income:
Interest income $39,533,006
-----------
Expenses -
Management fee $ 3,627,840
Trustees' compensation 44,595
Shareholder servicing agent fee 658,602
Distribution and service fee (Class B) 4,565,372
Distribution and service fee (Class C) 984,886
Administrative fee 91,012
Custodian fee 228,207
Printing 84,020
Postage 209,832
Auditing fees 21,094
Legal fees 4,923
Miscellaneous 1,071,611
-----------
Total expenses $11,591,994
Fees paid indirectly (153,556)
Reduction of expenses by investment adviser (664,128)
-----------
Net expenses $10,774,310
-----------
Net investment income $28,758,696
===========
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
-------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 28,758,696 $ 19,228,912
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,413,074) $ (3,392,925)
From net investment income (Class B) (19,228,950) (13,457,718)
From net investment income (Class C) (4,116,672) (2,378,269)
--------------- ---------------
Total distributions declared to shareholders $ (28,758,696) $ (19,228,912)
--------------- ---------------
Fund share (principal) transactions at net asset value
of $1.00 per share -
Net proceeds from sale of shares $ 8,978,157,752 $ 7,092,954,026
Shares issued in reinvestment of distributions 22,856,445 14,927,681
Shares reacquired (9,304,148,347) (6,952,174,564)
--------------- ---------------
Total increase (decrease) in net assets $ (303,134,150) $ 155,707,143
Net assets:
At beginning of period 745,404,765 589,697,622
--------------- ---------------
At end of period $ 442,270,615 $ 745,404,765
=============== ===============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------------
<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) $ 0.05 $ 0.04 $ 0.05 $ 0.05 $ 0.04
Less distributions declared to shareholders
from net investment income (0.05) (0.04) (0.05) (0.05) (0.04)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 5.39% 4.33% 4.87% 4.64% 4.75%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.81% 0.82% 0.82% 0.93% 0.84%
Net investment income 5.18% 4.22% 4.72% 4.54% 4.62%
Net assets at end of period (000 omitted) $76,062 $98,719 $80,374 $45,007 $37,872
(S) The investment adviser voluntarily waived a portion of its 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 $ 0.05 $ 0.04 $ 0.05 $ 0.04 $ 0.04
Ratios (to average net assets):
Expenses## 0.91% 0.92% 0.92% 1.03% 0.94%
Net investment income 5.08% 4.12% 4.62% 4.44% 4.52%
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
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 $ 0.03 $ 0.04 $ 0.03 $ 0.04
Less distributions declared to
shareholders from net investment income (0.04) (0.03) (0.04) (0.03) (0.04)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.35% 3.29% 3.83% 3.58% 3.64%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.81% 1.82% 1.82% 1.95% 1.92%
Net investment income 4.18% 3.22% 3.78% 3.53% 3.58%
Net assets at end of period (000 omitted) $313,782 $541,126 $438,577 $244,416 $251,192
(S) The investment adviser voluntarily waived a portion of its 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 $ 0.04 $ 0.03 $ 0.04 $ 0.03 $ 0.04
Ratios (to average net assets):
Expenses## 1.91% 1.92% 1.92% 2.05% 2.02%
Net investment income 4.08% 3.12% 3.68% 3.43% 3.48%
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996*
------------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------------
<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 $ 0.03 $ 0.04 $ 0.03 $ 0.01
Less distributions declared to shareholders
from net investment income (0.04) (0.03) (0.04) (0.03) (0.01)
------ ------ ------ ------ ------
Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return 4.32% 3.25% 3.76% 3.60% 3.67%+
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.81% 1.82% 1.82% 1.95% 1.79%+
Net investment income 4.15% 3.22% 3.80% 3.57% 3.60%+
Net assets at end of period (000 omitted) $52,426 $105,559 $70,746 $16,373 $ 6,642
(S) The investment adviser voluntarily waived a portion of its 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 $ 0.04 $ 0.03 $ 0.04 $ 0.03 $ 0.01
Ratios (to average net assets):
Expenses## 1.91% 1.92% 1.92% 2.05% 1.89%+
Net investment income 4.05% 3.12% 3.70% 3.47% 3.50%+
* For the period from the inception of Class C shares, April 1, 1996, through August 31, 1996.
+ Annualized.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
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 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 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 collateral 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 collateral to ensure that its value, including
accrued interest, 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 discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations.
Fees Paid Indirectly - The fund's custody 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 total 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.
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 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.
At August 31, 2000, the fund, for federal income tax purposes, had a capital
loss carryforward of $1,426 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, 2003, ($908), August 31, 2004, ($480), August 31, 2006,
($2), and August 31, 2007, ($36).
