MFS Variable Insurance Trust Iii NCSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-08879

MFS VARIABLE INSURANCE TRUST III

(Exact name of registrant as specified in charter)

111 Huntington Avenue, Boston, Massachusetts 02199

(Address of principal executive offices) (Zip code)

Christopher R. Bohane

Massachusetts Financial Services Company

111 Huntington Avenue

Boston, Massachusetts 02199

(Name and address of agents for service)

Registrant’s telephone number, including area code: (617) 954-5000

Date of fiscal year end: December 31

Date of reporting period: December 31, 2017

ITEM 1.

REPORTS TO STOCKHOLDERS.

ANNUAL REPORT

December 31, 2017

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MFS^® BLENDED RESEARCH^® SMALL CAP EQUITY PORTFOLIO

MFS^® Variable Insurance Trust III

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VSC-ANN

MFS® BLENDED RESEARCH® SMALL CAP EQUITY PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Blended Research Small Cap Equity Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

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Dear Contract Owners:

Rising bond yields have led to a measurable uptick in market volatility, which has been a departure from the low-volatility environment that prevailed for much of 2017. In spite of this, global markets remain elevated amid synchronized economic growth. Although the U.S. Federal Reserve continues to gradually raise interest rates and shrink its balance sheet, monetary policy remains accommodative around the world, with many central banks taking only tentative steps toward tighter policies. However, interest rates have begun to rise globally of late as investors anticipate that central policy shifts may be necessary in the months ahead.

Newly enacted U.S. tax reforms have been welcomed by equity markets while emerging market economies have been boosted by a weaker U.S. dollar. Around the world, inflation remains largely subdued but tight labor markets and solid global demand have investors on the lookout for its potential resurgence amid robust global trade and recovering commodity prices.

At MFS®, we believe having a disciplined, long-term investment approach through a full market cycle is essential to capturing the best opportunities while also managing risk. In our view, such a strategy, along with the professional guidance of a financial advisor, will help you reach your investment objectives.

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Blended Research Small Cap Equity Portfolio

PORTFOLIO COMPOSITION

Portfolio structure

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Top ten holdings
KBR, Inc.			1.5%
Michaels Co., Inc.			1.5%
WESCO International, Inc.			1.5%
Wintrust Financial Corp.			1.5%
East West Bancorp, Inc.			1.5%
Tech Data Corp.			1.4%
SPX FLOW, Inc.			1.4%
Trex Co., Inc.			1.4%
Univar, Inc.			1.3%
RE/MAX Holdings, Inc., “A”			1.3%


Equity sectors
Financial Services			24.9%
Technology			15.4%
Industrial Goods & Services			13.2%
Health Care			12.2%
Basic Materials			6.0%
Special Products & Services			5.4%
Leisure			4.4%
Retailing			4.1%
Utilities & Communications			4.0%
Consumer Staples			3.5%
Energy			3.3%
Autos & Housing			2.1%
Transportation			0.5%

(o)	Less than 0.1%.

Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.

Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Blended Research Small Cap Equity Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Blended Research Small Cap Equity Portfolio (“fund”) provided a total return of 14.97%, while Service Class shares of the fund provided a total return of 14.70%. These compare with a return of 14.65% over the same period for the fund’s benchmark, the Russell 2000® Index.

Market Environment

For the first time in many years, the global economy experienced a period of synchronized economic growth over the reporting period. The rebound in emerging markets (“EM”) economies was more pronounced (despite the slight deceleration in Chinese growth at the end of the period), helped by larger economies, such as Brazil and Russia, emerging from recessions. At the same time, developed markets (“DM”) economies continued to grow at or above potential. Market confidence increased in the US during the period fueled, in part, by a more lenient US regulatory backdrop and hopes for a significant cut in corporate tax rates, which came to fruition at the end of the period.

Globally, markets benefited from a reflation trade as commodity prices strengthened, activity and growth prospects improved, and inflation moved higher, though within moderate bounds. As a result, there were more tightening signals and actions by DM central banks. The US Federal Reserve increased interest rates by 25 basis points three times during the period, bringing the total number of quarter-percent hikes in the federal funds rate to five, since December 2015. The European Central Bank announced an extension of its quantitative easing program at the end of the period, but reduced the pace of its monthly asset purchases by half. In addition, the Bank of England hiked its base rate for the first time in a decade, late in the end of the period. Markets were comforted, along with central banks, by the decline in fears of a populist surge in Europe after establishment candidates won the Dutch and French elections, though a right-wing populist party gained seats in the German parliament for the first time in the post-World War II era. Additionally, European growth reflected a generally calmer political economic backdrop.

In recent months, the US dollar reversed the sharp rise seen early in the period, easing what had been a substantial headwind to earnings for multinationals. US consumer spending held up well during the second half of the period amid a modest increase in real wages and relatively low gasoline prices. However, demand for autos cooled from the record level logged early in the period, while the housing market improved, albeit constrained by below-average inventory levels. Global trade, which was sluggish early in the period, showed signs of improvement in the period’s second half, a positive indicator of global economic activity and prospects. Early in the period, there was a selloff in EM due to fears that President Trump would follow through on various campaign threats and promises that were judged to be detrimental to EM. While President Trump withdrew the US from the Trans-Pacific Partnership and began the renegotiation of the North American Free Trade Agreement, significant additional policy action was lacking on economic issues involving EM. As a result, EM resumed their upward trajectory, powered by strong inflows throughout 2017.

Contributors to Performance

Strong stock selection in both the industrial goods & services and utilities & communications sectors lifted performance relative to the Russell 2000® Index. Within the industrial goods & services sector, the fund’s holdings of high-performance laser manufacturer IPG Photonics (b) contributed positively to relative returns as stronger-than-expected demand for fiber lasers, notably from China, helped drive robust corporate earnings. Within the utilities & communications sector, owning shares of power generation company NRG Energy (b) benefited relative results. Shares of NRG climbed, particularly mid-period, as investors appeared to have reacted favorably to the announcement of a business transformation plan that would involve divesting non-core business lines and re-focusing on being an integrated retail-wholesale power company.

Elsewhere, the fund’s overweight positions in molecular diagnostic company Exact Sciences, manufacturer of oral fluid diagnostic products Orasure Technologies (h), biopharmaceutical company MiMedx Group, composite decking manufacturer Trex Company, cloud-based software solutions provider Paylocity and software engineering solutions provider EPAM Systems supported relative returns. Holding shares of retail bakery-cafes operator Panera Bread (b)(h) and airline services provider Copa Holdings (b)(h) (Panama) also helped relative results. Shares of Panera Bread rose early in the period as the company announced it would be acquired by JAB Holdings in an all-cash deal valued at $7.5 billion.

Detractors from Performance

Security selection in both the financial services and consumer staples sectors hurt relative performance during the reporting period. Within the financial services sector, an overweight position in retail shopping center operator Washington Prime Group and owning shares of residential real estate franchising and brokerage company Realogy (b) detracted from relative returns. Shares of Realogy declined after higher-than-expected commission split costs appeared to have weighed on investor sentiment. Within the consumer staples sector, the fund’s overweight position in dairy products producer Dean Foods, and holding shares of food manufacturer Treehouse Foods (b), weighed on relative results. Shares of Treehouse Foods came under pressure as increased price competition translated into lower sales and earnings that missed expectations.

MFS Blended Research Small Cap Equity Portfolio

Management Review – continued

Stocks in other sectors that dampened relative returns included the fund’s overweight positions in biopharmaceutical company AMAG Pharmaceuticals, casual dining restaurant company Brinker International, industrial energy products supplier Now (h), infrastructure services provider Chicago Bridge & Iron (h) and energy company Westmoreland Coal (h). Not holding shares of pharmaceutical company Nektar Therapeutics further hindered relative results as the stock advanced after the company announced that phase-three trials for its non-addictive opioid painkiller were successful.

Respectfully,

Portfolio Manager(s)

Jim Fallon, Matt Krummell, Jonathan Sage, and Jed Stocks

(b)	Security is not a benchmark constituent.

(h)	Security was not held in the portfolio at period end.

The views expressed in this report are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.

MFS Blended Research Small Cap Equity Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

The following chart illustrates the historical performance of the fund in comparison to its benchmark(s). Benchmarks are unmanaged and may not be invested in directly. Benchmark returns do not reflect any fees or expenses. The performance of other share classes will be greater than or less than that of the class depicted below. (See Notes to Performance Summary.)

Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your units, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a contract holder would pay on fund distributions or the redemption of contract units. The returns for the fund shown also do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges imposed by the insurance company separate accounts. Such expenses would reduce the overall returns shown.

Growth of a Hypothetical $10,000 Investment

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Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	10-yr
	Initial Class	7/17/00	14.97%	15.80%	9.15%
	Service Class	5/01/06	14.70%	15.52%	8.87%

Comparative benchmark(s)
	Russell 2000® Index (f)		14.65%	14.12%	8.71%

(f)	Source: FactSet Research Systems Inc.

Benchmark Definition(s)

Russell 2000® Index – constructed to provide a comprehensive barometer for securities in the small-cap segment of the U.S. equity universe. The index includes 2,000 of the smallest U.S. companies based on total market capitalization, representing approximately 10% of the investable U.S. equity market. The Russell 2000® Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.

It is not possible to invest directly in an index.

Notes to Performance Summary

Average annual total return represents the average annual change in value for each share class for the periods presented.

Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund’s performance results would be less favorable. Please see the prospectus and financial statements for complete details. All results are historical and assume the reinvestment of any dividends and capital gains distributions.

Performance prior to close of business December 7, 2012, reflects time periods when another adviser or subadviser was responsible for selecting investments for the fund under a different investment objective and different investment strategies.

Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Blended Research Small Cap Equity Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.52%		$1,000.00		$1,096.61		$2.75
Initial Class	Hypothetical (h)		0.52%		$1,000.00		$1,022.58		$2.65
Service Class	Actual		0.77%		$1,000.00		$1,095.25		$4.07
Service Class	Hypothetical (h)		0.77%		$1,000.00		$1,021.32		$3.92

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS Blended Research Small Cap Equity Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
COMMON STOCKS – 99.0%
Biotechnology – 4.2%
Acorda Therapeutics, Inc. (a)		25,435	$	545,571
AMAG Pharmaceuticals, Inc. (a)		42,166		558,700
Bruker BioSciences Corp.		17,341		595,143
Emergent BioSolutions, Inc. (a)		14,297		664,382
Exact Sciences Corp. (a)		25,012		1,314,130
MiMedx Group, Inc. (a)(l)		48,297		609,025
Natera, Inc. (a)		9,946		89,415
Vanda Pharmaceuticals, Inc. (a)		6,699		101,825

			$	4,478,191

Broadcasting – 0.2%
MDC Partners, Inc. (a)		25,567	$	249,278

Brokerage & Asset Managers – 0.4%
Hamilton Lane, Inc., “A”		7,762	$	274,697
Legg Mason, Inc.		1,323		55,540
OM Asset Management PLC		3,267		54,722

			$	384,959

Business Services – 4.1%
Conduent, Inc. (a)		62,678	$	1,012,876
Forrester Research, Inc.		27,647		1,221,997
Grand Canyon Education, Inc. (a)		15,369		1,375,987
Travelport Worldwide Ltd.		62,464		816,404

			$	4,427,264

Cable TV – 0.1%
Cable One, Inc.		202	$	142,077

Chemicals – 0.7%
Ingevity Corp. (a)		10,049	$	708,153

Computer Software – 2.8%
Aspen Technology, Inc. (a)		15,181	$	1,004,982
Cornerstone OnDemand, Inc. (a)		19,258		680,385
Paylocity Holding Corp. (a)		29,090		1,371,884

			$	3,057,251

Computer Software – Systems – 7.3%
Avnet, Inc.		3,486	$	138,115
EPAM Systems, Inc. (a)		10,914		1,172,491
NCR Corp. (a)		30,215		1,027,008
Pitney Bowes, Inc.		18,964		212,018
Presidio, Inc. (a)		33,907		649,997
Rapid7, Inc. (a)		75,115		1,401,646
Tech Data Corp. (a)		15,831		1,550,963
Varonis Systems, Inc. (a)		9,553		463,798
Verint Systems, Inc. (a)		29,623		1,239,723

			$	7,855,759

Construction – 2.1%
Armstrong World Industries, Inc. (a)		5,261	$	318,554
GMS, Inc. (a)		5,367		202,014
KB Home		8,638		275,984
Trex Co., Inc. (a)		13,406		1,453,076

			$	2,249,628


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Consumer Products – 0.3%
Herbalife Ltd. (a)		4,549	$	308,058

Consumer Services – 1.3%
Carriage Services, Inc.		20,982	$	539,447
ServiceMaster Global Holdings, Inc. (a)		16,826		862,669

			$	1,402,116

Electrical Equipment – 2.7%
TriMas Corp. (a)		50,044	$	1,338,677
WESCO International, Inc. (a)		23,689		1,614,405

			$	2,953,082

Electronics – 2.8%
Amkor Technology, Inc. (a)		44,843	$	450,672
Benchmark Electronics, Inc. (a)		13,275		386,303
Integrated Device Technology, Inc. (a)		9,152		272,089
Jabil Circuit, Inc.		26,150		686,438
OSI Systems, Inc. (a)		4,823		310,505
Sanmina Corp. (a)		17,910		591,030
TTM Technologies, Inc. (a)		22,159		347,232

			$	3,044,269

Energy – Independent – 2.3%
Delek U.S. Holdings, Inc.		26,930	$	940,934
Energen Corp. (a)		8,310		478,407
Par Pacific Holdings, Inc. (a)		29,379		566,427
PBF Energy, Inc., “A”		12,897		457,199

			$	2,442,967

Engineering – Construction – 2.0%
KBR, Inc.		82,649	$	1,638,930
Matrix Service Co. (a)		31,750		565,150

			$	2,204,080

Entertainment – 0.2%
Madison Square Garden Co., “A” (a)		1,130	$	238,261

Food & Beverages – 3.2%
Dean Foods Co.		28,012	$	323,819
Hostess Brands, Inc. (a)		25,061		371,153
Sanderson Farms, Inc.		3,724		516,817
Snyders-Lance, Inc.		22,114		1,107,469
SpartanNash Co.		16,182		431,736
TreeHouse Foods, Inc. (a)		13,788		681,954

			$	3,432,948

Forest & Paper Products – 1.2%
Boise Cascade Corp.		14,935	$	595,907
Verso Corp., “A” (a)		40,629		713,852

			$	1,309,759

Gaming & Lodging – 0.5%
Caesars Entertainment Corp. (a)		43,645	$	552,109

MFS Blended Research Small Cap Equity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Health Maintenance Organizations – 0.6%
Molina Healthcare, Inc. (a)		8,463	$	648,943

Insurance – 3.7%
American Equity Investment Life Holding Co.		35,526	$	1,091,714
Hanover Insurance Group, Inc.		1,058		114,349
Heritage Insurance Holdings, Inc. (l)		32,988		594,444
Safety Insurance Group, Inc.		7,635		613,854
Third Point Reinsurance Ltd. (a)		70,396		1,031,301
Universal Insurance Holdings, Inc.		20,847		570,165

			$	4,015,827

Internet – 2.4%
Blucora, Inc. (a)		33,733	$	745,499
LogMeIn, Inc.		11,206		1,283,087
Web.Com Group, Inc. (a)		25,240		550,232

			$	2,578,818

Leisure & Toys – 0.5%
Malibu Boats, Inc., “A” (a)		17,903	$	532,256

Machinery & Tools – 8.4%
ACCO Brands Corp. (a)		39,960	$	487,512
Greenbrier Cos., Inc.		11,371		606,074
Herman Miller, Inc.		25,090		1,004,855
IPG Photonics Corp. (a)		6,121		1,310,690
ITT, Inc.		24,091		1,285,737
Knoll, Inc.		21,184		488,079
Park-Ohio Holdings Corp.		7,358		338,100
Regal Beloit Corp.		16,090		1,232,494
SPX FLOW, Inc. (a)		31,513		1,498,443
Steelcase, Inc., “A”		12,501		190,015
Titan Machinery, Inc. (a)		29,117		616,407

			$	9,058,406

Medical & Health Technology & Services – 1.0%
American Renal Associates Holdings, Inc. (a)		23,544	$	409,666
Kindred Healthcare, Inc.		65,125		631,713

			$	1,041,379

Medical Equipment – 5.2%
Analogic Corp.		6,877	$	575,949
AngioDynamics, Inc. (a)		32,114		534,056
Biotelemetry, Inc. (a)		25,763		770,314
CONMED Corp.		25,460		1,297,696
Halyard Health, Inc. (a)		21,374		987,051
Integer Holdings Corp. (a)		17,957		813,452
Integra LifeSciences Holdings Corp. (a)		12,801		612,656

			$	5,591,174

Metals & Mining – 0.2%
Ryerson Holding Corp. (a)		22,371	$	232,658

Natural Gas – Distribution – 0.2%
Southwest Gas Holdings, Inc.		2,977	$	239,589

Oil Services – 1.1%
Exterran Holdings, Inc. (a)		19,445	$	611,351
McDermott International, Inc. (a)		81,813		538,330

			$	1,149,681


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Other Banks & Diversified Financials – 12.1%
BancFirst Corp.		6,467	$	330,787
Bank of N.T. Butterfield & Son Ltd.		16,688		605,608
CAI International, Inc. (a)		23,024		652,040
Cathay General Bancorp, Inc.		30,072		1,268,136
East West Bancorp, Inc.		25,871		1,573,733
Enova International, Inc. (a)		40,021		608,319
First Interstate BancSystem, Inc.		30,290		1,213,115
Glacier Bancorp, Inc.		3,579		140,977
OneMain Holdings, Inc. (a)		19,398		504,154
PennyMac Financial Services, Inc., “A “ (a)		25,081		560,560
Popular, Inc.		14,032		497,996
Preferred Bank		18,586		1,092,485
Regional Management Corp. (a)		26,569		699,030
Triton International Ltd. of Bermuda		19,087		714,808
Western Alliance Bancorp. (a)		14,306		810,006
Wintrust Financial Corp.		19,329		1,592,130
World Acceptance Corp. (a)		2,262		182,589

			$	13,046,473

Pharmaceuticals – 1.3%
Catalent, Inc. (a)		6,760	$	277,701
Endo International PLC (a)		23,640		183,210
Horizon Pharma PLC (a)		49,179		718,013
Impax Laboratories, Inc. (a)		2,698		44,922
Mallinckrodt PLC (a)		2,428		54,776
Sucampo Pharmaceuticals, Inc. (a)		5,274		94,668

			$	1,373,290

Printing & Publishing – 1.2%
Gannett Co., Inc.		51,560	$	597,580
LSC Communications, Inc.		3,293		49,889
Quad/Graphics, Inc.		27,101		612,483

			$	1,259,952

Real Estate – 8.7%
Ashford Hospitality Trust, REIT		77,576	$	522,086
CoreCivic, Inc., REIT		16,295		366,638
Gramercy Property Trust, REIT		51,566		1,374,750
Hospitality Properties Trust, REIT		14,745		440,138
Medical Properties Trust, Inc., REIT		96,074		1,323,900
Preferred Apartment Communities, Inc., “A”, REIT		27,281		552,440
RE/MAX Holdings, Inc., “A”		29,361		1,424,009
Realogy Holdings Corp.		2,444		64,766
RLJ Lodging Trust, REIT		16,759		368,195
Sabra Healthcare, REIT		35,066		658,189
STAG Industrial, Inc., REIT		10,044		274,503
Washington Prime Group, Inc., REIT		197,699		1,407,617
Xenia Hotels & Resorts Inc., REIT		27,291		589,213

			$	9,366,444

Restaurants – 1.7%
BJ’s Restaurants, Inc.		4,894	$	178,142
Bloomin Brands, Inc.		33,984		725,219
Brinker International, Inc.		23,059		895,612

			$	1,798,973

MFS Blended Research Small Cap Equity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Specialty Chemicals – 3.9%
Andersons, Inc.		16,177	$	503,914
Chemours Co.		5,991		299,909
Kronos Worldwide, Inc.		26,807		690,816
Renewable Energy Group, Inc. (a)		19,384		228,731
Trinseo S.A.		13,861		1,006,309
Univar, Inc. (a)		46,794		1,448,742

			$	4,178,421

Specialty Stores – 4.1%
Citi Trends, Inc.		22,680	$	600,113
Express, Inc. (a)		39,671		402,661
Michaels Co., Inc. (a)		67,078		1,622,617
Sally Beauty Holdings, Inc. (a)		13,710		257,200
Urban Outfitters, Inc. (a)		34,226		1,199,964
Zumiez, Inc. (a)		13,524		281,637

			$	4,364,192

Telecommunications – Wireless – 0.5%
Telephone and Data Systems, Inc.		17,932	$	498,510

Trucking – 0.5%
Hub Group, Inc., “A” (a)		8,684	$	415,964
Werner Enterprises, Inc.		1,948		75,290

			$	491,254

Utilities – Electric Power – 3.3%
Atlantica Yield PLC		37,542	$	796,266
NRG Energy, Inc.		43,559		1,240,560
NRG Yield, Inc., “A”		20,396		384,465
PNM Resources, Inc.		17,810		720,415
Spark Energy, Inc., “A” (l)		36,234		449,302

			$	3,591,008

Total Common Stocks (Identified Cost, $87,330,766)			$	106,497,457


	Strike Price		First Exercise
WARRANTS – 0.0%
OTHER BANKS & DIVERSIFIED FINANCIALS – 0.0%
Emergent Capital, Inc. (1 share for 1 warrant) (Identified Cost, $0) (a)(u)	$	10.75		11/06/14	318	$	3


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – 0.8%
MONEY MARKET FUNDS – 0.8%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $844,530)		844,615	$	844,530


COLLATERAL FOR SECURITIES LOANED – 1.1%
State Street Navigator Securities Lending Government Money Market Portfolio, 1.3% (j) (Identified Cost, $1,238,961)		1,238,961	$	1,238,961

OTHER ASSETS, LESS LIABILITIES – (0.9)%				(1,019,896	)

NET ASSETS – 100.0%			$	107,561,055

(a)

Non-income producing security.

(h)

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund’s investments in affiliated issuers and in unaffiliated issuers were $844,530 and $107,736,421, respectively.

(j)

The rate quoted is the annualized seven-day yield of the fund at period end.

(l)

A portion of this security is on loan.

(u)

The security was valued using significant unobservable inputs and is considered level 3 under the fair value hierarchy.

(v)

Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.

The following abbreviations are used in this report and are defined:

PLC

Public Limited Company

REIT

Real Estate Investment Trust

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value, including $1,341,195 of securities on loan (identified cost, $88,569,727)			$107,736,421
Investments in affiliated issuers, at value (identified cost, $844,530)			844,530
Receivables for
Investments sold			164,138
Fund shares sold			61,191
Interest and dividends			110,633
Other assets			1,087
Total assets			$108,918,000
Liabilities
Payable for fund shares reacquired			$66,689
Collateral for securities loaned, at value (c)			1,238,961
Payable to affiliates
Investment adviser			4,918
Shareholder servicing costs			96
Distribution and/or service fees			1,967
Payable for independent Trustees’ compensation			36
Accrued expenses and other liabilities			44,278
Total liabilities			$1,356,945
Net assets			$107,561,055
Net assets consist of
Paid-in capital			$76,001,468
Unrealized appreciation (depreciation)			19,166,694
Accumulated net realized gain (loss)			11,712,775
Undistributed net investment income			680,118
Net assets			$107,561,055
Shares of beneficial interest outstanding			8,126,807


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$36,194,719		2,686,934		$13.47
Service Class		71,366,336		5,439,873		13.12

(c)	Non-cash collateral is not included.

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Dividends	$1,309,910
Dividends from affiliated issuers	8,712
Income on securities loaned	110,953
Foreign taxes withheld	(2,232	)
Total investment income	$1,427,343
Expenses
Management fee	$429,428
Distribution and/or service fees	185,125
Shareholder servicing costs	8,698
Administrative services fee	26,557
Independent Trustees’ compensation	4,334
Custodian fee	6,421
Shareholder communications	29,242
Audit and tax fees	51,641
Legal fees	2,262
Miscellaneous	11,978
Total expenses	$755,686
Reduction of expenses by investment adviser	(8,597	)
Net expenses	$747,089
Net investment income (loss)	$680,254
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$12,100,424
Affiliated issuers	645
Net realized gain (loss)	$12,101,069
Change in unrealized appreciation (depreciation) on unaffiliated issuers	$2,075,039
Net realized and unrealized gain (loss)	$14,176,108
Change in net assets from operations	$14,856,362

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$680,254		$763,886
Net realized gain (loss)		12,101,069		11,388,941
Net unrealized gain (loss)		2,075,039		7,487,812
Change in net assets from operations		$14,856,362		$19,640,639
Distributions declared to shareholders
From net investment income		$(764,011	)	$(1,047,437	)
From net realized gain		(11,410,140	)	(10,876,539	)
Total distributions declared to shareholders		$(12,174,151	)	$(11,923,976	)
Change in net assets from fund share transactions		$1,710,788		$(15,137,767	)
Total change in net assets		$4,392,999		$(7,421,104	)
Net assets
At beginning of period		103,168,056		110,589,160
At end of period (including undistributed net investment income of $680,118 and $763,875, respectively)		$107,561,055		$103,168,056

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund’s financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$13.23			$12.29			$16.04			$18.24			$13.57
Income (loss) from investment operations
Net investment income (loss) (d)		$0.11			$0.11	(c)		$0.15			$0.10			$0.11
Net realized and unrealized gain (loss)		1.70			2.35			(0.94	)		1.16			5.91
Total from investment operations		$1.81			$2.46			$(0.79	)		$1.26			$6.02
Less distributions declared to shareholders
From net investment income		$(0.12	)		$(0.16	)		$(0.10	)		$(0.18	)		$(0.28	)
From net realized gain		(1.45	)		(1.36	)		(2.86	)		(3.28	)		(1.07	)
Total distributions declared to shareholders		$(1.57	)		$(1.52	)		$(2.96	)		$(3.46	)		$(1.35	)
Net asset value, end of period (x)		$13.47			$13.23			$12.29			$16.04			$18.24
Total return (%) (k)(r)(s)(x)		14.97			20.90	(c)		(4.15	)		7.29			45.71
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.53			0.42	(c)		0.54			0.51			0.51
Expenses after expense reductions (f)		0.52			0.41	(c)		0.53			0.50			0.51
Net investment income (loss)		0.82			0.92	(c)		1.03			0.56			0.68
Portfolio turnover		81			72			78			67			69
Net assets at end of period (000 omitted)		$36,195			$28,715			$27,795			$31,323			$33,401

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$12.92			$12.03			$15.75			$17.96			$13.38
Income (loss) from investment operations
Net investment income (loss) (d)		$0.07			$0.08	(c)		$0.12			$0.05			$0.07
Net realized and unrealized gain (loss)		1.67			2.29			(0.93	)		1.15			5.82
Total from investment operations		$1.74			$2.37			$(0.81	)		$1.20			$5.89
Less distributions declared to shareholders
From net investment income		$(0.09	)		$(0.12	)		$(0.05	)		$(0.13	)		$(0.24	)
From net realized gain		(1.45	)		(1.36	)		(2.86	)		(3.28	)		(1.07	)
Total distributions declared to shareholders		$(1.54	)		$(1.48	)		$(2.91	)		$(3.41	)		$(1.31	)
Net asset value, end of period (x)		$13.12			$12.92			$12.03			$15.75			$17.96
Total return (%) (k)(r)(s)(x)		14.70			20.58	(c)		(4.38	)		7.04			45.33
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.78			0.67	(c)		0.79			0.76			0.76
Expenses after expense reductions (f)		0.77			0.66	(c)		0.78			0.75			0.76
Net investment income (loss)		0.55			0.66	(c)		0.79			0.30			0.42
Portfolio turnover		81			72			78			67			69
Net assets at end of period (000 omitted)		$71,366			$74,453			$82,794			$104,221			$121,036

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

Financial Highlights – continued

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Blended Research Small Cap Equity Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Blended Research Small Cap Equity Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.

(2)

Significant Accounting Policies

In October 2016, the Securities and Exchange Commission (SEC) released its final rule on Investment Company Reporting Modernization (the “Rule”). The Rule, which introduced two new regulatory reporting forms for investment companies – Form N-PORT and Form N-CEN – also contained amendments to Regulation S-X which impact financial statement presentation, particularly the presentation of derivative investments, for all reporting periods ending after August 1, 2017. The fund has adopted the Rule’s Regulation S-X amendments and believes that the fund’s financial statements are in compliance with those amendments.

Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.

Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.

The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the

MFS Blended Research Small Cap Equity Portfolio

Notes to Financial Statements – continued

business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of December 31, 2017 in valuing the fund’s assets or liabilities:


Financial Instruments	Level 1		Level 2		Level 3		Total
Equity Securities:
United States		$105,095,583		$—		$3		$105,095,586
United Kingdom		796,266		—		—		796,266
Bermuda		605,608		—		—		605,608
Mutual Funds		2,083,491		—		—		2,083,491
Total		$108,580,948		$—		$3		$108,580,951

For further information regarding security characteristics, see the Portfolio of Investments.

The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.


	Equity Securities
Balance as of 12/31/16		$3
Change in unrealized appreciation (depreciation)		—
Balance as of 12/31/17		$3

The net change in unrealized appreciation (depreciation) from investments still held as level 3 at December 31, 2017 is $0. At December 31, 2017, the fund held one level 3 security.

Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $1,341,195. The fair value of the fund’s investment securities on loan and a related liability of $1,238,961 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of $134,825. The collateral on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.

MFS Blended Research Small Cap Equity Portfolio

Notes to Financial Statements – continued

Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.

The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.

Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.

Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended 12/31/17		Year ended 12/31/16
Ordinary income (including any short-term capital gains)		$2,113,078		$1,047,437
Long-term capital gains		10,061,073		10,876,539
Total distributions		$12,174,151		$11,923,976

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$89,909,477
Gross appreciation	21,554,480
Gross depreciation	(2,883,006	)
Net unrealized appreciation (depreciation)	$18,671,474
Undistributed ordinary income	2,612,841
Undistributed long-term capital gain	10,270,925
Other temporary differences	4,347

MFS Blended Research Small Cap Equity Portfolio

Notes to Financial Statements – continued

dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$312,130		$332,420		$3,720,235		$2,827,655
Service Class		451,881		715,017		7,689,905		8,048,884
Total		$764,011		$1,047,437		$11,410,140		$10,876,539

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.40% of the fund’s average daily net assets.

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $8,597, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.39% of the fund’s average daily net assets.

The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.60% of average daily net assets for the Initial Class shares and 0.85% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2019. For the year ended December 31, 2017, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.

Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.

The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $7,707, which equated to 0.0072% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $991.

Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.0247% of the fund’s average daily net assets.

Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, 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, MFD, and MFSC.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $190 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Blended Research Small Cap Equity Portfolio

Notes to Financial Statements – continued

The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money market fund does not pay a management fee to MFS.

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, aggregated $86,245,957 and $95,580,685, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		656,127			$8,983,200			227,042			$2,906,832
Service Class		366,000			4,715,043			140,305			1,746,230
		1,022,127			$13,698,243			367,347			$4,653,062
Shares issued to shareholders in reinvestment of distributions
Initial Class		330,522			$4,032,365			256,917			$3,160,075
Service Class		684,759			8,141,786			729,110			8,763,901
		1,015,281			$12,174,151			986,027			$11,923,976
Shares reacquired
Initial Class		(470,190	)		$(6,195,645	)		(575,061	)		$(7,148,347	)
Service Class		(1,373,684	)		(17,965,961	)		(1,990,124	)		(24,566,458	)
		(1,843,874	)		$(24,161,606	)		(2,565,185	)		$(31,714,805	)
Net change
Initial Class		516,459			$6,819,920			(91,102	)		$(1,081,440	)
Service Class		(322,925	)		(5,109,132	)		(1,120,709	)		(14,056,327	)
		193,534			$1,710,788			(1,211,811	)		$(15,137,767	)

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $717 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

(7)

Investments in Affiliated Issuers

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:


Affiliated Issuers		Beginning Shares/Par Amount		Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			1,052,191		27,806,514		(28,014,090	)		844,615

Affiliated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)		Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$645		$—		$—		$8,712			$844,530

MFS Blended Research Small Cap Equity Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of

MFS Blended Research Small Cap Equity Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Blended Research Small Cap Equity Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Blended Research Small Cap Equity Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND

The Trustees and Officers of the Trust, as of February 1, 2018, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Blended Research Small Cap Equity Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

Date first appointed to serve as Trustee/officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. For the period from December 15, 2004 until February 22, 2005, Mr. Manning served as Advisory Trustee. Prior to January 2012, Messrs. DiLorenzo and Yost served as Assistant Treasurers of the Funds. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively.

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

“Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.

MFS Blended Research Small Cap Equity Portfolio

Trustees and Officers – continued

Each Trustee has been elected by shareholders and each Trustee and officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. The Trust does not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board’s retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of 75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Jim Fallon Matt Krummell Jonathan Sage Jed Stocks

MFS Blended Research Small Cap Equity Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

The Investment Company Act of 1940 requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2017 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review meetings. The independent Trustees were also assisted in this process by the MFS Funds’ Independent Senior Officer, a senior officer appointed by and reporting to the independent Trustees.

In connection with their deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreement and other arrangements with the Fund.

In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2016 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified by Broadridge (the “Broadridge expense group”), (iii) information provided by MFS on the advisory fees of portfolios of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.

The Trustees’ conclusion as to the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 3rd quintile for the one-year period and the 1st quintile for the five-year period ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.

MFS Blended Research Small Cap Equity Portfolio

Board Review of Investment Advisory Agreement – continued

In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each lower than the Broadridge expense group median.

The Trustees also considered the advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised funds”) that have comparable investment strategies to the Fund, if any. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is not subject to any breakpoints. Taking into account the expense limitation noted above, the Trustees determined not to recommend any advisory fee breakpoints for the Fund at this time. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the group fee waiver was sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

The Trustees also considered information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable compensation in light of the services being provided by MFS to the Fund.

In addition, the Trustees considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.

The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.

The Trustees also considered benefits to MFS from the use of the Fund’s portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.

Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be continued for an additional one-year period, commencing August 1, 2017.

MFS Blended Research Small Cap Equity Portfolio

PROXY VOTING POLICIES AND INFORMATION

MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.

Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.

QUARTERLY PORTFOLIO DISCLOSURE

The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.

FURTHER INFORMATION

From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available at https://www.mfs.com/en-us/what-we-do/announcements.html or at mfs.com/vit3 by choosing the fund’s name.

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $11,068,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 39.11% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

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MFS^® CONSERVATIVE ALLOCATION PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VCA-ANN

MFS® CONSERVATIVE ALLOCATION PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Conservative Allocation Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Conservative Allocation Portfolio

PORTFOLIO COMPOSITION

Portfolio target allocation

LOGO


Portfolio holdings
MFS Total Return Bond Series			17.0%
MFS Limited Maturity Portfolio			11.9%
MFS Inflation-Adjusted Bond Portfolio			10.0%
MFS Government Securities Portfolio			10.0%
MFS Global Governments Portfolio			8.0%
MFS Value Series			6.0%
MFS Research Series			5.9%
MFS Growth Series			5.9%
MFS High Yield Portfolio			5.0%
MFS Research International Portfolio			4.0%
MFS Mid Cap Growth Series			4.0%
MFS Mid Cap Value Portfolio			4.0%
MFS International Growth Portfolio			2.0%
MFS International Value Portfolio			2.0%
MFS Global Real Estate Portfolio			2.0%
MFS New Discovery Value Portfolio			1.0%
MFS New Discovery Series			1.0%
Cash & Cash Equivalents			0.3%

Portfolio actual allocation

LOGO

Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statement of Assets and Liabilities until the trades with the underlying funds settle. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Conservative Allocation Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Conservative Allocation Portfolio (“fund”) provided a total return of 11.48%, while Service Class shares of the fund provided a total return of 11.24%. These compare with a return of 3.54% for the fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. The fund’s other benchmark, the MFS Conservative Allocation Portfolio Blended Index (“Blended Index”), generated a return of 10.21%. The Blended Index reflects the blended returns of various equity and fixed income market indices, with percentage allocations to each index designed to resemble the allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.

Market Environment

Factors Affecting Performance

During the reporting period, the fund outperformed both the Bloomberg Barclays U.S. Aggregate Bond Index and the Blended Index.

Relative to the Blended Index, the fixed income asset class was a primary contributor to performance. The fund’s allocation to the MFS Inflation-Adjusted Bond Portfolio and MFS Global Governments Portfolio benefited relative performance, as global markets in US dollar terms, performed well over the reporting period. Additionally, the fund’s allocation to the MFS High Yield Portfolio also strengthened relative returns, as credit markets outperformed the broad Bloomberg Barclays U.S. Aggregate Bond Index. Conversely, the fund’s exposure to the MFS Limited Maturity Portfolio and MFS Government Securities Portfolio, which underperformed the Bloomberg Barclays U.S. Aggregate Bond Index, held back relative performance.

The U.S. equity asset class benefited relative returns, led by strong active performance across most of the fund’s underlying portfolios, with the MFS Mid Cap Value Portfolio a notable standout. Although the fund’s diversification down the market capitalization spectrum held back relative performance, this was more than offset by the positive relative performance of the fund’s underlying US equity portfolios.

The international equity segment was another positive factor for relative performance, as the MFS Research International Portfolio and the MFS International Value Portfolio outperformed their respective benchmarks during the reporting period.

MFS Conservative Allocation Portfolio

Management Review – continued

Respectfully,

Portfolio Manager(s)

Joseph Flaherty

MFS Conservative Allocation Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	10/01/08	11.48%	6.07%	6.43%
	Service Class	10/01/08	11.24%	5.80%	6.17%

Comparative benchmark(s)
	Bloomberg Barclays U.S. Aggregate Bond Index (f)		3.54%	2.10%	4.26%
	MFS Conservative Allocation Portfolio Blended Index (f)(w)		10.21%	6.47%	6.84%
	FTSE EPRA/NAREIT Developed Real Estate Index (net div) (f)		10.36%	6.32%	6.53%
	MSCI EAFE Index (net div) (f)		25.03%	7.90%	5.99%
	Standard & Poor’s 500 Stock Index (f)		21.83%	15.79%	11.77%

(f)

Source: FactSet Research Systems Inc.

(t)

For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

(w)

As of December 31, 2017, the MFS Conservative Allocation Portfolio Blended Index was comprised of 62% Bloomberg Barclays U.S. Aggregate Bond Index, 28% Standard & Poor’s 500 Stock Index, 8% MSCI EAFE Index (net div), and 2% FTSE EPRA/NAREIT Developed Real Estate Index (net div).

Benchmark Definition(s)

Bloomberg Barclays U.S. Aggregate Bond Index – a market capitalization-weighted index that measures the performance of the U.S. investment-grade, fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with at least one year to final maturity.

FTSE EPRA/NAREIT Developed Real Estate Index (net div) – measures the performance of eligible real estate equities worldwide that generate a majority of their revenue and income through the ownership, disposure and development of income-producing real estate.

MFS Conservative Allocation Portfolio

Performance Summary – continued

MSCI EAFE (Europe, Australasia, Far East) Index (net div) – a market capitalization index that is designed to measure equity market performance in the developed markets, excluding the U.S. and Canada.

Standard & Poor’s 500 Stock Index – a market capitalization index of 500 widely held equity securities, designed to measure broad U.S. equity performance.

It is not possible to invest directly in an index.

Notes to Performance Summary

Average annual total return represents the average annual change in value for each share class for the periods presented. Life returns are presented where the share class has less than 10 years of performance history and represent the average annual total return from the class inception date to the stated period end date.

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Conservative Allocation Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

As a contract holder of the fund, you incur ongoing costs, including distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.

In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Because the underlying funds have varied expenses and fee levels and the fund may own different proportions of the underlying funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. If these indirect costs were included, your costs would have been higher.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.02%		$1,000.00		$1,048.69		$0.10
Initial Class	Hypothetical (h)		0.02%		$1,000.00		$1,025.10		$0.10
Service Class	Actual		0.27%		$1,000.00		$1,046.47		$1.39
Service Class	Hypothetical (h)		0.27%		$1,000.00		$1,023.84		$1.38

(h)	5% class return per year before expenses.

(p)

“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher.

MFS Conservative Allocation Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – 100.0%
Bond Funds – 61.9%
MFS Global Governments Portfolio – Initial Class (a)		4,199,849	$	44,350,403
MFS Government Securities Portfolio – Initial Class		4,473,015		55,420,661
MFS High Yield Portfolio – Initial Class		4,796,242		27,674,316
MFS Inflation-Adjusted Bond Portfolio – Initial Class (a)		5,136,227		55,522,618
MFS Limited Maturity Portfolio – Initial Class		6,520,227		66,375,916
MFS Total Return Bond Series – Initial Class		7,126,269		94,209,270

			$	343,553,184

International Stock Funds – 8.0%
MFS International Growth Portfolio – Initial Class		716,142	$	11,100,203
MFS International Value Portfolio – Initial Class		392,455		11,086,866
MFS Research International Portfolio – Initial Class		1,301,754		22,194,900

			$	44,381,969

Specialty Funds – 2.0%
MFS Global Real Estate Portfolio – Initial Class		776,900	$	11,086,366

U.S. Stock Funds – 27.8%
MFS Growth Series – Initial Class		675,751	$	33,044,220
MFS Mid Cap Growth Series – Initial Class		2,318,834		22,052,116
MFS Mid Cap Value Portfolio – Initial Class		2,446,894		22,046,515
MFS New Discovery Series – Initial Class		274,606		5,519,571
MFS New Discovery Value Portfolio – Initial Class		496,034		5,520,858
MFS Research Series – Initial Class		1,120,543		33,056,023
MFS Value Series – Initial Class		1,581,540		33,085,823

			$	154,325,126


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – continued
Money Market Funds – 0.3%
MFS Institutional Money Market Portfolio, 1.25% (v)		1,624,261	$	1,624,098

Total Investment Companies (Identified Cost, $497,173,731)			$	554,970,743

OTHER ASSETS, LESS LIABILITIES – (0.0)%				(53,696	)

NET ASSETS – 100.0%			$	554,917,047

(a)

Non-income producing security.

(h)

(v)

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in affiliated issuers, at value (identified cost, $497,173,731)			$554,970,743
Receivables for
Investments sold			1,001,467
Fund shares sold			303
Other assets			3,710
Total assets			$555,976,223
Liabilities
Payable for fund shares reacquired			$1,001,770
Payable to affiliates
Administrator			190
Shareholder servicing costs			110
Distribution and/or service fees			15,146
Payable for independent Trustees’ compensation			47
Accrued expenses and other liabilities			41,913
Total liabilities			$1,059,176
Net assets			$554,917,047
Net assets consist of
Paid-in capital			$469,110,683
Unrealized appreciation (depreciation)			57,797,012
Accumulated net realized gain (loss)			18,328,334
Undistributed net investment income			9,681,018
Net assets			$554,917,047
Shares of beneficial interest outstanding			47,711,362


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$2,338,245		201,413		$11.61
Service Class		552,578,802		47,509,949		11.63

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Dividends from affiliated issuers			$11,294,899
Expenses
Distribution and/or service fees			$1,473,856
Shareholder servicing costs			12,116
Administrative services fee			17,500
Independent Trustees’ compensation			15,214
Custodian fee			9,637
Shareholder communications			18,005
Audit and tax fees			37,675
Legal fees			7,649
Miscellaneous			21,025
Total expenses			$1,612,677
Net investment income (loss)			$9,682,222
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Affiliated issuers			$12,359,388
Capital gain distributions from affiliated issuers			8,298,493
Net realized gain (loss)			$20,657,881
Change in unrealized appreciation (depreciation)
Affiliated issuers			32,920,622
Net realized and unrealized gain (loss)			$53,578,503
Change in net assets from operations			$63,260,725

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$9,682,222		$10,988,313
Net realized gain (loss)		20,657,881		15,444,977
Net unrealized gain (loss)		32,920,622		5,301,508
Change in net assets from operations		$63,260,725		$31,734,798
Distributions declared to shareholders
From net investment income		$(10,989,398	)	$(16,110,618	)
From net realized gain		(15,777,594	)	(22,418,780	)
Total distributions declared to shareholders		$(26,766,992	)	$(38,529,398	)
Change in net assets from fund share transactions		$(96,807,155	)	$(71,588,922	)
Total change in net assets		$(60,313,422	)	$(78,383,522	)
Net assets
At beginning of period		615,230,469		693,613,991
At end of period (including undistributed net investment income of $9,681,018 and $10,988,194, respectively)		$554,917,047		$615,230,469

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.95			$11.09			$11.79			$11.61			$11.80
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.22			$0.22	(c)		$0.24			$0.20			$0.11
Net realized and unrealized gain (loss)		1.02			0.36			(0.27	)		0.34			0.97
Total from investment operations		$1.24			$0.58			$(0.03	)		$0.54			$1.08
Less distributions declared to shareholders
From net investment income		$(0.26	)		$(0.32	)		$(0.41	)		$(0.22	)		$(0.37	)
From net realized gain		(0.32	)		(0.40	)		(0.26	)		(0.14	)		(0.90	)
Total distributions declared to shareholders		$(0.58	)		$(0.72	)		$(0.67	)		$(0.36	)		$(1.27	)
Net asset value, end of period (x)		$11.61			$10.95			$11.09			$11.79			$11.61
Total return (%) (k)(r)(s)(x)		11.48			5.03	(c)		(0.19	)		4.61			9.82
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.02			0.02	(c)		0.01			0.02			0.03
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.02			0.03
Net investment income (loss) (l)		1.94			1.92	(c)		2.06			1.66			0.93
Portfolio turnover		0	(b)		1			2			1			1
Net assets at end of period (000 omitted)		$2,338			$2,266			$2,419			$2,948			$4,167

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.96			$11.10			$11.80			$11.61			$11.80
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.19			$0.19	(c)		$0.21			$0.16			$0.07
Net realized and unrealized gain (loss)		1.02			0.35			(0.28	)		0.36			0.98
Total from investment operations		$1.21			$0.54			$(0.07	)		$0.52			$1.05
Less distributions declared to shareholders
From net investment income		$(0.22	)		$(0.28	)		$(0.37	)		$(0.19	)		$(0.34	)
From net realized gain		(0.32	)		(0.40	)		(0.26	)		(0.14	)		(0.90	)
Total distributions declared to shareholders		$(0.54	)		$(0.68	)		$(0.63	)		$(0.33	)		$(1.24	)
Net asset value, end of period (x)		$11.63			$10.96			$11.10			$11.80			$11.61
Total return (%) (k)(r)(s)(x)		11.24			4.73	(c)		(0.49	)		4.41			9.52
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.27			0.27	(c)		0.26			0.27			0.28
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.27			0.28
Net investment income (loss) (l)		1.63			1.66	(c)		1.80			1.36			0.62
Portfolio turnover		0	(b)		1			2			1			1
Net assets at end of period (000 omitted)		$552,579			$612,965			$691,195			$801,775			$896,495

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

Financial Highlights – continued

(b)	Less than 0.5%.

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(h)

In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary.

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(l)

Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by the underlying affiliated funds in which the fund invests. The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests.

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Conservative Allocation Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Conservative Allocation Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

The fund is a “fund of funds”, which invests the majority of its assets in other MFS mutual funds (hereafter referred to as “underlying affiliated funds” or “underlying funds”), which may have different fiscal year ends than the funds. The underlying funds, in turn, may engage in a number of investment techniques and practices, which involve certain risks. Certain underlying funds invest their portfolio in high-yield securities rated below investment grade. Investments in below investment grade quality securities can involve a substantially greater risk of default or can already be in default, and their values can decline significantly. Below investment grade quality securities tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. Certain underlying funds invest a significant portion of their assets in asset-backed and/or mortgage-backed securities. For these securities, the value of the debt instrument also depends on the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying assets or collateral may be difficult. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae. Certain underlying funds invest in foreign securities, including securities of emerging market issuers. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industry, political, regulatory, geopolitical, and other conditions. Investments in emerging markets can involve additional and greater risks than the risks associated with investments in developed foreign markets. Emerging markets can have less developed markets, greater custody and operational risk, less developed legal, regulatory, and accounting systems, and greater political, social, and economic instability than developed markets.

The accounting policies of the underlying funds in which the fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov or at the SEC’s public reference room in Washington, D.C. The underlying funds’ shareholder reports are not covered by this report.

Investment Valuations – Open-end investment companies (underlying funds) are generally valued at their net asset value per share. The investments of underlying funds managed by the adviser are valued as described below. For purposes of this policy disclosure, “fund” also refers to the underlying funds in which the fund-of-funds invests.

Equity securities, including restricted equity securities and equity securities held short, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Equity securities held short, for which there were no sales reported for that day, are generally valued at the last quoted daily ask quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Exchange-traded options are generally valued at the last sale or

MFS Conservative Allocation Portfolio

Notes to Financial Statements – continued

official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. Futures contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a third-party pricing service. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Swap agreements are generally valued at valuations provided by a third-party pricing service, which for cleared swaps includes an evaluation of any trading activity at the clearinghouses. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.


Financial Instruments	Level 1		Level 2		Level 3		Total
Mutual Funds		$554,970,743		$—		$—		$554,970,743

For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the underlying funds’ shareholder reports for further information regarding the levels used in valuing the underlying funds’ assets or liabilities.

Derivatives – The fund does not invest in derivatives directly. The fund does invest in underlying funds that may use derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the underlying funds use derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.

MFS Conservative Allocation Portfolio

Notes to Financial Statements – continued

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on an accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Distributions of income and capital gains from the underlying funds are recorded on the ex-dividend date. Recognition of net investment income by the fund is affected by the timing of the declaration of distributions by the underlying funds in which the fund invests. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

The fund and/or the underlying funds may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended 12/31/17		Year ended 12/31/16
Ordinary income (including any short-term capital gains)		$11,663,511		$17,225,958
Long-term capital gains		15,103,481		21,303,440
Total distributions		$26,766,992		$38,529,398

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$499,669,583
Gross appreciation	64,088,711
Gross depreciation	(8,787,551	)
Net unrealized appreciation (depreciation)	$55,301,160
Undistributed ordinary income	10,084,263
Undistributed long-term capital gain	20,420,941

MFS Conservative Allocation Portfolio

Notes to Financial Statements – continued


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$49,416		$63,216		$61,677		$78,776
Service Class		10,939,982		16,047,402		15,715,917		22,340,004
Total		$10,989,398		$16,110,618		$15,777,594		$22,418,780

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. MFS receives no compensation under this agreement; however MFS receives management fees from the underlying MFS funds.

The investment adviser has agreed in writing to pay a portion of the fund’s operating expenses, excluding distribution and/or service fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses such as fees and expenses associated with investments in investment companies and other similar investment vehicles such that fund operating expenses do not exceed 0.20% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2019. For the year ended December 31, 2017, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.

In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which a fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $11,752, which equated to 0.0020% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $364.

Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund pays an annual fixed amount of $17,500. The administrative services fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.0030% of the fund’s average daily net assets.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $1,055 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Conservative Allocation Portfolio

Notes to Financial Statements – continued

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of shares of underlying funds aggregated $1,885,752 and $127,067,266, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		10,169			$115,023			4,714			$53,379
Service Class		423,197			4,768,408			1,740,149			19,371,122
		433,366			$4,883,431			1,744,863			$19,424,501
Shares issued to shareholders in reinvestment of distributions
Initial Class		9,901			$111,093			12,667			$141,992
Service Class		2,369,413			26,655,899			3,418,291			38,387,406
		2,379,314			$26,766,992			3,430,958			$38,529,398
Shares reacquired
Initial Class		(25,609	)		$(286,704	)		(28,643	)		$(322,731	)
Service Class		(11,197,619	)		(128,170,874	)		(11,535,443	)		(129,220,090	)
		(11,223,228	)		$(128,457,578	)		(11,564,086	)		$(129,542,821	)
Net change
Initial Class		(5,539	)		$(60,588	)		(11,262	)		$(127,360	)
Service Class		(8,405,009	)		(96,746,567	)		(6,377,003	)		(71,461,562	)
		(8,410,548	)		$(96,807,155	)		(6,388,265	)		$(71,588,922	)

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $3,993 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Conservative Allocation Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Underlying Affiliated Funds				Beginning Share/Par Amount			Acquisitions Share/Par Amount		Dispositions Share/Par Amount			Ending Share/Par Amount
MFS Global Governments Portfolio					4,938,466			16,270		(754,887	)		4,199,849
MFS Global Real Estate Portfolio					890,228			91,730		(205,058	)		776,900
MFS Government Securities Portfolio					4,926,875			154,594		(608,454	)		4,473,015
MFS Growth Series					938,398			32,297		(294,944	)		675,751
MFS High Yield Portfolio					5,316,638			342,065		(862,461	)		4,796,242
MFS Inflation-Adjusted Bond Portfolio					6,208,240			29,808		(1,101,821	)		5,136,227
MFS Institutional Money Market Portfolio					1,174,771			28,222,937		(27,773,447	)		1,624,261
MFS International Growth Portfolio					1,018,004			29,994		(331,856	)		716,142
MFS International Value Portfolio					545,861			7,858		(161,264	)		392,455
MFS Limited Maturity Portfolio					7,249,706			120,123		(849,602	)		6,520,227
MFS Mid Cap Growth Series					3,055,327			166,501		(902,994	)		2,318,834
MFS Mid Cap Value Portfolio					2,941,536			152,369		(647,011	)		2,446,894
MFS New Discovery Series					376,974			9,259		(111,627	)		274,606
MFS New Discovery Value Portfolio					566,503			72,382		(142,851	)		496,034
MFS Research International Portfolio					1,818,764			29,222		(546,232	)		1,301,754
MFS Research Series					1,404,106			106,286		(389,849	)		1,120,543
MFS Total Return Bond Series					8,000,609			259,318		(1,133,658	)		7,126,269
MFS Value Series					1,935,497			114,560		(468,517	)		1,581,540

Underlying Affiliated Funds	Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Global Governments Portfolio		$(591,894	)		$3,836,002			$—		$—			$44,350,403
MFS Global Real Estate Portfolio		292,693			29,019			543,232		627,346			11,086,366
MFS Government Securities Portfolio		(565,571	)		82,318			—		1,807,626			55,420,661
MFS Growth Series		4,540,736			3,914,805			1,353,838		35,777			33,044,220
MFS High Yield Portfolio		(173,336	)		252,681			—		1,865,565			27,674,316
MFS Inflation-Adjusted Bond Portfolio		(244,469	)		4,985,451			—		—			55,522,618
MFS Institutional Money Market Portfolio		(279	)		(26	)		—		13,268			1,624,098
MFS International Growth Portfolio		698,865			2,266,837			224,936		197,610			11,100,203
MFS International Value Portfolio		1,323,118			1,374,867			—		179,660			11,086,866
MFS Limited Maturity Portfolio		(34,227	)		150,603			—		1,116,851			66,375,916
MFS Mid Cap Growth Series		1,728,255			2,627,059			1,346,894		28,125			22,052,116
MFS Mid Cap Value Portfolio		211,802			1,831,139			665,583		337,664			22,046,515
MFS New Discovery Series		93,361			1,203,113			111,471		—			5,519,571
MFS New Discovery Value Portfolio		175,095			62,671			455,166		148,920			5,520,858
MFS Research International Portfolio		1,138,867			4,410,485			—		425,631			22,194,900
MFS Research Series		2,030,847			2,703,175			2,250,061		540,271			33,056,023
MFS Total Return Bond Series		(556,912	)		1,712,402			—		3,273,841			94,209,270
MFS Value Series		2,292,437			1,478,021			1,347,312		696,744			33,085,823

		$12,359,388			$32,920,622			$8,298,493		$11,294,899			$554,970,743

MFS Conservative Allocation Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of MFS Conservative Allocation Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Conservative Allocation Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinion.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Conservative Allocation Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Conservative Allocation Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Conservative Allocation Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Joseph Flaherty

MFS Conservative Allocation Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2016 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Broadridge on the Fund’s fees and expenses and the fees and expenses of comparable funds identified by Broadridge (the “Broadridge expense group”), (iii) information as to whether and to what extent applicable expense waivers and reimbursements are observed for the Fund, (iv) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (v) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vi) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (vii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 3rd quintile for the one-year period and the 2nd quintile for the five-year period ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

The Trustees considered that MFS does not charge an advisory fee for providing investment advisory services to the Fund, but that the Fund pays its pro rata share of the advisory fees paid by the underlying funds in which it invests (the “Underlying Funds”).

MFS Conservative Allocation Portfolio

Board Review of Investment Advisory Agreement – continued

In assessing the reasonableness of the Fund’s expenses, the Trustees considered, among other information, the Fund’s total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also considered that, according to the data provided by Broadridge (which takes into account any expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s total expense ratio was approximately at the Broadridge expense group median. Because the Fund does not pay an advisory fee, the Trustees did not consider the extent to which economies of scale would be realized due to the Fund’s growth of assets, whether fee levels reflect economies of scale for shareholders, or the fees paid by similar funds to other investment advisers or by similar clients of MFS.

The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s or the Underlying Funds’ behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.

The Trustees also considered benefits to MFS from the use of the Underlying Funds’ portfolio brokerage commissions, if applicable, to pay for investment research and various other factors. Additionally, the Trustees considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Fund.

MFS Conservative Allocation Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $16,614,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 17.05% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® GLOBAL REAL ESTATE PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VRE-ANN

MFS® GLOBAL REAL ESTATE PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Global Real Estate Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Global Real Estate Portfolio

PORTFOLIO COMPOSITION

Portfolio structure

LOGO


Top ten holdings
Simon Property Group, Inc., REIT			5.5%
Public Storage, Inc., REIT			4.3%
Unibail-Rodamco, REIT			4.0%
Mitsui Fudosan Co. Ltd.			3.2%
Link REIT			3.2%
Gateway Lifestyle Group Stapled Security			2.9%
Medical Properties Trust, Inc., REIT			2.7%
Sun Communities, Inc., REIT			2.7%
Hang Lung Properties Ltd.			2.7%
Mid-America Apartment Communities, Inc., REIT			2.6%

Equity industries
Real Estate			97.4%
Telecommunications – Wireless			1.8%


Issuer country weightings (x)
United States			52.4%
Japan			8.5%
United Kingdom			7.6%
Hong Kong			6.9%
Australia			5.2%
Singapore			4.3%
France			4.0%
Germany			3.4%
Canada			2.3%
Other Countries			5.4%

Currency exposure weightings (y)
United States Dollar			52.4%
Euro			11.4%
Japanese Yen			8.5%
British Pound Sterling			7.6%
Hong Kong Dollar			6.9%
Australian Dollar			5.2%
Singapore Dollar			4.3%
Canadian Dollar			2.3%
Norwegian Krone			1.4%

(x)	Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents.

(y)	Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents.

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Global Real Estate Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Global Real Estate Portfolio (“fund”) provided a total return of 13.33%, while Service Class shares of the fund provided a total return of 13.07%. These compare with a return of 10.36% over the same period for the fund’s benchmark, the FTSE EPRA/NAREIT Developed Real Estate Index (net div).

Market Environment

Contributors to Performance

Strong security selection within both United States and United Kingdom real estate investments contributed to performance relative to the FTSE EPRA/NAREIT Developed Real Estate Index. Within the United States, the fund’s position in wireless communications infrastructure provider American Tower (b) bolstered relative results. Within the United Kingdom, overweight positions in self-storage company Big Yellow Group and property investment and development business Derwent London further supported relative results.

The fund’s overweight positions in both Norway and Singapore real estate investments also benefited relative performance. Within Norway, an overweight position in real estate company Entra ASA aided relative results. Within Singapore, an overweight position in real estate development, investment and capital management company Mapletree Logistics Trust bolstered relative returns.

Elsewhere, the fund’s overweight positions in property development company Kerry Properties (h) (Hong Kong), real estate investment trust Link REIT (Hong Kong), property developer Hang Lung Properties (Hong Kong) and real estate company Grand City Properties buoyed relative results. Additionally, not holding shares of poor-performing real estate developer Mitsubishi Estate (Japan) further contributed to relative performance.

Detractors from Performance

Weak security selection in both Canadian-based and French-based real estate investments detracted from relative performance. However, there were no individual stocks within either country that were among the fund’s largest relative detractors during the reporting period.

An underweight position and security selection in German real estate investments also hindered relative results. Here, not holding shares of housing association Vonovia weighed on relative returns.

MFS Global Real Estate Portfolio

Management Review – continued

Other notable detractors from relative performance included the fund’s overweight positions in real estate investment trust Washington Prime Group, real estate companies Tanger Factory Outlet Centers (h), Advance Residence Investment (Japan) and Mitsui Fudosan, Real Estate Investment Trust Japan Logistics Fund (Japan) and self-storage company Public Storage. Additionally, not holding shares of real estate companies Sun Hung Kai Properties (Hong Kong) and Prologis, and an underweight position in property developer CK Asset Holdings (h) (Hong Kong), hindered relative performance.

Respectfully,

Portfolio Manager(s)

Rick Gable

(b)	Security is not a benchmark constituent.

(h)	Security was not held in the portfolio at period end.

MFS Global Real Estate Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	10-yr
	Initial Class	12/07/98	13.33%	8.39%	4.07%
	Service Class	2/01/04	13.07%	8.13%	3.81%

Comparative benchmark(s)
	FTSE EPRA/NAREIT Developed Real Estate Index (net div) (f)		10.36%	6.32%	3.28%

(f)	Source: FactSet Research Systems Inc.

Benchmark Definition(s)

It is not possible to invest directly in an index.

Notes to Performance Summary

Average annual total return represents the average annual change in value for each share class for the periods presented.

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Global Real Estate Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.92%		$1,000.00		$1,060.63		$4.78
Initial Class	Hypothetical (h)		0.92%		$1,000.00		$1,020.57		$4.69
Service Class	Actual		1.17%		$1,000.00		$1,059.33		$6.07
Service Class	Hypothetical (h)		1.17%		$1,000.00		$1,019.31		$5.96

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS Global Real Estate Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
COMMON STOCKS – 99.2%
Real Estate – 97.4%
Advance Residence Investment Corp., REIT		1,630	$	4,008,635
Alexandria Real Estate Equities, Inc., REIT		34,447		4,498,434
American Homes 4 Rent, “A”, REIT		145,429		3,176,169
Ascendas India Trust, REIT		4,361,000		3,749,785
Atrium European Real Estate Ltd.		687,174		3,421,697
AvalonBay Communities, Inc., REIT		26,212		4,676,483
Big Yellow Group PLC, REIT		318,242		3,736,021
Boardwalk, REIT		122,914		4,213,496
Brixmor Property Group Inc., REIT		215,525		4,021,697
Derwent London PLC, REIT		114,198		4,807,473
Entra ASA		170,480		2,533,135
Equity Lifestyle Properties, Inc., REIT		45,078		4,012,844
Fortune REIT		1,541,000		1,905,330
Gateway Lifestyle Group Stapled Security		3,135,641		5,333,555
Gramercy Property Trust, REIT		151,208		4,031,205
Grand City Properties S.A.		145,019		3,411,049
Hang Lung Properties Ltd.		1,999,944		4,889,244
Hibernia PLC, REIT		1,145,704		2,095,000
Japan Logistics Fund, Inc., REIT		1,394		2,570,874
Kenedix Office Investment Corp., REIT		541		3,072,909
LEG Immobilien AG		25,347		2,893,120
Life Storage, Inc., REIT		47,130		4,197,869
Link REIT		632,764		5,867,737
LondonMetric Property PLC, REIT		1,075,583		2,701,091
Mapletree Logistics Trust, REIT		4,308,023		4,251,815
Medical Properties Trust, Inc., REIT		365,186		5,032,263
Mid-America Apartment Communities, Inc., REIT		48,329		4,859,964
Mitsui Fudosan Co. Ltd.		266,575		5,973,835
National Storage, REIT		3,650,484		4,372,127
OUTFRONT Media, Inc., REIT		56,966		1,321,611
Public Storage, Inc., REIT		37,869		7,914,621
Ramco-Gershenson Properties Trust, REIT		241,333		3,554,835
Rexford Industrial Realty, Inc., REIT		51,758		1,509,263
Shaftesbury PLC, REIT		198,948		2,804,286
Simon Property Group, Inc., REIT		58,775		10,094,021
STAG Industrial, Inc., REIT		144,932		3,960,992
Starwood Property Trust, Inc., REIT		143,191		3,057,128
Store Capital Corp., REIT		164,686		4,288,423
Sun Communities, Inc., REIT		52,732		4,892,475
Unibail-Rodamco, REIT		29,001		7,307,334
Urban Edge Properties, REIT		115,571		2,945,905
Warehouses De Pauw, REIT		16,581		1,858,762
Washington Prime Group, Inc., REIT		564,575		4,019,774
Welltower, Inc., REIT		69,619		4,439,604
Weyerhaeuser Co., REIT		38,788		1,367,665

			$	179,651,555


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Telecommunications – Wireless – 1.8%
American Tower Corp., REIT		23,096	$	3,295,106

Total Common Stocks (Identified Cost, $154,878,561)			$	182,946,661


INVESTMENT COMPANIES (h) – 0.7%
MUTUAL FUNDS – 0.7%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $1,208,768)		1,208,889	$	1,208,768

OTHER ASSETS, LESS LIABILITIES – 0.1%				209,836

NET ASSETS – 100.0%			$	184,365,265

(h)

(v)

The following abbreviations are used in this report and are defined:

PLC

Public Limited Company

REIT

Real Estate Investment Trust

See Notes to Financial Statements

MFS Global Real Estate Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value (identified cost, $154,878,561)	$182,946,661
Investments in affiliated issuers, at value (identified cost, $1,208,768)	1,208,768
Receivables for
Fund shares sold	19,817
Dividends	807,076
Other assets	1,503
Total assets	$184,983,825
Liabilities
Payable to custodian	$2,561
Payable for fund shares reacquired	536,316
Payable to affiliates
Investment adviser	12,082
Shareholder servicing costs	85
Distribution and/or service fees	1,919
Payable for independent Trustees’ compensation	33
Accrued expenses and other liabilities	65,564
Total liabilities	$618,560
Net assets	$184,365,265
Net assets consist of
Paid-in capital	$151,759,930
Unrealized appreciation (depreciation)	28,068,658
Accumulated distributions in excess of net realized gain	(2,089,900	)
Undistributed net investment income	6,626,577
Net assets	$184,365,265
Shares of beneficial interest outstanding	12,276,987


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$114,197,788		8,001,338		$14.27
Service Class		70,167,477		4,275,649		16.41

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Global Real Estate Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Dividends	$6,819,781
Dividends from affiliated issuers	12,788
Foreign taxes withheld	(300,668	)
Total investment income	$6,531,901
Expenses
Management fee	$1,687,185
Distribution and/or service fees	181,277
Shareholder servicing costs	7,931
Administrative services fee	39,229
Independent Trustees’ compensation	4,519
Custodian fee	25,199
Shareholder communications	42,444
Audit and tax fees	52,951
Legal fees	3,129
Miscellaneous	15,017
Total expenses	$2,058,881
Reduction of expenses by investment adviser	(151,165	)
Net expenses	$1,907,716
Net investment income (loss)	$4,624,185
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$3,019,077
Affiliated issuers	64
Foreign currency	(2,879	)
Net realized gain (loss)	$3,016,262
Change in unrealized appreciation (depreciation)
Unaffiliated issuers	$15,784,354
Affiliated issuers	(125	)
Translation of assets and liabilities in foreign currencies	16,768
Net unrealized gain (loss)	$15,800,997
Net realized and unrealized gain (loss)	$18,817,259
Change in net assets from operations	$23,441,444

See Notes to Financial Statements

MFS Global Real Estate Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$4,624,185		$4,991,786
Net realized gain (loss)		3,016,262		11,269,493
Net unrealized gain (loss)		15,800,997		(394,920	)
Change in net assets from operations		$23,441,444		$15,866,359
Distributions declared to shareholders
From net investment income		$(7,173,022	)	$(4,607,565	)
From net realized gain		(10,457,204	)	(3,314,243	)
Total distributions declared to shareholders		$(17,630,226	)	$(7,921,808	)
Change in net assets from fund share transactions		$(11,722,179	)	$(25,366,300	)
Total change in net assets		$(5,910,961	)	$(17,421,749	)
Net assets
At beginning of period		190,276,226		207,697,975
At end of period (including undistributed net investment income of $6,626,577 and $7,501,834, respectively)		$184,365,265		$190,276,226

See Notes to Financial Statements

MFS Global Real Estate Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$14.01			$13.55			$14.06			$12.43			$12.54
Income (loss) from investment operations
Net investment income (loss) (d)		$0.37			$0.37	(c)		$0.29			$0.26			$0.26
Net realized and unrealized gain (loss)		1.42			0.74			(0.23	)		1.68			0.34
Total from investment operations		$1.79			$1.11			$0.06			$1.94			$0.60
Less distributions declared to shareholders
From net investment income		$(0.63	)		$(0.39	)		$(0.57	)		$(0.31	)		$(0.71	)
From net realized gain		(0.90	)		(0.26	)		—			—			—
Total distributions declared to shareholders		$(1.53	)		$(0.65	)		$(0.57	)		$(0.31	)		$(0.71	)
Net asset value, end of period (x)		$14.27			$14.01			$13.55			$14.06			$12.43
Total return (%) (k)(r)(s)(x)		13.33			7.94	(c)		0.74			15.62			5.07
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		1.00			0.97	(c)		1.00			0.98			1.01
Expenses after expense reductions (f)		0.92			0.91	(c)		0.94			0.95			0.95
Net investment income (loss)		2.56			2.63	(c)		2.11			1.93			2.02
Portfolio turnover		24			30			40			25			34
Net assets at end of period (000 omitted)		$114,198			$115,023			$124,563			$143,090			$151,176

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$15.89			$15.28			$15.77			$13.91			$13.94
Income (loss) from investment operations
Net investment income (loss) (d)		$0.38			$0.38	(c)		$0.29			$0.25			$0.26
Net realized and unrealized gain (loss)		1.62			0.83			(0.25	)		1.88			0.38
Total from investment operations		$2.00			$1.21			$0.04			$2.13			$0.64
Less distributions declared to shareholders
From net investment income		$(0.58	)		$(0.34	)		$(0.53	)		$(0.27	)		$(0.67	)
From net realized gain		(0.90	)		(0.26	)		—			—			—
Total distributions declared to shareholders		$(1.48	)		$(0.60	)		$(0.53	)		$(0.27	)		$(0.67	)
Net asset value, end of period (x)		$16.41			$15.89			$15.28			$15.77			$13.91
Total return (%) (k)(r)(s)(x)		13.07			7.70	(c)		0.47			15.31			4.84
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		1.25			1.22	(c)		1.25			1.23			1.26
Expenses after expense reductions (f)		1.17			1.16	(c)		1.19			1.20			1.20
Net investment income (loss)		2.31			2.37	(c)		1.84			1.67			1.78
Portfolio turnover		24			30			40			25			34
Net assets at end of period (000 omitted)		$70,167			$75,253			$83,135			$99,204			$114,111

See Notes to Financial Statements

MFS Global Real Estate Portfolio

Financial Highlights – continued

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Global Real Estate Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Global Real Estate Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

General – The preparation of financial statements in conformity with U.S. 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests a significant amount of its net assets in U.S. and foreign real estate related investments and as a result is subject to certain risks associated with the direct ownership of real estate and the real estate industry in general. These include risks related to general, regional and local economic conditions; fluctuations in interest rates; property tax rates, zoning laws, environmental regulations and other governmental action; cash flow dependency; increased operating expenses; lack of availability of mortgage funds; losses due to natural disasters; changes in property values and rental rates; and other factors. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industry, political, regulatory, geopolitical, and other conditions.

MFS Global Real Estate Portfolio

Notes to Financial Statements – continued

traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.


Financial Instruments	Level 1		Level 2		Level 3		Total
Equity Securities:
United States		$95,168,351		$—		$—		$95,168,351
Japan		15,626,253		—		—		15,626,253
United Kingdom		14,048,871		—		—		14,048,871
Hong Kong		12,662,311		—		—		12,662,311
Australia		9,705,682		—		—		9,705,682
Singapore		8,001,600		—		—		8,001,600
France		7,307,334		—		—		7,307,334
Germany		—		6,304,169		—		6,304,169
Canada		4,213,496		—		—		4,213,496
Other Countries		9,908,594		—		—		9,908,594
Mutual Funds		1,208,768		—		—		1,208,768
Total		$177,851,260		$6,304,169		$—		$184,155,429

For further information regarding security characteristics, see the Portfolio of Investments.

Of the level 2 investments presented above, equity investments amounting to $3,411,049 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $48,224,150 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued using other observable market-based inputs. The fund’s policy is to recognize transfers between the levels as of the end of the period.

Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.

MFS Global Real Estate Portfolio

Notes to Financial Statements – continued

Investment Transactions and Income – Investment transactions are recorded on the trade date. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.

Book/tax differences primarily relate to real estate investment trusts, passive foreign investment companies, and wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended 12/31/17		Year ended 12/31/16
Ordinary income (including any short-term capital gains)		$9,358,136		$4,607,565
Long-term capital gains		8,272,090		3,314,243
Total distributions		$17,630,226		$7,921,808

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$160,630,194
Gross appreciation	28,684,894
Gross depreciation	(5,159,659	)
Net unrealized appreciation (depreciation)	$23,525,235
Undistributed ordinary income	7,656,242
Undistributed long-term capital gain	1,092,015
Other temporary differences	331,843

Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$4,760,935		$3,072,515		$6,757,227		$2,103,171
Service Class		2,412,087		1,535,050		3,699,977		1,211,072
Total		$7,173,022		$4,607,565		$10,457,204		$3,314,243

MFS Global Real Estate Portfolio

Notes to Financial Statements – continued

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:


Up to $1 billion			0.90%
In excess of $1 billion and up to $2.5 billion			0.75%
In excess of $2.5 billion			0.65%

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $14,983, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.89% of the fund’s average daily net assets.

The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.92% of average daily net assets for the Initial Class shares and 1.17% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2019. For the year ended December 31, 2017, this reduction amounted to $136,182, which is included in the reduction of total expenses in the Statement of Operations.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $6,912, which equated to 0.0037% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $1,019.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $330 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Global Real Estate Portfolio

Notes to Financial Statements – continued

ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended December 31, 2017, the fund engaged in sale transactions pursuant to this policy, which amounted to $1,077,637. The sales transactions resulted in net realized gains (losses) of $174,261.

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, aggregated $45,103,378 and $66,983,477, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		150,081			$2,133,782			284,283			$4,031,253
Service Class		236,313			3,775,753			372,899			5,924,989
		386,394			$5,909,535			657,182			$9,956,242
Shares issued to shareholders in reinvestment of distributions
Initial Class		850,049			$11,518,162			349,001			$5,175,686
Service Class		391,799			6,112,064			163,168			2,746,122
		1,241,848			$17,630,226			512,169			$7,921,808
Shares reacquired
Initial Class		(1,207,552	)		$(17,436,759	)		(1,618,412	)		$(23,330,710	)
Service Class		(1,087,364	)		(17,825,181	)		(1,240,603	)		(19,913,640	)
		(2,294,916	)		$(35,261,940	)		(2,859,015	)		$(43,244,350	)
Net change
Initial Class		(207,422	)		$(3,784,815	)		(985,128	)		$(14,123,771	)
Service Class		(459,252	)		(7,937,364	)		(704,536	)		(11,242,529	)
		(666,674	)		$(11,722,179	)		(1,689,664	)		$(25,366,300	)

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 28%, 11%, and 6%, respectively, of the value of outstanding voting shares of the fund.

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $1,257 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

(7)

Investments in Affiliated Issuers


Affiliated Issuers		Beginning Shares/Par Amount			Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			2,776,118			29,847,727		(31,414,956	)		1,208,889

Affiliated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$64		$(125	)		$—		$12,788			$1,208,768

MFS Global Real Estate Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of MFS Global Real Estate Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Global Real Estate Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Global Real Estate Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Global Real Estate Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Global Real Estate Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Rick Gable

MFS Global Real Estate Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 1st quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 1st quintile for each of the one- and five-year periods ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS Global Real Estate Portfolio

Board Review of Investment Advisory Agreement – continued

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is subject to contractual breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $1 billion and $2.5 billion. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoints and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

MFS Global Real Estate Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available at https://www.mfs.com/en-us/what-we-do/announcements.html or at mfs.com/vit3 by choosing the fund’s name.

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $9,100,000 as capital gain dividends paid during the fiscal year.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® GROWTH

ALLOCATION PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VGA-ANN

MFS® GROWTH ALLOCATION PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Growth Allocation Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Growth Allocation Portfolio

PORTFOLIO COMPOSITION

Portfolio target allocation

LOGO


Portfolio holdings
MFS Value Series			11.0%
MFS Growth Series			10.9%
MFS Research Series			9.9%
MFS Research International Portfolio			9.1%
MFS Mid Cap Growth Series			9.0%
MFS Mid Cap Value Portfolio			9.0%
MFS Inflation-Adjusted Bond Portfolio			5.0%
MFS International Growth Portfolio			5.0%
MFS Global Real Estate Portfolio			5.0%
MFS International Value Portfolio			5.0%
MFS High Yield Portfolio			5.0%
MFS Total Return Bond Series			5.0%
MFS Global Governments Portfolio			4.0%
MFS Limited Maturity Portfolio			2.0%
MFS New Discovery Value Portfolio			2.0%
MFS New Discovery Series			2.0%
MFS Emerging Markets Equity Portfolio			1.0%
Cash & Cash Equivalents			0.1%

Portfolio actual allocation

LOGO

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Growth Allocation Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Growth Allocation Portfolio (“fund”) provided a total return of 19.86%, while Service Class shares of the fund provided a total return of 19.51%. These compare with a return of 21.83% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”). The fund’s other benchmark, the MFS Growth Allocation Portfolio Blended Index (“Blended Index”), generated a return of 17.83%. The Blended Index reflects the blended returns of various equity and fixed income market indices, with percentage allocations to each index designed to resemble the allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.

Market Environment

Factors Affecting Performance

During the reporting period, the fund underperformed its benchmark, the S&P 500 Index, as equities outpaced both the fixed income and real estate markets. However, the fund outperformed the Blended Index.

Within the U.S. equity asset class, the fund’s diversification down the market capitalization spectrum held back performance relative to the Blended Index. However, this was more than offset by strong active performance across most of the fund’s underlying portfolios, with the MFS Mid Cap Value Portfolio a notable standout.

The international equity segment also strengthened relative performance, as the MFS Research International Portfolio and the MFS International Value Portfolio outperformed their respective benchmarks during the reporting period. Additionally, the fund’s allocation to both the MFS International Growth Portfolio and MFS Emerging Markets Equity Portfolio benefited relative returns, driven by the strong performance of emerging markets.

MFS Growth Allocation Portfolio

Management Review – continued

Within the fixed income asset class, the fund’s allocation to the MFS Inflation-Adjusted Bond Portfolio and MFS Global Governments Portfolio benefited relative performance, as global markets in US dollar terms, performed well over the reporting period. The fund’s allocation to the MFS High Yield Portfolio also strengthened relative returns, as credit markets also performed well.

Respectfully,

Portfolio Manager(s)

Joseph Flaherty

MFS Growth Allocation Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	10/01/08	19.86%	10.77%	9.55%
	Service Class	10/01/08	19.51%	10.50%	9.28%

Comparative benchmark(s)
	Standard & Poor’s 500 Stock Index (f)		21.83%	15.79%	11.77%
	MFS Growth Allocation Portfolio Blended Index (f)(w)		17.83%	10.88%	9.03%
	Bloomberg Barclays U.S. Aggregate Bond Index (f)		3.54%	2.10%	4.26%
	FTSE EPRA/NAREIT Developed Real Estate Index (net div) (f)		10.36%	6.32%	6.53%
	MSCI EAFE Index (net div) (f)		25.03%	7.90%	5.99%

(f)

Source: FactSet Research Systems Inc.

(t)

For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

(w)

As of December 31, 2017, the MFS Growth Allocation Portfolio Blended Index was comprised of 54% Standard & Poor’s 500 Stock Index, 21% Bloomberg Barclays U.S. Aggregate Bond Index, 20% MSCI EAFE Index (net div), and 5% FTSE EPRA/NAREIT Developed Real Estate Index (net div).

Benchmark Definition(s)

MFS Growth Allocation Portfolio

Performance Summary – continued

Standard & Poor’s 500 Stock Index – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.

It is not possible to invest directly in an index.

Notes to Performance Summary

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Growth Allocation Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period,

July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.03%		$1,000.00		$1,082.16		$0.16
Initial Class	Hypothetical (h)		0.03%		$1,000.00		$1,025.05		$0.15
Service Class	Actual		0.28%		$1,000.00		$1,080.90		$1.47
Service Class	Hypothetical (h)		0.28%		$1,000.00		$1,023.79		$1.43

(h)	5% class return per year before expenses.

(p)

MFS Growth Allocation Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – 100.0%
Bond Funds – 21.0%
MFS Global Governments Portfolio – Initial Class (a)		1,594,242	$	16,835,196
MFS High Yield Portfolio – Initial Class		3,643,033		21,020,300
MFS Inflation-Adjusted Bond Portfolio – Initial Class (a)		1,949,655		21,075,773
MFS Limited Maturity Portfolio – Initial Class		825,077		8,399,288
MFS Total Return Bond Series – Initial Class		1,589,342		21,011,098

			$	88,341,655

International Stock Funds – 20.1%
MFS Emerging Markets Equity Portfolio – Initial Class		244,952	$	4,213,170
MFS International Growth Portfolio – Initial Class		1,359,489		21,072,087
MFS International Value Portfolio – Initial Class		744,930		21,044,282
MFS Research International Portfolio – Initial Class		2,224,083		37,920,621

			$	84,250,160

Specialty Funds – 5.0%
MFS Global Real Estate Portfolio – Initial Class		1,475,141	$	21,050,257

U.S. Stock Funds – 53.8%
MFS Growth Series – Initial Class		941,343	$	46,031,655
MFS Mid Cap Growth Series – Initial Class		3,965,067		37,707,790
MFS Mid Cap Value Portfolio – Initial Class		4,184,248		37,700,078
MFS New Discovery Series – Initial Class		417,359		8,388,920
MFS New Discovery Value Portfolio – Initial Class		753,947		8,391,430
MFS Research Series – Initial Class		1,419,152		41,864,995
MFS Value Series – Initial Class		2,203,345		46,093,973

			$	226,178,841


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – continued
Money Market Funds – 0.1%
MFS Institutional Money Market Portfolio, 1.25% (v)		263,952	$	263,926

Total Investment Companies (Identified Cost, $324,497,031)			$	420,084,839

OTHER ASSETS, LESS LIABILITIES – (0.0)%				(45,169	)

NET ASSETS – 100.0%			$	420,039,670

(a)

Non-income producing security.

(h)

(v)

See Notes to Financial Statements

MFS Growth Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in affiliated issuers, at value (identified cost, $324,497,031)			$420,084,839
Receivables for
Investments sold			626,932
Fund shares sold			235
Other assets			2,832
Total assets			$420,714,838
Liabilities
Payable for fund shares reacquired			$627,167
Payable to affiliates
Administrator			190
Shareholder servicing costs			88
Distribution and/or service fees			11,413
Payable for independent Trustees’ compensation			60
Accrued expenses and other liabilities			36,250
Total liabilities			$675,168
Net assets			$420,039,670
Net assets consist of
Paid-in capital			$295,249,978
Unrealized appreciation (depreciation)			95,587,808
Accumulated net realized gain (loss)			23,226,594
Undistributed net investment income			5,975,290
Net assets			$420,039,670
Shares of beneficial interest outstanding			34,366,415


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$4,116,487		337,044		$12.21
Service Class		415,923,183		34,029,371		12.22

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Growth Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Dividends from affiliated issuers			$7,148,617
Expenses
Distribution and/or service fees			$1,055,508
Shareholder servicing costs			9,580
Administrative services fee			17,500
Independent Trustees’ compensation			9,160
Custodian fee			6,573
Shareholder communications			13,554
Audit and tax fees			37,543
Legal fees			5,804
Miscellaneous			17,874
Total expenses			$1,173,096
Net investment income (loss)			$5,975,521
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Affiliated issuers			$13,067,584
Capital gain distributions from affiliated issuers			11,758,518
Net realized gain (loss)			$24,826,102
Change in unrealized appreciation (depreciation)
Affiliated issuers			45,331,921
Net realized and unrealized gain (loss)			$70,158,023
Change in net assets from operations			$76,133,544

See Notes to Financial Statements

MFS Growth Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$5,975,521		$6,733,946
Net realized gain (loss)		24,826,102		21,721,064
Net unrealized gain (loss)		45,331,921		1,399,771
Change in net assets from operations		$76,133,544		$29,854,781
Distributions declared to shareholders
From net investment income		$(6,734,034	)	$(10,983,900	)
From net realized gain		(21,973,275	)	(30,256,616	)
Total distributions declared to shareholders		$(28,707,309	)	$(41,240,516	)
Change in net assets from fund share transactions		$(51,183,005	)	$(35,961,954	)
Total change in net assets		$(3,756,770	)	$(47,347,689	)
Net assets
At beginning of period		423,796,440		471,144,129
At end of period (including undistributed net investment income of $5,975,290 and $6,733,803, respectively)		$420,039,670		$423,796,440

See Notes to Financial Statements

MFS Growth Allocation Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.97			$11.27			$12.42			$12.19			$11.22
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.21			$0.20	(c)		$0.21			$0.16			$0.12
Net realized and unrealized gain (loss)		1.91			0.62			(0.19	)		0.50			2.28
Total from investment operations		$2.12			$0.82			$0.02			$0.66			$2.40
Less distributions declared to shareholders
From net investment income		$(0.23	)		$(0.32	)		$(0.58	)		$(0.21	)		$(0.32	)
From net realized gain		(0.65	)		(0.80	)		(0.59	)		(0.22	)		(1.11	)
Total distributions declared to shareholders		$(0.88	)		$(1.12	)		$(1.17	)		$(0.43	)		$(1.43	)
Net asset value, end of period (x)		$12.21			$10.97			$11.27			$12.42			$12.19
Total return (%) (k)(r)(s)(x)		19.86			7.15	(c)		0.53			5.39			22.56
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.03			0.03	(c)		0.02			0.03			0.03
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.03			0.03
Net investment income (loss) (l)		1.75			1.81	(c)		1.75			1.29			0.98
Portfolio turnover		2			1			1			1			4
Net assets at end of period (000 omitted)		$4,116			$3,140			$2,908			$2,939			$2,858

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.98			$11.27			$12.41			$12.19			$11.21
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.17			$0.17	(c)		$0.17			$0.12			$0.08
Net realized and unrealized gain (loss)		1.92			0.63			(0.18	)		0.50			2.30
Total from investment operations		$2.09			$0.80			$(0.01	)		$0.62			$2.38
Less distributions declared to shareholders
From net investment income		$(0.20	)		$(0.29	)		$(0.54	)		$(0.18	)		$(0.29	)
From net realized gain		(0.65	)		(0.80	)		(0.59	)		(0.22	)		(1.11	)
Total distributions declared to shareholders		$(0.85	)		$(1.09	)		$(1.13	)		$(0.40	)		$(1.40	)
Net asset value, end of period (x)		$12.22			$10.98			$11.27			$12.41			$12.19
Total return (%) (k)(r)(s)(x)		19.51			6.94	(c)		0.30			5.04			22.38
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.28			0.28	(c)		0.27			0.28			0.28
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.28			0.28
Net investment income (loss) (l)		1.40			1.50	(c)		1.40			1.00			0.71
Portfolio turnover		2			1			1			1			4
Net assets at end of period (000 omitted)		$415,923			$420,657			$468,237			$538,164			$618,967

See Notes to Financial Statements

MFS Growth Allocation Portfolio

Financial Highlights – continued

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(h)

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(l)

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Growth Allocation Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Growth Allocation Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

MFS Growth Allocation Portfolio

Notes to Financial Statements – continued

Financial Instruments

Level 1

Level 2

Level 3

Total

Mutual Funds

$420,084,839

$��

$—

$420,084,839

MFS Growth Allocation Portfolio

Notes to Financial Statements – continued

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended		Year ended
	12/31/17		12/31/16
Ordinary income (including any short-term capital gains)		$6,853,058		$12,020,610
Long-term capital gains		21,854,251		29,219,906
Total distributions		$28,707,309		$41,240,516

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$326,158,929
Gross appreciation	95,484,801
Gross depreciation	(1,558,891	)
Net unrealized appreciation (depreciation)	$93,925,910
Undistributed ordinary income	6,785,025
Undistributed long-term capital gain	24,078,757

MFS Growth Allocation Portfolio

Notes to Financial Statements – continued


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$73,606		$87,692		$206,198		$216,265
Service Class		6,660,428		10,896,208		21,767,077		30,040,351
Total		$6,734,034		$10,983,900		$21,973,275		$30,256,616

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the funds. MFS receives no compensation under this agreement; however MFS receives management fees from the underlying MFS funds.

The investment adviser has agreed in writing to pay a portion of the fund’s operating expenses, excluding distribution and/or service fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses such as fees and expenses associated with investments in investment companies and other similar investment vehicles, such that fund operating expenses do not exceed 0.20% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2019. For the year ended December 31, 2017, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $9,191, which equated to 0.0022% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $389.

Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund pays an annual fixed amount of $17,500. The administrative services fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.0041% the fund’s average daily net assets.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $756 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Growth Allocation Portfolio

Notes to Financial Statements – continued

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of shares of underlying funds aggregated $9,832,100 and $90,891,511, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		52,316			$607,045			30,929			$342,169
Service Class		1,144,381			13,421,704			1,222,192			13,813,513
		1,196,697			$14,028,749			1,253,121			$14,155,682
Shares issued to shareholders in reinvestment of distributions
Initial Class		24,523			$279,804			27,285			$303,957
Service Class		2,487,096			28,427,505			3,671,440			40,936,559
		2,511,619			$28,707,309			3,698,725			$41,240,516
Shares reacquired
Initial Class		(25,904	)		$(303,523	)		(30,130	)		$(336,968	)
Service Class		(7,917,693	)		(93,615,540	)		(8,127,901	)		(91,021,184	)
		(7,943,597	)		$(93,919,063	)		(8,158,031	)		$(91,358,152	)
Net change
Initial Class		50,935			$583,326			28,084			$309,158
Service Class		(4,286,216	)		(51,766,331	)		(3,234,269	)		(36,271,112	)
		(4,235,281	)		$(51,183,005	)		(3,206,185	)		$(35,961,954	)

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $2,855 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Growth Allocation Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Underlying Affiliated Funds				Beginning Shares/Par Amount			Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Emerging Markets Equity Portfolio					332,359			7,659		(95,066	)		244,952
MFS Global Governments Portfolio					1,644,025			125,218		(175,001	)		1,594,242
MFS Global Real Estate Portfolio					1,519,359			210,276		(254,494	)		1,475,141
MFS Growth Series					1,198,827			56,155		(313,639	)		941,343
MFS High Yield Portfolio					3,691,362			315,042		(363,371	)		3,643,033
MFS Inflation-Adjusted Bond Portfolio					2,086,034			115,797		(252,176	)		1,949,655
MFS Institutional Money Market Portfolio					416,288			11,442,668		(11,595,004	)		263,952
MFS International Growth Portfolio					1,741,544			70,260		(452,315	)		1,359,489
MFS International Value Portfolio					935,257			23,223		(213,550	)		744,930
MFS Limited Maturity Portfolio					832,134			52,850		(59,907	)		825,077
MFS Mid Cap Growth Series					4,796,751			309,256		(1,140,940	)		3,965,067
MFS Mid Cap Value Portfolio					4,649,648			292,535		(757,935	)		4,184,248
MFS New Discovery Series					526,593			16,045		(125,279	)		417,359
MFS New Discovery Value Portfolio					799,029			115,119		(160,201	)		753,947
MFS Research International Portfolio					2,822,484			81,978		(680,379	)		2,224,083
MFS Research Series					1,635,509			143,136		(359,493	)		1,419,152
MFS Total Return Bond Series					1,599,853			126,003		(136,514	)		1,589,342
MFS Value Series					2,487,093			169,533		(453,281	)		2,203,345

Underlying Affiliated Funds	Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Emerging Markets Equity Portfolio		$78,323			$1,260,980			$—		$43,492			$4,213,170
MFS Global Governments Portfolio		(131,098	)		1,282,078			—		—			16,835,196
MFS Global Real Estate Portfolio		332,901			240,184			976,404		1,127,590			21,050,257
MFS Growth Series		4,066,422			7,038,234			1,788,950		47,276			46,031,655
MFS High Yield Portfolio		(59,396	)		93,709			—		1,342,707			21,020,300
MFS Inflation-Adjusted Bond Portfolio		(38,901	)		1,737,403			—		—			21,075,773
MFS Institutional Money Market Portfolio		(262	)		(9	)		—		1,827			263,926
MFS International Growth Portfolio		723,254			4,596,924			404,593		355,440			21,072,087
MFS International Value Portfolio		1,653,106			3,191,265			—		323,472			21,044,282
MFS Limited Maturity Portfolio		1,347			10,337			—	��	134,036			8,399,288
MFS Mid Cap Growth Series		1,643,327			5,365,754			2,182,526		45,574			37,707,790
MFS Mid Cap Value Portfolio		174,460			3,129,663			1,090,410		553,188			37,700,078
MFS New Discovery Series		168,422			1,693,240			160,867		—			8,388,920
MFS New Discovery Value Portfolio		138,790			203,778			660,076		215,963			8,391,430
MFS Research International Portfolio		1,333,543			7,628,469			—		689,673			37,920,621
MFS Research Series		1,104,251			4,536,025			2,704,817		649,465			41,864,995
MFS Total Return Bond Series		(79,967	)		311,922			—		693,058			21,011,098
MFS Value Series		1,959,062			3,011,965			1,789,875		925,856			46,093,973

		$13,067,584			45,331,921			$11,758,518		$7,148,617			$420,084,839

MFS Growth Allocation Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of MFS Growth Allocation Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Growth Allocation Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinion.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Growth Allocation Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Growth Allocation Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Growth Allocation Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Joseph Flaherty

MFS Growth Allocation Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2016 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Broadridge on the Fund’s fees and expenses and the fees and expenses of comparable funds identified by Broadridge (the “Broadridge expense group”), (iii) information as to whether and to what extent applicable expense waivers and reimbursements are observed for the Fund, (iv) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (v) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vi) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (vii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 3rd quintile for the one-year period and in the 2nd quintile for the five-year period ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS Growth Allocation Portfolio

Board Review of Investment Advisory Agreement – continued

The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s or the Underlying Funds’ behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.

MFS Growth Allocation Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $24,040,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 37.39% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® INFLATION-ADJUSTED BOND PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VIA-ANN

MFS® INFLATION-ADJUSTED BOND PORTFOLIO

CONTENTS


Letter from the Executive Chairman			1
Portfolio composition			2
Management review			3
Performance summary			4
Expense table			6
Portfolio of investments			7
Statement of assets and liabilities			11
Statement of operations			12
Statements of changes in net assets			13
Financial highlights			14
Notes to financial statements			16
Report of independent registered public accounting firm			23
Trustees and officers			24
Board review of investment advisory agreement			27
Proxy voting policies and information			29
Quarterly portfolio disclosure			29
Further information			29
Information about fund contracts and legal claims			29
MFS^® privacy notice			30

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Inflation-Adjusted Bond Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Inflation-Adjusted Bond Portfolio

PORTFOLIO COMPOSITION

Portfolio structure (i)

LOGO


Fixed income sectors (i)
Non-U.S. Government Bonds			55.2%
U.S. Treasury Securities			34.6%

Composition including fixed income credit quality (a)(i)
AAA			5.8%
AA			31.8%
A			2.9%
BBB			14.7%
U.S. Government			38.5%
Not Rated			(3.9)%
Cash & Cash Equivalents			6.3%
Other			3.9%


Portfolio facts (i)
Average Duration (d)			9.4
Average Effective Maturity (m)			14.5 yrs.

Issuer country weightings (i)(x)
United States			44.9%
United Kingdom			24.8%
Italy			11.6%
France			5.4%
Canada			3.2%
Spain			3.1%
Japan			2.9%
New Zealand			1.5%
Sweden			1.1%
Other Countries			1.5%

Currency exposure weightings (i)(y)
United States Dollar			42.4%
British Pound Sterling			29.2%
Euro			20.1%
Swedish Krona			2.5%
Japanese Yen			2.4%
Canadian Dollar			1.5%
Australian Dollar			1.1%
New Zealand Dollar			0.5%
Danish Krone			0.3%

(a)

For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Not Rated includes fixed income securities, including fixed income futures contracts, which have not been rated by any rating agency. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.

(d)

Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move.

(i)

For purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts.

(m)

In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity.

(x)

Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents and Other.

(y)

Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents and Other.

Where the fund holds convertible bonds, they are treated as part of the equity portion of the portfolio.

Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions.

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Inflation-Adjusted Bond Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Inflation-Adjusted Bond Portfolio (“fund”) provided a total return of 8.32%, while Service Class shares of the fund provided a total return of 7.99%. These compare with a return of 8.51% over the same period for the fund’s benchmark, the Bloomberg Barclays World Government Inflation-Linked Bond Index.

Market Environment

Factors Affecting Performance

Relative to the Bloomberg Barclays World Government Inflation-Linked Bond Index, security selection, most notably within Japanese bonds, detracted from performance. Additionally, bonds with maturities shorter than three years also held back relative results. The combination of an overweight allocation and security selection of bonds with maturities of 10-15 years was another negative factor for relative performance.

Conversely, the fund’s yield curve (y) positioning, particularly its longer relative duration (d) exposure to the British pound yield curve, and shorter relative duration exposure to both the Canadian dollar and New Zealand dollar yield curves, contributed to relative returns. Additionally, the fund’s overweight exposure to bonds issued in Spain also helped relative returns.

Respectfully,

Portfolio Manager(s)

Erik Weisman

(d)	Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value.

(y)	A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates.

MFS Inflation-Adjusted Bond Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	10/01/08	8.32%	0.76%	3.86%
	Service Class	10/01/08	7.99%	0.52%	3.59%

Comparative benchmark(s)
	Bloomberg Barclays World Government Inflation-Linked Bond Index (f)		8.51%	1.28%	3.66%

(f)	Source: FactSet Research Systems Inc.

(t)	For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

Benchmark Definition(s)

Bloomberg Barclays World Government Inflation-Linked Bond Index – measures the performance of the major government inflation-linked bond markets.

It is not possible to invest directly in an index.

Notes to Performance Summary

MFS Inflation-Adjusted Bond Portfolio

Performance Summary – continued

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Inflation-Adjusted Bond Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period,

July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.55%		$1,000.00		$1,046.47		$2.84
Initial Class	Hypothetical (h)		0.55%		$1,000.00		$1,022.43		$2.80
Service Class	Actual		0.80%		$1,000.00		$1,045.01		$4.12
Service Class	Hypothetical (h)		0.80%		$1,000.00		$1,021.17		$4.08

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS Inflation-Adjusted Bond Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
BONDS – 93.4%
International Market Sovereign – 55.0%
Commonwealth of Australia, Inflation Linked Bond, 2.5%, 9/20/2030	AUD	820,540	$	768,726
Commonwealth of Australia, Inflation Linked Bond, 2%, 8/21/2035	AUD	1,684,075		1,540,446
Commonwealth of Australia, Inflation Linked Bond, 1.25%, 8/21/2040	AUD	1,042,500		895,338
Federal Republic of Germany, Inflation Linked Bond, 0.1%, 4/15/2046	EUR	403,693		569,318
Government of Canada, Inflation Linked Bond, 4.25%, 12/01/2026	CAD	5,403,425		5,759,742
Government of Canada, Inflation Linked Bond, 4%, 12/01/2031	CAD	902,525		1,058,741
Government of Canada, Inflation Linked Bond, 3%, 12/01/2036	CAD	889,770		1,017,091
Government of Canada, Inflation Linked Bond, 2%, 12/01/2041	CAD	954,612		996,594
Government of Canada, Inflation Linked Bond, 1.5%, 12/01/2044	CAD	792,722		772,964
Government of Canada, Inflation Linked Bond, 1.25%, 12/01/2047	CAD	955,647		899,578
Government of Japan, Inflation Linked Bond, 1.4%, 3/10/2018	JPY	205,400,000		1,824,765
Government of Japan, Inflation Linked Bond, 0.1%, 3/10/2026	JPY	813,499,200		7,642,236
Government of New Zealand, Inflation Linked Bond, 2%, 9/20/2025	NZD	3,385,920		2,533,870
Government of New Zealand, Inflation Linked Bond, 3%, 9/20/2030	NZD	1,573,350		1,295,534
Government of New Zealand, Inflation Linked Bond, 2.5%, 9/20/2035	NZD	1,548,900		1,212,547
Kingdom of Denmark, Inflation Linked Bond, 0.1%, 11/15/2023	DKK	6,360,540		1,101,598
Kingdom of Spain, Inflation Linked Bond, 0.55%, 11/30/2019	EUR	4,593,735		5,727,510
Kingdom of Spain, Inflation Linked Bond, 0.3%, 11/30/2021	EUR	1,835,442		2,327,958
Kingdom of Spain, Inflation Linked Bond, 0.65%, 11/30/2027	EUR	1,625,712		2,036,050
Kingdom of Sweden, Inflation Linked Bond, 4%, 12/01/2020	SEK	13,194,696		1,914,007
Kingdom of Sweden, Inflation Linked Bond, 3.5%, 12/01/2028	SEK	8,204,969		1,547,255
Republic of France, Inflation Linked Bond, 2.25%, 7/25/2020	EUR	2,487,980		3,298,850
Republic of France, Inflation Linked Bond, 1.1%, 7/25/2022	EUR	2,432,914		3,278,183
Republic of France, Inflation Linked Bond, 2.1%, 7/25/2023	EUR	1,949,308		2,792,112
Republic of France, Inflation Linked Bond, 0.25%, 7/25/2024	EUR	3,158,580		4,171,455
Republic of France, Inflation Linked Bond, 3.4%, 7/25/2029	EUR	1,269,840		2,272,221


Issuer	Shares/Par		Value ($)
BONDS – continued
International Market Sovereign – continued
Republic of France, Inflation Linked Bond, 3.15%, 7/25/2032	EUR	1,007,068	$	1,882,195
Republic of Italy, Inflation Linked Bond, 2.1%, 9/15/2021	EUR	3,313,470		4,406,428
Republic of Italy, Inflation Linked Bond, 2.6%, 9/15/2023	EUR	3,142,503		4,357,602
Republic of Italy, Inflation Linked Bond, 2.35%, 9/15/2024	EUR	10,603,679		14,546,988
Republic of Italy, Inflation Linked Bond, 3.1%, 9/15/2026	EUR	4,156,945		6,056,413
Republic of Italy, Inflation Linked Bond, 1.3%, 5/15/2028	EUR	2,799,748		3,501,104
Republic of Italy, Inflation Linked Bond, 1.25%, 9/15/2032	EUR	305,505		373,224
Republic of Italy, Inflation Linked Bond, 2.35%, 9/15/2035	EUR	2,193,642		3,125,810
Republic of Italy, Inflation Linked Bond, 2.55%, 9/15/2041	EUR	1,107,620		1,581,961
United Kingdom Treasury, 4.75%, 12/07/2030	GBP	2,149,000		4,043,619
United Kingdom Treasury, 4.25%, 3/07/2036	GBP	1,000,000		1,897,738
United Kingdom Treasury, 3.25%, 1/22/2044	GBP	1,000,000		1,758,301
United Kingdom Treasury, Inflation Linked Bond, 1.25%, 11/22/2032	GBP	1,136,101		2,322,183
United Kingdom Treasury, Inflation Linked Bond, 0.75%, 3/22/2034	GBP	2,193,249		4,333,978
United Kingdom Treasury, Inflation Linked Bond, 2%, 1/26/2035	GBP	2,330,422		5,448,736
United Kingdom Treasury, Inflation Linked Bond, 1.125%, 11/22/2037	GBP	2,532,037		5,715,900
United Kingdom Treasury, Inflation Linked Bond, 0.625%, 3/22/2040	GBP	2,661,333		5,851,887
United Kingdom Treasury, Inflation Linked Bond, 0.625%, 11/22/2042	GBP	1,930,772		4,477,497
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2044	GBP	2,231,631		4,759,594
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2046	GBP	1,580,625		3,466,518
United Kingdom Treasury, Inflation Linked Bond, 0.75%, 11/22/2047	GBP	2,018,158		5,215,491
United Kingdom Treasury, Inflation Linked Bond, 0.5%, 3/22/2050	GBP	1,834,579		4,700,995
United Kingdom Treasury, Inflation Linked Bond, 0.25%, 3/22/2052	GBP	1,586,715		3,974,039
United Kingdom Treasury, Inflation Linked Bond, 1.25%, 11/22/2055	GBP	1,803,455		6,080,974
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 11/22/2056	GBP	207,878		541,959
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2058	GBP	1,409,468		3,770,757

MFS Inflation-Adjusted Bond Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
International Market Sovereign – continued
United Kingdom Treasury, Inflation Linked Bond, 0.375%, 3/22/2062	GBP	1,720,807	$	5,336,104
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 11/22/2065	GBP	745,284		2,291,241
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2068	GBP	1,609,781		5,220,752

			$	180,294,677

U.S. Treasury Inflation Protected Securities – 38.4%
U.S. Treasury Bonds, 0.125%, 4/15/2020	$	6,846,450	$	6,833,771
U.S. Treasury Bonds, 1.125%, 1/15/2021		3,774,044		3,887,672
U.S. Treasury Bonds, 0.375%, 7/15/2023		4,588,394		4,624,960
U.S. Treasury Bonds, 0.625%, 1/15/2024 (f)		4,896,672		4,984,869
U.S. Treasury Bonds, 0.125%, 7/15/2024		4,270,589		4,222,674
U.S. Treasury Bonds, 0.25%, 1/15/2025		6,703,556		6,647,989
U.S. Treasury Bonds, 2.375%, 1/15/2025		4,806,414		5,480,098
U.S. Treasury Bonds, 0.375%, 7/15/2025		6,748,428		6,762,781
U.S. Treasury Bonds, 0.625%, 1/15/2026		7,162,890		7,282,073
U.S. Treasury Bonds, 2%, 1/15/2026		2,894,435		3,257,628
U.S. Treasury Bonds, 2.375%, 1/15/2027		2,560,032		2,997,069
U.S. Treasury Bonds, 1.75%, 1/15/2028		3,353,264		3,771,584
U.S. Treasury Bonds, 3.625%, 4/15/2028		2,534,650		3,327,861
U.S. Treasury Bonds, 2.5%, 1/15/2029		1,769,275		2,147,817
U.S. Treasury Bonds, 3.875%, 4/15/2029		3,817,145		5,207,682
U.S. Treasury Bonds, 3.375%, 4/15/2032		337,685		467,552
U.S. Treasury Bonds, 2.125%, 2/15/2040		1,765,467		2,300,156


Issuer	Shares/Par		Value ($)
BONDS – continued
U.S. Treasury Inflation Protected Securities – continued
U.S. Treasury Bonds, 2.125%, 2/15/2041	$	3,229,274	$	4,236,614
U.S. Treasury Bonds, 0.75%, 2/15/2042		2,452,870		2,480,446
U.S. Treasury Bonds, 0.625%, 2/15/2043		3,175,666		3,112,223
U.S. Treasury Bonds, 1.375%, 2/15/2044		3,276,714		3,788,511
U.S. Treasury Bonds, 0.75%, 2/15/2045		3,283,850		3,305,797
U.S. Treasury Bonds, 1%, 2/15/2046		3,084,542		3,300,569
U.S. Treasury Notes, 1.875%, 7/15/2019		895,303		923,225
U.S. Treasury Notes, 1.375%, 1/15/2020		2,017,828		2,071,018
U.S. Treasury Notes, 1.25%, 7/15/2020		3,502,831		3,617,659
U.S. Treasury Notes, 0.125%, 4/15/2021		4,630,252		4,612,449
U.S. Treasury Notes, 0.625%, 7/15/2021		5,354,948		5,459,572
U.S. Treasury Notes, 0.125%, 1/15/2022		1,684,862		1,678,638
U.S. Treasury Notes, 0.125%, 7/15/2022		2,111,989		2,109,938
U.S. Treasury Notes, 0.125%, 1/15/2023		6,238,662		6,192,783
U.S. Treasury Notes, 0.125%, 7/15/2026		4,865,301		4,757,012

			$	125,850,690

Total Bonds (Identified Cost, $281,267,729)			$	306,145,367


INVESTMENT COMPANIES (h) – 5.8%
MONEY MARKET FUNDS – 5.8%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $18,949,940)		18,951,029	$	18,949,134

OTHER ASSETS, LESS LIABILITIES – 0.8%				2,752,399

NET ASSETS – 100.0%			$	327,846,900

(f)

All or a portion of the security has been segregated as collateral for open futures contracts.

(h)

(v)

Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below:

AUD

Australian Dollar

CAD

Canadian Dollar

CNH

Chinese Yuan Renminbi (Offshore)

DKK

Danish Krone

EUR

Euro

GBP

British Pound

JPY

Japanese Yen

MXN

Mexican Peso

NZD

New Zealand Dollar

SEK

Swedish Krona

MFS Inflation-Adjusted Bond Portfolio

Portfolio of Investments – continued

Derivative Contracts at 12/31/17

Forward Foreign Currency Exchange Contracts


Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
Asset Derivatives
AUD	4,314,000	USD	3,295,571	Barclays Bank PLC		1/12/2018		$70,398
AUD	6,220,000	USD	4,811,662	Goldman Sachs International		1/12/2018		41,447
CAD	1,634,000	USD	1,284,879	Brown Brothers Harriman		1/12/2018		15,326
CAD	2,074,000	USD	1,647,157	Goldman Sachs International		1/12/2018		3,165
CNH	11,888,000	USD	1,661,955	JPMorgan Chase Bank N.A.		1/5/2018		162,921
EUR	1,844,684	USD	2,180,274	Brown Brothers Harriman		1/12/2018		34,243
EUR	2,224,000	USD	2,642,457	Deutsche Bank AG		1/12/2018		27,424
EUR	5,325,226	USD	6,333,014	Goldman Sachs International		1/12/2018		59,846
EUR	1,542,155	USD	1,833,445	HSBC Bank		1/12/2018		17,891
EUR	1,174,735	USD	1,403,332	Morgan Stanley Capital Services, Inc.		1/12/2018		6,921
EUR	824,000	USD	982,521	State Street Bank Corp.		1/12/2018		6,679
GBP	1,468,622	USD	1,972,987	Brown Brothers Harriman		1/12/2018		10,430
GBP	1,602,507	USD	2,159,035	Citibank N.A.		1/12/2018		5,197
GBP	9,811,309	USD	13,004,264	Goldman Sachs International		1/12/2018		246,195
GBP	1,339,531	USD	1,801,354	HSBC Bank		1/12/2018		7,721
JPY	370,538,000	USD	3,289,227	Brown Brothers Harriman		1/12/2018		496
NZD	4,750,000	USD	3,297,260	Morgan Stanley Capital Services, Inc.		1/12/2018		68,737
SEK	27,593,000	USD	3,310,303	Brown Brothers Harriman		1/12/2018		55,205
SEK	13,601,000	USD	1,643,237	Deutsche Bank AG		1/12/2018		15,672
USD	1,475,405	CAD	1,842,500	Citibank N.A.		1/12/2018		9,292
USD	190,190	SEK	1,526,010	Deutsche Bank AG		1/12/2018		4,063
USD	2,111,136	CAD	2,632,796	Goldman Sachs International		1/12/2018		16,170
USD	1,889,133	JPY	210,915,986	Goldman Sachs International		1/12/2018		16,571
USD	3,293,634	SEK	26,740,000	Goldman Sachs International		1/12/2018		32,167
USD	1,475,110	CAD	1,842,500	Merrill Lynch International		1/12/2018		8,997

								$943,174

Liability Derivatives
JPY	184,764,000	USD	1,649,234	Goldman Sachs International		1/12/2018		$(8,856	)
MXN	133,881	USD	7,045	Deutsche Bank AG		1/12/2018		(247	)
NZD	162,000	USD	115,251	Barclays Bank PLC		1/12/2018		(453	)
SEK	26,470,000	USD	3,305,717	Brown Brothers Harriman		1/12/2018		(77,182	)
USD	1,634,463	GBP	1,220,000	Brown Brothers Harriman		1/12/2018		(13,182	)
USD	1,987,512	AUD	2,645,000	Citibank N.A.		1/12/2018		(76,229	)
USD	1,956,599	CAD	2,473,802	Citibank N.A.		1/12/2018		(11,853	)
USD	224,593	DKK	1,406,894	Citibank N.A.		1/12/2018		(2,280	)
USD	3,269,761	EUR	2,761,000	Citibank N.A.		1/12/2018		(44,781	)
USD	2,434,627	GBP	1,859,146	Citibank N.A.		1/12/2018		(76,204	)
USD	1,144,730	JPY	129,765,000	Citibank N.A.		1/12/2018		(7,354	)
USD	324,894	NZD	474,000	Citibank N.A.		1/12/2018		(10,997	)
USD	2,270,516	AUD	2,917,186	Deutsche Bank AG		1/12/2018		(5,597	)
USD	1,628,539	CAD	2,051,000	Deutsche Bank AG		1/12/2018		(3,481	)
USD	5,813,599	EUR	4,969,482	Deutsche Bank AG		1/12/2018		(152,195	)
USD	3,292,115	AUD	4,291,000	Goldman Sachs International		1/12/2018		(55,906	)
USD	6,895,893	EUR	5,824,002	Goldman Sachs International		1/12/2018		(95,740	)
USD	658,647	GBP	499,000	Goldman Sachs International		1/12/2018		(15,267	)
USD	1,634,475	JPY	185,159,000	Goldman Sachs International		1/12/2018		(9,411	)
USD	6,710,220	NZD	9,502,112	Goldman Sachs International		1/12/2018		(23,271	)
USD	1,667,438	CNH	11,888,000	JPMorgan Chase Bank N.A.		1/5/2018		(157,438	)
USD	1,794,047	JPY	202,801,000	Morgan Stanley Capital Services, Inc.		1/12/2018		(6,468	)

								$(854,392	)

MFS Inflation-Adjusted Bond Portfolio

Portfolio of Investments – continued

Futures Contracts

Description

Long/

Short

Currency

Contracts

Notional
Amount

Expiration
Date

Value/
Unrealized
Appreciation
(Depreciation)

Asset Derivatives

Interest Rate Futures

U.S. Treasury Ultra Note 10 yr

Short

USD

$1,869,875

March - 2018

$10,532

U.S. Treasury Note 10 yr

Short

USD

10,916,125

March - 2018

82,175

$92,707

At December 31, 2017, the fund had liquid securities with an aggregate value of $121,613 to cover any collateral or margin obligations for certain derivative contracts.

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value (identified cost, $281,267,729)	$306,145,367
Investments in affiliated issuers, at value (identified cost, $18,949,940)	18,949,134
Foreign currency, at value (identified cost, $21)	21
Receivables for
Forward foreign currency exchange contracts	943,174
Investments sold	2,481,795
Fund shares sold	172
Interest	952,911
Other assets	2,359
Total assets	$329,474,933
Liabilities
Payables for
Forward foreign currency exchange contracts	$854,392
Daily variation margin on open futures contracts	21,809
Fund shares reacquired	661,218
Payable to affiliates
Investment adviser	18,219
Shareholder servicing costs	57
Distribution and/or service fees	4,518
Payable for independent Trustees’ compensation	67
Accrued expenses and other liabilities	67,753
Total liabilities	$1,628,033
Net assets	$327,846,900
Net assets consist of
Paid-in capital	$302,725,616
Unrealized appreciation (depreciation)	25,067,279
Accumulated net realized gain (loss)	(4,462,651	)
Undistributed net investment income	4,516,656
Net assets	$327,846,900
Shares of beneficial interest outstanding	30,512,989


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$162,429,111		15,025,900		$10.81
Service Class		165,417,789		15,487,089		10.68

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Interest	$6,058,780
Dividends from affiliated issuers	69,187
Total investment income	$6,127,967
Expenses
Management fee	$1,671,231
Distribution and/or service fees	419,327
Shareholder servicing costs	6,399
Administrative services fee	62,428
Independent Trustees’ compensation	9,000
Custodian fee	38,750
Shareholder communications	27,437
Audit and tax fees	41,251
Legal fees	4,817
Miscellaneous	20,621
Total expenses	$2,301,261
Reduction of expenses by investment adviser	(26,719	)
Net expenses	$2,274,542
Net investment income (loss)	$3,853,425
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$1,518,856
Affiliated issuers	(992	)
Futures contracts	87,024
Forward foreign currency exchange contracts	694,657
Foreign currency	(205,798	)
Net realized gain (loss)	$2,093,747
Change in unrealized appreciation (depreciation)
Unaffiliated issuers	$20,271,879
Affiliated issuers	(806	)
Futures contracts	92,707
Forward foreign currency exchange contracts	(94,657	)
Translation of assets and liabilities in foreign currencies	23,669
Net unrealized gain (loss)	$20,292,792
Net realized and unrealized gain (loss)	$22,386,539
Change in net assets from operations	$26,239,964

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$3,853,425		$1,846,895
Net realized gain (loss)		2,093,747		(9,640,570	)
Net unrealized gain (loss)		20,292,792		17,862,614
Change in net assets from operations		$26,239,964		$10,068,939
Change in net assets from fund share transactions		$(36,327,130	)	$(33,733,905	)
Total change in net assets		$(10,087,166	)	$(23,664,966	)
Net assets
At beginning of period		337,934,066		361,599,032
At end of period (including undistributed net investment income of $4,516,656 and accumulated net investment loss of $366,250, respectively)		$327,846,900		$337,934,066

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17		12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$9.98		$9.73			$10.32			$10.04			$11.29
Income (loss) from investment operations
Net investment income (loss) (d)		$0.13		$0.07	(c)		$(0.01	)		$0.08			$0.02
Net realized and unrealized gain (loss)		0.70		0.18			(0.51	)		0.29			(0.61	)
Total from investment operations		$0.83		$0.25			$(0.52	)		$0.37			$(0.59	)
Less distributions declared to shareholders
From net investment income		$—		$—			$(0.07	)		$(0.09	)		$—
From net realized gain		—		—			—			—			(0.66	)
Total distributions declared to shareholders		$—		$—			$(0.07	)		$(0.09	)		$(0.66	)
Net asset value, end of period (x)		$10.81		$9.98			$9.73			$10.32			$10.04
Total return (%) (k)(r)(s)(x)		8.32		2.57	(c)		(5.04	)		3.71			(5.07	)
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.56		0.55	(c)		0.56			0.55			0.56
Expenses after expense reductions (f)		0.55		0.54	(c)		0.55			0.54			0.56
Net investment income (loss)		1.28		0.65	(c)		(0.11	)		0.72			0.22
Portfolio turnover		40		47			44			24			51
Net assets at end of period (000 omitted)		$162,429		$168,857			$184,691			$214,183			$230,805

Service Class	Year ended
	12/31/17		12/31/16			12/31/15			12/31/14			12/31/13

Net asset value, beginning of period		$9.89		$9.66			$10.24			$9.96			$11.23
Income (loss) from investment operations
Net investment income (loss) (d)		$0.11		$0.04	(c)		$(0.04	)		$0.05			$(0.00	)(w)
Net realized and unrealized gain (loss)		0.68		0.19			(0.50	)		0.29			(0.61	)
Total from investment operations		$0.79		$0.23			$(0.54	)		$0.34			$(0.61	)
Less distributions declared to shareholders
From net investment income		$—		$—			$(0.04	)		$(0.06	)		$—
From net realized gain		—		—			—			—			(0.66	)
Total distributions declared to shareholders		$—		$—			$(0.04	)		$(0.06	)		$(0.66	)
Net asset value, end of period (x)		$10.68		$9.89			$9.66			$10.24			$9.96
Total return (%) (k)(r)(s)(x)		7.99		2.38	(c)		(5.27	)		3.43			(5.28	)
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.81		0.80	(c)		0.81			0.80			0.81
Expenses after expense reductions (f)		0.80		0.79	(c)		0.80			0.79			0.81
Net investment income (loss)		1.03		0.40	(c)		(0.37	)		0.46			(0.00	)(w)
Portfolio turnover		40		47			44			24			51
Net assets at end of period (000 omitted)		$165,418		$169,077			$176,909			$217,249			$248,127

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

Financial Highlights – continued

(c)

Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)

Per share data is based on average shares outstanding.

(f)

Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)

The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)

Certain expenses have been reduced without which performance would have been lower.

(s)

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(w)

Per share amount was less than $0.01 and total return or ratio was less than 0.01%, as applicable.

(x)

The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Inflation-Adjusted Bond Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Inflation-Adjusted Bond Portfolio (the fund) is a non-diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

Investment Valuations – Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Futures contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a third-party pricing service. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments, such as futures contracts and forward foreign currency exchange contracts. The following is a summary of the levels used as of December 31, 2017 in valuing the fund’s assets or liabilities:


Financial Instruments	Level 1		Level 2			Level 3		Total
U.S. Treasury Bonds & U.S. Government Agency & Equivalents		$—		$125,850,690			$—		$125,850,690
Non-U.S. Sovereign Debt		—		180,294,677			—		180,294,677
Mutual Funds		18,949,134		—			—		18,949,134
Total		$18,949,134		$306,145,367			$—		$325,094,501

Other Financial Instruments
Futures Contracts – Assets		$92,707		$—			$—		$92,707
Forward Foreign Currency Exchange Contracts – Assets		—		943,174			—		943,174
Forward Foreign Currency Exchange Contracts – Liabilities		—		(854,392	)		—		(854,392	)

For further information regarding security characteristics, see the Portfolio of Investments.

Inflation-Adjusted Debt Securities – The fund invests in inflation-adjusted debt securities issued by the U.S. Treasury. The fund also invests in inflation-adjusted debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury and by other entities such as U.S. and foreign corporations and foreign governments. The principal value of these debt securities is adjusted through income according to changes in the Consumer Price Index or another general price or wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.

Derivatives – The fund uses derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.

The derivative instruments used by the fund were futures contracts and forward foreign currency exchange contracts. Depending on the type of derivative, the fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement with the derivative counterparty, or novating the position to a third party. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by the exchange. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by the exchange. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at December 31, 2017 as reported in the Statement of Assets and Liabilities:


		Fair Value (a)
Risk	Derivative Contracts	Asset Derivatives		Liability Derivatives
Interest Rate	Interest Rate Futures		$92,707		$—
Foreign Exchange	Forward Foreign Currency Exchange		943,174		(854,392	)
Total			$1,035,881		$(854,392	)

(a)	Values presented in this table for futures contracts correspond to the values reported in the fund’s Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities.

The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended December 31, 2017 as reported in the Statement of Operations:


Risk	Futures Contracts		Forward Foreign Currency Exchange Contracts
Interest Rate		$87,024		$—
Foreign Exchange		—		694,657
Total		$87,024		$694,657

The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the year ended December 31, 2017 as reported in the Statement of Operations:


Risk	Futures Contracts		Forward Foreign Currency Exchange Contracts
Interest Rate		$92,707		$—
Foreign Exchange		—		(94,657	)
Total		$92,707		$(94,657	)

Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each agreement to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.

Collateral and margin requirements differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in the form of cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund’s custodian in connection with these agreements. For derivatives traded under an ISDA Master Agreement, which contains a collateral support annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and one amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives, respectively. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any such payments are included in “Miscellaneous” expense in the Statement of Operations.

Futures Contracts – The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is realized.

The fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.

Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.

Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on forward foreign currency exchange contracts.

Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, a multicurrency cash settlement system for the centralized settlement of foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward based on the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even though the adjusted principal is not received until maturity. Interest payments received in additional securities are recorded on the ex-interest date in an amount equal to the value of the security on such date.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.

Book/tax differences primarily relate to wash sale loss deferrals and derivative transactions.

The fund declared no distributions for the years ended December 31, 2017 and December 31, 2016.

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$301,322,787
Gross appreciation	25,497,088
Gross depreciation	(1,543,885	)
Net unrealized appreciation (depreciation)	$23,953,203
Undistributed ordinary income	4,683,345
Capital loss carryforwards	(3,524,222	)
Other temporary differences	8,958

As of December 31, 2017, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:


Short-Term			$(3,524,222	)

(3)

Transactions with Affiliates

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $26,719, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.49% of the fund’s average daily net assets.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $5,961, which equated to 0.0018% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $438.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $595 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, were as follows:


	Purchases		Sales
U.S. Government securities		$47,653,332		$72,074,493
Non-U.S. Government securities		$83,138,671		$111,936,269

(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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		182,892			$1,884,961			257,954			$2,594,615
Service Class		1,081,322			10,987,114			1,856,045			18,332,975
		1,264,214			$12,872,075			2,113,999			$20,927,590
Shares reacquired
Initial Class		(2,068,811	)		$(21,629,213	)		(2,327,493	)		$(23,708,840	)
Service Class		(2,689,558	)		(27,569,992	)		(3,069,800	)		(30,952,655	)
		(4,758,369	)		$(49,199,205	)		(5,397,293	)		$(54,661,495	)
Net change
Initial Class		(1,885,919	)		$(19,744,252	)		(2,069,539	)		$(21,114,225	)
Service Class		(1,608,236	)		(16,582,878	)		(1,213,755	)		(12,619,680	)
		(3,494,155	)		$(36,327,130	)		(3,283,294	)		$(33,733,905	)

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 26%, 17%, and 6%, respectively, of the value of outstanding voting shares of the fund.

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $2,255 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Inflation-Adjusted Bond Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Affiliated Issuers		Beginning Shares/Par Amount			Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			2,064,011			128,812,640		(111,925,622	)		18,951,029

Affilated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$(992)		$(806	)		$—		$69,187			$18,949,134

MFS Inflation-Adjusted Bond Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of MFS Inflation-Adjusted Bond Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Inflation-Adjusted Bond Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Inflation-Adjusted Bond Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Inflation-Adjusted Bond Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Inflation-Adjusted Bond Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Erik Weisman

MFS Inflation-Adjusted Bond Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 5th quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 5th quintile for the one-year period and the 4th quintile for the five-year period ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

In the course of their deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance. The Trustees noted that the total return performance (Class A shares) of the Fund’s retail counterpart, MFS Inflation-Adjusted Bond Fund, which has substantially similar investment strategies, was in the 3rd quintile relative to the other Funds in its Lipper performance universe for the three-year period ended December 31, 2016. After reviewing

MFS Inflation-Adjusted Bond Portfolio

Board Review of Investment Advisory Agreement – continued

these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.

In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each approximately at the Broadridge expense group median.

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is not subject to any breakpoints. Taking into account that the Fund’s effective advisory fee rate was approximately at the Broadridge expense group median described above, the Trustees determined not to recommend any advisory fee breakpoints for the Fund at this time. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the group fee waiver was sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

MFS Inflation-Adjusted Bond Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® LIMITED MATURITY PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VLT-ANN

MFS® LIMITED MATURITY PORTFOLIO

CONTENTS


Letter from the Executive Chairman			1
Portfolio composition			2
Management review			3
Performance summary			5
Expense table			7
Portfolio of investments			8
Statement of assets and liabilities			15
Statement of operations			16
Statements of changes in net assets			17
Financial highlights			18
Notes to financial statements			20
Report of independent registered public accounting firm			27
Trustees and officers			28
Board review of investment advisory agreement			31
Proxy voting policies and information			33
Quarterly portfolio disclosure			33
Further information			33
Information about fund contracts and legal claims			33
MFS^® privacy notice			34

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Limited Maturity Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Limited Maturity Portfolio

PORTFOLIO COMPOSITION

Portfolio structure (i)

LOGO


Fixed income sectors (i)
Investment Grade Corporates			56.3%
Asset-Backed Securities			10.8%
Collateralized Debt Obligations			9.5%
U.S. Treasury Securities			6.5%
Emerging Markets Bonds			3.1%
Non-U.S. Government Bonds			3.0%
Commercial Mortgage-Backed Securities			2.8%
Mortgage-Backed Securities			2.0%
Residential Mortgage-Backed Securities			1.2%
U.S. Government Agencies			0.8%
Municipal Bonds			0.6%
High Yield Corporates			0.4%


Composition including fixed income credit quality (a)(i)
AAA			9.8%
AA			17.8%
A			31.3%
BBB			28.1%
BB			0.4%
U.S. Government			6.5%
Federal Agencies			2.8%
Not Rated			0.3%
Cash & Cash Equivalents			3.0%

Portfolio facts (i)
Average Duration (d)			1.8
Average Effective Maturity (m)			2.9 yrs.

Issuer country weightings (i)(x)
United States			71.8%
United Kingdom			5.3%
Canada			3.5%
France			3.2%
Japan			2.8%
Switzerland			2.6%
Netherlands			2.1%
Sweden			1.5%
Australia			1.4%
Other Countries			5.8%

(a)

For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures contracts, which have not been rated by any rating agency. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.

(d)

(i)

(m)

(x)

Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents.

Where the fund holds convertible bonds, they are treated as part of the equity portion of the portfolio.

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Limited Maturity Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Limited Maturity Portfolio (“fund”) provided a total return of 1.73%, while Service Class shares of the fund provided a total return of 1.45%. These compare with a return of 0.84% over the same period for the fund’s benchmark, the Bloomberg Barclays 1-3 Year U.S. Government/Credit Bond Index.

Market Environment

Factors Affecting Performance

During the reporting period, the fund’s overweight allocation to both the industrials and financial institutions sectors, and an out-of-benchmark exposure to the asset-backed securities (ABS) sector, contributed to performance relative to the Bloomberg Barclays 1-3 Year U.S. Government/Credit Bond Index. An underweight exposure to the treasury sector additionally aided relative returns. The fund’s yield curve (y) positioning, particularly a duration (d) overweight to the 5-year segment of the yield curve, benefited relative performance, as yields tightened in the second quarter. Additionally, security selection within the financial institutions and industrials sectors, as well as within “BBB” and “A” rated (r) securities, buoyed relative returns.

There were no factors that materially detracted from the fund’s relative performance during the reporting period.

Respectfully,

Portfolio Manager(s)

Philipp Burgener and Alexander Mackey

(d)	Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value.

(r)

Bonds rated “BBB”, “Baa”, or higher are considered investment grade; bonds rated “BB”, “Ba”, or below are considered non-investment grade. The source for bond quality ratings is Moody’s Investors Service, Standard & Poor’s and Fitch, Inc. and are applied using the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). For securities which are not rated by any of the three agencies, the security is considered Not Rated.

(y)	A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates.

Note to Shareholders: Effective February 1, 2017, James Calmas was no longer a Portfolio Manager of the Fund. Effective February 1, 2017, Philipp Burgener and Alexander Mackey became Portfolio Managers of the Fund.

MFS Limited Maturity Portfolio

Management Review – continued

MFS Limited Maturity Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	3/07/08	1.73%	1.08%	1.78%
	Service Class	3/07/08	1.45%	0.83%	1.52%

Comparative benchmark(s)
	Bloomberg Barclays 1-3 Year U.S. Government/Credit Bond Index (f)		0.84%	0.84%	1.62%

(f)	Source: FactSet Research Systems Inc.

(t)	For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

Benchmark Definition(s)

Bloomberg Barclays 1-3 Year U.S. Government/Credit Bond Index – a market capitalization-weighted index that measures the performance of the short-term (1 to 3 years) investment-grade corporate and U.S. government bond markets.

It is not possible to invest directly in an index.

Notes to Performance Summary

MFS Limited Maturity Portfolio

Performance Summary – continued

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Limited Maturity Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.45%		$1,000.00		$1,005.43		$2.27
Initial Class	Hypothetical (h)		0.45%		$1,000.00		$1,022.94		$2.29
Service Class	Actual		0.70%		$1,000.00		$1,003.60		$3.54
Service Class	Hypothetical (h)		0.70%		$1,000.00		$1,021.68		$3.57

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS Limited Maturity Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
BONDS – 96.5%
Asset-Backed & Securitized – 24.2%
A Voce CLO Ltd., 2014-1A, “A2R”, FLR, 2.909% (U.S. LIBOR-3mo. + 1.55%), 7/15/2026 (n)	$	1,735,000	$	1,737,707
A Voce CLO Ltd., 2014-1A, “BR”, FLR, 3.509% (U.S. LIBOR-3mo. + 2.15%), 7/15/2026 (n)		2,276,000		2,279,305
AIMCO Properties CLO LP, 2014-AA, “B1R”, FLR, 2.962% (U.S. LIBOR-3mo. + 1.6%), 7/20/2026 (n)		1,715,000		1,716,067
AIMCO Properties CLO LP, 2014-AA, “B2R”, 3.49%, 7/20/2026 (n)		545,000		545,531
AmeriCredit Automobile Receivables Trust, 2016-3, “A2A”, 1.37%, 11/08/2019		340,682		340,535
AmeriCredit Automobile Receivables Trust, 2017-2, “C”, 2.97%, 3/20/2023		1,837,000		1,846,457
Ares CLO Ltd., 2013-3A, “B1R”, FLR, 2.853% (U.S. LIBOR-3mo. + 1.5%), 10/17/2024 (n)		2,162,000		2,160,584
ARI Fleet Lease Trust, 2016-A, “A2”, 1.82%, 7/15/2024 (n)		807,285		806,896
Atrium CDO Corp., 2010-A, “B1R”, FLR, 2.809% (U.S. LIBOR-3mo. + 1.45%), 7/16/2025 (n)		2,575,000		2,572,829
Atrium CDO Corp., 2011-A, “BR”, FLR, 2.862% (U.S. LIBOR-3mo. + 1.5%), 10/23/2025 (n)		1,735,000		1,734,344
Avery Point CLO Ltd., 2014-1A, “CR”, FLR, 3.717% (U.S. LIBOR-3mo. + 2.35%), 4/25/2026 (n)		1,720,000		1,733,743
Babson CLO Ltd., 2013-IIA, “A2R”, FLR, 2.903% (U.S. LIBOR-3mo. + 1.55%), 1/18/2025 (n)		1,488,327		1,491,240
Babson CLO Ltd., 2013-IIA, “BR”, FLR, 2.853% (U.S. LIBOR-3mo. + 1.5%), 10/17/2026 (n)		2,609,000		2,606,782
Babson CLO Ltd., 2013-IIA, “BR”, FLR, 3.603% (U.S. LIBOR-3mo. + 2.25%), 1/18/2025 (n)		1,488,327		1,485,708
Ballyrock Ltd., 2014-1A, “A2R”, FLR, 3.062% (U.S. LIBOR-3mo. + 1.7%), 10/20/2026 (n)		1,724,000		1,723,998
Ballyrock Ltd., 2014-1A, “BR”, FLR, 3.462% (U.S. LIBOR-3mo. + 2.1%), 10/20/2026 (n)		730,000		729,999
Capital One Multi-Asset Execution Trust, 2016-A4, “A4”, 1.33%, 6/15/2022		4,180,000		4,128,089
CD Commercial Mortgage Trust, 2017-CD4, “XA”, 1.327%, 5/10/2050 (i)		17,708,009		1,594,712
Cent CLO LP, 2014-21A, “A2AR”, FLR, 3.074% (U.S. LIBOR-3mo. + 1.7%), 7/27/2026 (n)		1,060,053		1,066,009


Issuer	Shares/Par		Value ($)
BONDS – continued
Asset-Backed & Securitized – continued
Cent CLO LP, 2014-21A, “BR”, FLR, 3.774% (U.S. LIBOR-3mo. + 2.4%), 7/27/2026 (n)	$	1,439,531	$	1,437,303
Chesapeake Funding II LLC, 2016-1A, “A2”, FLR, 2.627% (U.S. LIBOR-1mo. + 1.15%), 3/15/2028 (n)		1,108,691		1,113,636
Chesapeake Funding II LLC, 2017-2A, “B”, 2.81%, 5/15/2029 (n)		1,200,000		1,207,170
Chesapeake Funding II LLC, 2017-2A, “C”, 3.01%, 5/15/2029 (n)		536,000		537,945
Chesapeake Funding II LLC, 2017-3A, “B”, 2.57%, 8/15/2029 (n)		869,000		867,862
Chesapeake Funding II LLC, 2017-4A, “C”, 2.76%, 11/15/2029 (n)		438,000		435,050
Chrysler Capital Auto Receivables Trust 2016-B, “A2”, 1.36%, 1/15/2020 (n)		441,104		440,593
Colony Starwood Homes, 2016-2A, “A”, FLR, 2.727% (LIBOR-1mo. + 1.25%), 12/17/2033 (n)		2,517,848		2,532,702
CPS Auto Trust, 2016-D, “B”, 2.11%, 3/15/2021 (n)		2,062,000		2,052,330
CPS Auto Trust, 2017-C, “C”, 2.86%, 6/15/2023 (n)		1,340,000		1,328,998
Credit Acceptance Auto Loan Trust, 2015-2A, “A”, 2.4%, 2/15/2023 (n)		1,629,479		1,631,087
Credit Acceptance Auto Loan Trust, 2016-3A, “A”, 2.15%, 4/15/2024 (n)		2,525,000		2,514,158
Credit Acceptance Auto Loan Trust, 2017-2A, “B”, 3.02%, 4/15/2026 (n)		2,607,000		2,580,510
Dell Equipment Finance Trust, 2017-2, “B”, 2.47%, 10/24/2022 (n)		692,000		687,871
DLL Securitization Trust, 2017-A, “A3”, 2.14%, 12/15/2021 (n)		868,000		863,559
Drive Auto Receivables Trust, 2016-CA, “A3”, 1.67%, 11/15/2019 (n)		657,202		657,116
Drive Auto Receivables Trust, 2017-1, “B”, 2.36%, 3/15/2021		846,000		846,756
Dryden Senior Loan Fund, 2014-31A, “CR”, FLR, 3.453% (LIBOR-3mo. + 2.1%), 4/18/2026 (n)		790,000		788,710
Dryden Senior Loan Fund, 2014-34A, “BR”, FLR, 2.909% (LIBOR-3mo. + 1.55%), 10/15/2026 (n)		1,064,000		1,063,296
Dryden Senior Loan Fund, 2014-34A, “CR”, CLO, FLR, 3.509% (LIBOR-3mo. + 2.15%), 10/15/2026 (n)		1,364,684		1,372,445
DT Auto Owner Trust, 2017-2A, “C”, 3.03%, 1/17/2023 (n)		2,017,000		2,017,190
DT Auto Owner Trust, 2017-3A, “C”, 3.01%, 5/15/2023 (n)		1,461,000		1,463,166
Eaton Vance CLO Ltd., 2014-1A, “BR”, FLR, 2.959% (U.S. LIBOR-3mo. + 1.6%), 7/15/2026 (n)		1,284,737		1,283,606

MFS Limited Maturity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
Asset-Backed & Securitized – continued
Eaton Vance CLO Ltd., 2014-1A, “CR”, FLR, 3.609% (U.S. LIBOR-3mo. + 2.25%), 7/15/2026 (n)	$	2,569,474	$	2,564,962
Enterprise Fleet Financing LLC, 1.74%, 2/22/2022 (n)		1,059,360		1,057,252
Exeter Automobile Receivables Trust, 2016-1A, “A”, 2.35%, 7/15/2020 (n)		100,688		100,756
Exeter Automobile Receivables Trust, 2016-3A, “A”, 1.84%, 11/16/2020 (n)		1,058,633		1,057,414
Exeter Automobile Receivables Trust, 2017-1A, “A”, 1.96%, 3/15/2021 (n)		546,500		545,998
Flagship Credit Auto Trust, 2016-1, “A”, 2.77%, 12/15/2020 (n)		666,616		669,244
Ford Credit Auto Owner Trust, 2014-1, “A”, 2.26%, 11/15/2025 (n)		1,104,000		1,106,238
Ford Credit Auto Owner Trust, 2014-2, “A”, 2.31%, 4/15/2026 (n)		3,515,000		3,520,082
GMF Floorplan Owner Revolving Trust, 2017-A1, “A”, 2.22%, 1/18/2022 (n)		1,730,000		1,725,223
GS Mortgage Securities Trust, 2010-C1, “A2”, 4.592%, 8/10/2043 (n)		2,890,000		3,012,464
GS Mortgage Securities Trust, 2017-GS6, “XA”, 1.051%, 5/10/2050 (i)		15,883,248		1,280,149
GS Mortgage Securities Trust, 2017-GS7, “XA”, 1.141%, 8/10/2050 (i)		15,850,002		1,328,289
HarbourView CLO VII Ltd., “B1R”, FLR, 3.085% (U.S. LIBOR-3mo. + 1.65%), 11/18/2026 (n)		2,716,743		2,715,616
HarbourView CLO VII Ltd., 7A, “CR”, FLR, 3.815% (U.S. LIBOR-3mo. + 2.38%), 11/18/2026 (n)		1,759,743		1,757,661
Hertz Fleet Lease Funding LP, 2016-1, “A2”, 1.96%, 4/10/2030 (n)		1,170,170		1,169,956
Invitation Homes Trust, 2017-SFR2, “A”, FLR, 2.34% (LIBOR-1mo. + 1.00%), 12/17/2036 (n)		2,798,258		2,807,239
JPMorgan Chase Commercial Mortgage Securities Corp., 1.093%, 9/15/2050 (i)		33,041,694		2,484,002
JPMorgan Chase Commercial Mortgage Securities Corp., 2011-C3, “A4”, 4.717%, 2/15/2046 (n)		2,755,372		2,904,739
Loomis, Sayles & Co., CLO, “A1”, FLR, 2.889% (U.S. LIBOR-3mo. + 1.53%), 10/15/2027 (n)		1,619,932		1,629,067
Madison Park Funding XIV Ltd., 2014-14A, “C1R”, FLR, 3.412% (U.S. LIBOR-3mo. + 2.05%), 7/20/2026 (n)		2,418,000		2,429,558
Magnetite XI Ltd., 2014-11A, “BR”, FLR, 3.453% (U.S. LIBOR-3mo. + 2.1%), 1/18/2027 (n)		1,204,000		1,210,296
Morgan Stanley Bank of America Merrill Lynch Trust, 2017-C33, “XA”, 1.447%, 5/15/2050 (i)		17,543,798		1,575,568
Morgan Stanley Capital I Trust, 2017-H1, “XA”, 1.46%, 6/15/2050 (i)		7,897,426		747,750


Issuer	Shares/Par		Value ($)
BONDS – continued
Asset-Backed & Securitized – continued
Mountain Hawk CLO Ltd., 2014-3A, “BR”, FLR, 3.153% (U.S. LIBOR-3mo. + 1.8%), 4/18/2025 (n)	$	3,468,000	$	3,473,837
Nationstar HECM Loan Trust, 2016-2A, “A”, 2.239%, 6/25/2026 (n)		226,092		225,668
Navient Student Loan Trust, 2016-3A, “A1”, FLR, 2.152% (U.S. LIBOR-1mo. + 0.6%), 6/25/2065 (n)		396,982		397,715
NextGear Floorplan Master Owner Trust, 2017-1A, “A2”, 2.54%, 4/18/2022 (n)		1,378,000		1,374,420
NextGear Floorplan Master Owner Trust, 2017-2A, “B”, 3.02%, 10/17/2022 (n)		1,038,000		1,031,273
Oaktree CLO Ltd., 2014-2A, “BR”, FLR, 3.912% (U.S. LIBOR-3mo. + 2.55%), 10/20/2026 (n)		1,752,000		1,758,468
OneMain Direct Auto Receivables Trust, 2016-1A, “A”, 2.04%, 1/15/2021 (n)		196,804		196,871
OneMain Financial Issuance Trust, 2017-1A, “A1”, 2.37%, 9/14/2032 (n)		2,089,000		2,070,095
Oscar U.S. Funding Trust, 2016-2A, “A”, 2.31%, 11/15/2019 (n)		409,884		409,467
Oscar U.S. Funding Trust, 2017-1A, “A3”, 2.82%, 6/10/2021 (n)		1,980,000		1,979,083
Oscar U.S. Funding Trust, 2017-2A, “A2B”, FLR, 2.081% (U.S. LIBOR-1mo. + 6.5%), 11/10/2020 (n)		1,420,000		1,420,214
PFS Financing Corp., 2017-C, “A”, FLR, 1.947% (LIBOR-1mo. + 0.47%), 10/15/2021 (n)		908,000		906,544
Santander Drive Auto Receivables Trust, 2017-2, “C”, 2.79%, 8/15/2022		1,109,000		1,112,332
Santander Retail Auto Lease Trust, 2017-A, “B”, 2.68%, 1/20/2022 (n)		866,000		864,988
Securitized Term Auto Receivables Trust, 2016-1A, “A2A”, 1.284%, 11/26/2018 (n)		194,763		194,624
Shackelton CLO Ltd., 2013-4A, “CR”, FLR, 3.458% (U.S. LIBOR-3mo. + 2.1%), 1/13/2025 (n)		880,000		881,463
Sierra Receivables Funding Co. LLC, 2015-1A, “A”, 2.4%, 3/22/2032 (n)		634,615		632,235
Silver Spring CLO Ltd., FLR, 4.109% (LIBOR-3mo. + 2.75%), 10/15/2026 (n)		1,393,000		1,389,263
SPS Servicer Advance Receivables Trust, 2016-T1, “AT1”, 2.53%, 11/16/2048 (n)		3,150,000		3,122,352
Student Loan Consolidation Center, “A”, FLR, 2.772% (LIBOR-1mo. + 1.22%), 10/25/2027 (n)		618,927		626,409
Thacher Park CLO Ltd. 2014-1A. “CR”, FLR, 3.562% (U.S. LIBOR-3mo. + 2.2%), 10/20/2026 (n)		1,743,000		1,748,619
TICP CLO Ltd., FLR, 3.612% (U.S. LIBOR-3mo. + 2.25%), 1/20/2027 (n)		1,528,000		1,536,891
Tricon American Homes 2015-SFR1, Trust “1A”, 2.589%, 11/17/2033 (n)		1,710,000		1,685,790
UBS Commercial Mortgage Trust, 2017-C1, “XA”, 1.022%, 11/15/2050 (i)		12,088,525		867,095

MFS Limited Maturity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
Asset-Backed & Securitized – continued
Verizon Owner Trust, 2017-3a, “B”, 2.38%, 4/20/2022 (n)	$	1,230,000	$	1,225,450
Veros Auto Receivables Trust, 2017-1, “A”, 2.84%, 4/17/2023 (n)		916,416		914,654
Volvo Financial Equipment LLC, “A2”, 1.44%, 10/15/2018 (n)		18,598		18,595
Volvo Financial Equipment Master Owner Trust, 2017-A, “A”, FLR, 1.977% (LIBOR-1mo. + 0.50%), 11/15/2022 (n)		1,354,000		1,357,852
West CLO Ltd., 2013-1A, “A2BR”, 3.393%, 11/07/2025 (n)		1,720,000		1,699,164
World Financial Network Credit Card Master Trust, 2017-B, “A”, 1.98%, 6/15/2023		3,012,000		3,000,180

			$	139,544,728

Automotive – 3.6%
Ford Motor Credit Co. LLC, 2.262%, 3/28/2019	$	2,220,000	$	2,216,492
Ford Motor Credit Co. LLC, 2.021%, 5/03/2019		1,530,000		1,522,936
Ford Motor Credit Co. LLC, 2.343%, 11/02/2020		1,723,000		1,706,524
Ford Motor Credit Co. LLC, FLR, 2.29% (U.S. LIBOR-3mo. + 0.94%), 1/09/2018		1,940,000		1,940,170
General Motors Financial Co., Inc., 2.65%, 4/13/2020		2,643,000		2,643,400
General Motors Financial Co., Inc., 3.15%, 6/30/2022		1,207,000		1,205,908
Hyundai Capital America, 2%, 3/19/2018 (n)		2,863,000		2,862,098
Hyundai Capital America, 2.4%, 10/30/2018 (n)		1,820,000		1,818,232
Toyota Motor Credit Corp., 1.7%, 2/19/2019		1,510,000		1,503,170
Toyota Motor Credit Corp., FLR, 1.743% (U.S. LIBOR-3mo. + 0.39%), 1/17/2019		3,370,000		3,382,202

			$	20,801,132

Broadcasting – 0.2%
SES Global Americas Holdings GP, 2.5%, 3/25/2019 (n)	$	1,141,000	$	1,136,735

Brokerage & Asset Managers – 0.4%
Intercontinental Exchange, Inc., 2.75%, 12/01/2020	$	2,516,000	$	2,540,026

Building – 0.3%
Stanley Black & Decker, Inc., 1.622%, 11/17/2018	$	1,780,000	$	1,773,462

Business Services – 0.3%
Fidelity National Information Services, Inc., 2.25%, 8/15/2021	$	1,810,000	$	1,779,295

Cable TV – 0.6%
Time Warner Cable, Inc., 5%, 2/01/2020	$	3,475,000	$	3,626,342


Issuer	Shares/Par		Value ($)
BONDS – continued
Chemicals – 1.8%
Chevron Phillips Chemical Co. LLC, 1.7%, 5/01/2018 (n)	$	2,350,000	$	2,348,485
Dow Chemical Co., 8.55%, 5/15/2019		1,570,000		1,700,449
E.I. du Pont de Nemours & Co., 2.2%, 5/01/2020		2,145,000		2,142,978
LyondellBasell Industries N.V., 5%, 4/15/2019		1,267,000		1,300,779
Sherwin-Williams Co., 2.25%, 5/15/2020		2,652,000		2,642,957

			$	10,135,648

Computer Software – 0.3%
Diamond 1 Finance Corp./Diamond 2 Finance Corp., 3.48%, 6/01/2019 (n)	$	1,660,000	$	1,680,647

Conglomerates – 0.1%
Roper Technologies, Inc., 2.8%, 12/15/2021	$	783,000	$	784,292

Consumer Products – 1.4%
Mattel, Inc., 1.7%, 3/15/2018	$	1,232,000	$	1,227,380
Reckitt Benckiser Treasury Services PLC, 2.125%, 9/21/2018 (n)		2,480,000		2,482,189
Reckitt Benckiser Treasury Services PLC, 2.375%, 6/24/2022 (n)		4,352,000		4,266,095

			$	7,975,664

Consumer Services – 0.4%
Alibaba Group Holding Ltd., 2.8%, 6/06/2023	$	2,521,000	$	2,513,438

Electrical Equipment – 0.6%
Arrow Electronics, Inc., 3%, 3/01/2018	$	919,000	$	920,155
Molex Electronic Technologies LLC, 2.878%, 4/15/2020 (n)		2,430,000		2,430,386

			$	3,350,541

Electronics – 0.4%
Tyco Electronics Group S.A., 2.375%, 12/17/2018	$	971,000	$	973,178
Xilinx, Inc., 2.125%, 3/15/2019		1,490,000		1,485,129

			$	2,458,307

Emerging Market Quasi-Sovereign – 0.8%
Corporacion Financiera de Desarrollo S.A., 3.25%, 7/15/2019 (n)	$	2,022,000	$	2,037,165
State Grid International Development Co. Ltd., 1.75%, 5/22/2018 (n)		2,429,000		2,423,555

			$	4,460,720

Energy – Integrated – 0.7%
BP Capital Markets PLC, 2.521%, 1/15/2020	$	1,371,000	$	1,382,436
Shell International Finance B.V., 1.375%, 5/10/2019		2,640,000		2,617,042

			$	3,999,478

Entertainment – 0.2%
Royal Caribbean Cruises Ltd., 2.65%, 11/28/2020	$	1,207,000	$	1,206,015

MFS Limited Maturity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
Financial Institutions – 0.5%
LeasePlan Corp. N.V., 2.5%, 5/16/2018 (n)	$	2,949,000	$	2,949,337

Food & Beverages – 2.1%
Anheuser-Busch InBev Finance, Inc., 1.9%, 2/01/2019	$	2,405,000	$	2,399,850
Anheuser-Busch InBev Finance, Inc., 2.65%, 2/01/2021		2,528,000		2,540,462
Mondelez International, Inc., FLR, 1.988% (LIBOR-3mo. + 0.61%), 10/28/2019 (n)		3,160,000		3,171,629
Pernod Ricard S.A., 5.75%, 4/07/2021 (n)		810,000		888,995
Want Want China Finance Co., 1.875%, 5/14/2018 (n)		2,722,000		2,714,771
Wm. Wrigley Jr. Co., 2.4%, 10/21/2018 (n)		334,000		334,933

			$	12,050,640

Insurance – 1.2%
American International Group, Inc., 2.3%, 7/16/2019	$	408,000	$	407,655
American International Group, Inc., 3.3%, 3/01/2021		3,039,000		3,097,758
Metropolitan Life Global Funding I, 2%, 4/14/2020 (n)		2,660,000		2,639,470
Voya Financial, Inc., 2.9%, 2/15/2018		573,000		573,560

			$	6,718,443

Insurance – Health – 0.4%
UnitedHealth Group, Inc., 1.95%, 10/15/2020	$	2,580,000	$	2,556,233

International Market Quasi-Sovereign – 2.8%
Caisse d’Amortissement de la Dette Sociale, 1.875%, 1/13/2020 (n)	$	4,000,000	$	3,976,314
Dexia Credit Local S.A., 2.25%, 1/30/2019 (n)		1,390,000		1,391,404
Dexia Credit Local S.A., 2.25%, 2/18/2020 (n)		3,880,000		3,870,880
Electricite de France, 2.15%, 1/22/2019 (n)		2,500,000		2,500,146
Swedish Export Credit Corp., 1.125%, 8/28/2019		4,510,000		4,438,999

			$	16,177,743

International Market Sovereign – 0.2%
Republic of Finland, 1%, 4/23/2019 (n)	$	1,190,000	$	1,175,139

Internet – 0.1%
Baidu, Inc., 2.75%, 6/09/2019	$	440,000	$	440,554

Major Banks – 16.9%
ABN AMRO Bank N.V., 2.1%, 1/18/2019 (n)	$	3,280,000	$	3,275,710
Bank of America Corp., 6.875%, 4/25/2018		1,000,000		1,015,275
Bank of America Corp., 2.151%, 11/09/2020		1,300,000		1,293,950
Bank of America Corp., 2.369% to 7/21/2020, FLR to 7/21/2021		3,937,000		3,929,842
Bank of America Corp., 2.881% to 4/24/2022, FLR to 4/24/2023		3,106,000		3,110,185
Bank of Montreal, FLR, 1.95% (LIBOR-3mo. + 0.6%), 4/09/2018		1,380,000		1,381,712


Issuer	Shares/Par		Value ($)
BONDS – continued
Major Banks – continued
Bank of Montreal, FLR, 2.003% (LIBOR-3mo. + 0.65%), 7/18/2019	$	2,110,000	$	2,124,675
Barclays PLC, 3.25%, 1/12/2021		4,360,000		4,401,869
Citibank N.A., 2.125%, 10/20/2020		2,381,000		2,358,081
Commonwealth Bank of Australia, 1.75%, 11/02/2018		610,000		608,644
Commonwealth Bank of Australia, 2.3%, 9/06/2019		2,579,000		2,582,244
Credit Agricole, “A”, FLR, 2.78% (LIBOR-3mo. + 1.43%), 1/10/2022 (n)		1,270,000		1,300,935
Credit Suisse Group AG, “A”, 3.574%, 1/09/2023 (n)		2,020,000		2,053,522
Credit Suisse New York, 1.75%, 1/29/2018		2,170,000		2,170,016
DNB Bank A.S.A., 2.125%, 10/02/2020 (n)		2,620,000		2,594,871
Goldman Sachs Group, Inc., 2%, 4/25/2019		60,000		59,814
Goldman Sachs Group, Inc., 2.55%, 10/23/2019		6,227,000		6,238,010
Goldman Sachs Group, Inc., 2.6%, 12/27/2020		2,544,000		2,543,524
Goldman Sachs Group, Inc., 3%, 4/26/2022		1,970,000		1,977,533
HSBC Holdings PLC, 3.262% to 3/13/2022, FLR to 3/13/2023		1,745,000		1,769,080
HSBC Holdings PLC, 3.033% to 3/13/2022, FLR to 11/22/2023		1,294,000		1,296,426
ING Bank N.V., 1.8%, 3/16/2018 (n)		3,290,000		3,289,736
JPMorgan Chase & Co., 2.776% to 4/25/2022, FLR to 4/25/2023		2,896,000		2,898,449
Mitsubishi UFJ Financial Group, Inc., 2.95%, 3/01/2021		1,340,000		1,352,105
Mitsubishi UFJ Financial Group, Inc., 2.998%, 2/22/2022		1,340,000		1,348,353
Mizuho Bank Ltd., FLR, 2.552% (U.S. LIBOR-3mo. + 1.19%), 10/20/2018 (n)		2,390,000		2,407,315
Morgan Stanley, 2.375%, 7/23/2019		4,566,000		4,570,691
Morgan Stanley, 2.65%, 1/27/2020		2,300,000		2,310,260
National Australia Bank Ltd., 1.375%, 7/12/2019		1,900,000		1,876,128
PNC Bank N.A., 2.25%, 7/02/2019		3,080,000		3,081,550
Royal Bank of Canada, 1.5%, 7/29/2019		3,527,000		3,486,335
Skandinaviska Enskilda, 1.75%, 3/19/2018 (n)		1,721,000		1,720,466
Sumitomo Mitsui Banking Corp., FLR, 2.027% (U.S. LIBOR-3mo. + 0.67%), 10/19/2018		2,710,000		2,719,992
Svenska Handelsbanken AB, 2.25%, 6/17/2019		2,580,000		2,580,894
Toronto-Dominion Bank, 1.45%, 9/06/2018		3,040,000		3,029,059
Toronto-Dominion Bank, FLR, 2.062% (U.S. LIBOR-3mo. + 0.65%), 8/13/2019		2,770,000		2,789,886
UBS AG, 2.375%, 8/14/2019		1,660,000		1,661,198
UBS Group Funding (Jersey) Ltd., 3%, 4/15/2021 (n)		2,915,000		2,935,183
UBS Group Funding (Switzerland) AG, 3.491%, 5/23/2023 (n)		3,498,000		3,553,227

MFS Limited Maturity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
Major Banks – continued
Wells Fargo Bank N.A., FLR, 2.102% (U.S. LIBOR-3mo. + 0.74%), 1/22/2018	$	250,000	$	250,061
Westpac Banking Corp., 1.55%, 5/25/2018		1,580,000		1,579,854

			$	97,526,660

Medical & Health Technology & Services – 1.3%
Becton, Dickinson and Co., 2.675%, 12/15/2019	$	2,571,000	$	2,579,978
Becton, Dickinson and Co., 2.404%, 6/05/2020		1,234,000		1,227,230
Becton, Dickinson and Co., 2.894%, 6/06/2022		1,367,000		1,358,277
Laboratory Corp. of America Holdings, 2.625%, 2/01/2020		2,460,000		2,466,342

			$	7,631,827

Medical Equipment – 1.4%
Abbott Laboratories, 2.35%, 11/22/2019	$	2,680,000	$	2,680,278
Abbott Laboratories, 2.9%, 11/30/2021		2,030,000		2,053,275
Medtronic, Inc., 1.5%, 3/15/2018		1,320,000		1,319,050
Zimmer Holdings, Inc., 2%, 4/01/2018		1,740,000		1,740,631

			$	7,793,234

Metals & Mining – 0.6%
Freeport-McMoRan, Inc., 2.375%, 3/15/2018	$	800,000	$	799,000
Glencore Funding LLC, 2.125%, 4/16/2018 (n)		1,650,000		1,649,615
Glencore Funding LLC, 3%, 10/27/2022 (n)		886,000		877,362

			$	3,325,977

Midstream – 1.2%
Andeavor Logistics LP/Tesoro Logistics Finance Corp., 3.5%, 12/01/2022	$	1,712,000	$	1,708,518
EL Paso LLC, 6.5%, 9/15/2020		2,578,000		2,818,696
EnLink Midstream Partners LP, 2.7%, 4/01/2019		1,342,000		1,340,694
Enterprise Products Operating LP, 6.5%, 1/31/2019		630,000		658,288
TransCanada PipeLines Ltd., 1.875%, 1/12/2018		195,000		194,996

			$	6,721,192

Mortgage-Backed – 2.0%
Fannie Mae, 2.8%, 3/01/2018	$	2,915,997	$	2,912,575
Fannie Mae, 3.766%, 6/01/2018		3,267,658		3,272,386
Fannie Mae, 5.5%, 5/01/2025		246,879		251,921
Fannie Mae, 5%, 7/01/2039 - 3/01/2042		1,480,791		1,598,741
Fannie Mae, 2%, 5/25/2044		3,296,424		3,234,688
Fannie Mae, FLR, 1.487%, 5/25/2018		165,619		165,479
Freddie Mac, 0.882%, 4/25/2024 (i)		628,961		28,718

			$	11,464,508

Municipals – 0.6%
New Jersey Economic Development Authority State Pension Funding Rev., “B”, AGM, 0%, 2/15/2023	$	4,091,000	$	3,422,531


Issuer	Shares/Par		Value ($)
BONDS – continued
Network & Telecom – 1.7%
AT&T, Inc., 2.3%, 3/11/2019	$	1,530,000	$	1,531,520
AT&T, Inc., 2.45%, 6/30/2020		3,240,000		3,236,244
AT&T, Inc., 3.2%, 3/01/2022		2,171,000		2,194,172
AT&T, Inc., 2.85%, 2/14/2023		1,194,000		1,198,563
British Telecommunications PLC, 2.35%, 2/14/2019		1,860,000		1,861,839

			$	10,022,338

Oils – 0.5%
Marathon Petroleum Corp., 2.7%, 12/14/2018	$	2,908,000	$	2,918,427

Other Banks & Diversified Financials – 7.6%
Banque Federative du Credit Mutuel, 2.75%, 1/22/2019 (n)	$	798,000	$	802,620
Banque Federative du Credit Mutuel, 2%, 4/12/2019 (n)		2,430,000		2,420,857
Banque Federative du Credit Mutuel, 2.2%, 7/20/2020 (n)		2,614,000		2,597,054
BNZ International Funding Ltd. London, 1.9%, 2/26/2018 (n)		2,470,000		2,470,194
BPCE S.A., 1.625%, 1/26/2018		840,000		839,748
Branch Banking & Trust Co., 1.45%, 5/10/2019		2,610,000		2,585,059
Capital One Financial Corp., 2.5%, 5/12/2020		1,708,000		1,705,756
Capital One Financial Corp., 2.4%, 10/30/2020		868,000		862,609
Citigroup, Inc., 2.4%, 2/18/2020		4,151,000		4,150,153
Citizens Bank N.A., 2.3%, 12/03/2018		1,380,000		1,380,936
Citizens Bank N.A., 2.25%, 3/02/2020		1,400,000		1,393,254
Citizens Bank N.A., 2.55%, 5/13/2021		374,000		372,579
Compass Bank, 2.875%, 6/29/2022		2,717,000		2,688,248
Discover Bank, 3.1%, 6/04/2020		1,705,000		1,725,130
Fifth Third Bancorp, 2.3%, 3/01/2019		1,171,000		1,171,873
Fifth Third Bancorp, 2.3%, 3/15/2019		1,200,000		1,200,823
First Republic Bank, 2.375%, 6/17/2019		849,000		847,377
Groupe BPCE S.A., 2.5%, 12/10/2018		2,980,000		2,988,359
Lloyds Bank PLC, FLR, 2.362% (U.S. LIBOR-3mo. + 1%), 1/22/2019		730,000		736,100
National Bank of Canada, FLR, 2.413% (LIBOR-3mo. + 0.84%), 12/14/2018		2,480,000		2,495,808
Santander UK Group Holdings PLC, 2.875%, 8/05/2021		3,090,000		3,082,430
SunTrust Banks, Inc., 2.7%, 1/27/2022		2,255,000		2,254,657
U.S. Bank NA Cincinnati, 2.05%, 10/23/2020		2,945,000		2,923,569

			$	43,695,193

Pharmaceuticals – 3.5%
Actavis Funding SCS, 2.35%, 3/12/2018	$	1,038,000	$	1,038,809
Amgen, Inc., 2.2%, 5/11/2020		3,420,000		3,400,886
Biogen, Inc., 2.9%, 9/15/2020		1,780,000		1,804,120
Celgene Corp., 2.875%, 8/15/2020		2,591,000		2,614,970
Celgene Corp., 2.75%, 2/15/2023		1,806,000		1,790,833
EMD Finance LLC, 1.7%, 3/19/2018 (n)		2,790,000		2,789,351

MFS Limited Maturity Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
BONDS – continued
Pharmaceuticals – continued
Gilead Sciences, Inc., 1.85%, 9/04/2018	$	2,490,000	$	2,489,741
Shire Acquisitions Investments Ireland Designated Activity Co., 1.9%, 9/23/2019		4,540,000		4,498,410

			$	20,427,120

Real Estate – Retail – 0.2%
Simon Property Group, Inc., REIT, 1.5%, 2/01/2018 (n)	$	1,208,000	$	1,207,856

Retailers – 0.8%
Alimentation Couche-Tard, Inc., 2.35%, 12/13/2019 (n)	$	2,587,000	$	2,586,529
Dollar General Corp., 1.875%, 4/15/2018		365,000		364,782
Wesfarmers Ltd., 1.874%, 3/20/2018 (n)		1,593,000		1,592,945

			$	4,544,256

Supranational – 0.5%
Corporacion Andina de Fomento, 2%, 5/10/2019	$	1,330,000	$	1,325,218
Corporacion Andina de Fomento, FLR, 1.928% (U.S. LIBOR-3mo. + 0.55%), 1/29/2018		1,490,000		1,490,310

			$	2,815,528

Telecommunications – Wireless – 2.0%
American Tower Corp., REIT, 2.8%, 6/01/2020	$	857,000	$	862,287
American Tower Corp., REIT, 3%, 6/15/2023		2,118,000		2,112,130
American Tower Trust I, REIT, 1.551%, 3/15/2018 (n)		1,900,000		1,897,423
Crown Castle International Corp., 3.4%, 2/15/2021		1,000,000		1,021,149
Crown Castle Towers LLC, 4.883%, 8/15/2020 (n)		2,680,000		2,802,582
SBA Tower Trust, 2.877%, 7/09/2021 (n)		629,000		624,283
SBA Tower Trust, 2.898%, 10/15/2044 (n)		2,395,000		2,400,689

			$	11,720,543

Tobacco – 1.5%
BAT Capital Corp., 2.297%, 8/14/2020 (n)	$	2,930,000	$	2,913,684
Imperial Tobacco Finance PLC, 2.05%, 7/20/2018 (n)		2,494,000		2,491,743
Imperial Tobacco Finance PLC, 2.95%, 7/21/2020 (n)		3,388,000		3,420,480

			$	8,825,907

Transportation – Services – 0.6%
TTX Co., 2.6%, 6/15/2020 (n)	$	3,160,000	$	3,146,036

U.S. Government Agencies and Equivalents – 0.8%
Hashemite Kingdom of Jordan, 1.945%, 6/23/2019	$	2,040,000	$	2,038,433
National Credit Union Administration, “1-A”, FLR, 1.778% (LIBOR-1mo. + 0.45%), 1/08/2020		764,542		766,139
National