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(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 the fund's average daily net assets. The investment
adviser has voluntarily agreed to waive a portion of its fee, which is shown
as a reduction of total 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. Included in Trustees' compensation is a net
periodic pension expense of $12,530 for the year ended August 31, 2000.
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:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - The Trustees have adopted a distribution plan relating to 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 paid 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 securties dealer and 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. Payment of 0.10% per annum Class A distribution fee and payment
of 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 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 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 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 $51,930 and $5,923 for Class B and Class C shares, respectively, for
the year ended August 31, 2000. Fees incurred under the distribution plan during
the year ended August 31, 2000, were 1.00% of average daily net assets
attributable to both Class B and Class C shares on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
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. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended August 31,
2000, were $65,429, $2,259,358, and $125,976 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. The fee is calculated as
a percentage of the fund's average daily net assets at an effective annual
rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities subject
to repurchase agreements, aggregated $27,971,471,366 and $28,277,814,469,
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). Transactions in fund shares were as follows:
<TABLE>
Class A shares
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 3,167,945,154 1,911,002,475
Shares issued to shareholders in reinvestment
of distributions 3,873,793 2,554,337
Shares reacquired (3,194,476,119) (1,895,211,541)
-------------- --------------
Net increase (decrease) (22,657,172) 18,345,271
============== ==============
Class B shares
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------------------------------------------------------------------------------------------
Shares sold 3,519,872,998 3,254,509,295
Shares issued to shareholders in reinvestment
of distributions 16,000,572 10,788,781
Shares reacquired (3,763,217,903) (3,162,749,084)
-------------- --------------
Net increase (decrease) (227,344,333) 102,548,992
============== ==============
Class C shares
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------------------------------------------------------------------------------------------
Shares sold 2,290,339,600 1,927,442,256
Shares issued to shareholders in reinvestment
of distributions 2,982,080 1,584,563
Shares reacquired (2,346,454,325) (1,894,213,939)
-------------- --------------
Net increase (decrease) (53,132,645) 34,812,880
============== ==============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily financing needs. 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,
2000, was $5,260. The fund had no significant borrowings during the year.
<PAGE>
INDEPENDENT AUDITORS' 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, 2000, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended August 31, 2000 and 1999, and the financial highlights for each
of the years in the five-year period ended August 31, 2000. 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 auditing standards generally
accepted in the United States of America. 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, 2000 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, 2000, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 5, 2000
<PAGE>
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
--------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2000.
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) CASH RESERVE FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Marshall N. Cohan - Private Investor Mark E. Bradley*
Robert R. Flaherty*
Lawrence H. Cohn, M.D. - Chief of Cardiac Laura F. Healy*
Surgery, Brigham and Women's Hospital; Ellen Moynihan*
Professor of Surgery, Harvard Medical School
SECRETARY
The Hon. Sir J. David Gibbons, KBE - Chief Stephen E. Cavan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Abby M. O'Neill - Private Investor
CUSTODIAN
Walter E. Robb, III - President and Treasurer, State Street Bank and Trust Company
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting AUDITORS
Group, Inc. (office services) Deloitte & Touche LLP
Arnold D. Scott* - Senior Executive INVESTOR INFORMATION
Vice President, Director, and Secretary, For information on MFS mutual funds, call your
MFS Investment Management investment professional or, for an information
kit, call toll free: 1-800-637-2929 any
Jeffrey L. Shames* - Chairman and Chief business day from 9 a.m. to 5 p.m. Eastern time
Executive Officer, MFS Investment Management (or leave a message anytime).
J. Dale Sherratt - President, Insight Resources, INVESTOR SERVICE
Inc. (acquisition planning specialists) Ward MFS Service Center, Inc.
Smith - Former Chairman (until 1994), NACCO P.O. Box 2281
Industries (holding company) Boston, MA 02107-9906
INVESTMENT ADVISER For general information, call toll free:
Massachusetts Financial Services Company 1-800-225-2606 any business day from
500 Boylston Street 8 a.m. to 8 p.m. Eastern time.
Boston, MA 02116-3741
For service to speech- or hearing-impaired,
DISTRIBUTOR call toll free: 1-800-637-6576 any business day
MFS Fund Distributors, Inc. from 9 a.m. to 5 p.m. Eastern time. (To use
500 Boylston Street this service, your phone must be equipped with
Boston, MA 02116-3741 a Telecommunications Device for the Deaf.)
CHAIRMAN AND PRESIDENT For share prices, account balances, exchanges,
Jeffrey L. Shames* or stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a
PORTFOLIO MANAGER touch-tone telephone.
Jean O. Alessandro*
WORLD WIDE WEB
TREASURER www.mfs.com
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) CASH RESERVE 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)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MCR-2 10/00 64.3M 01/201/301
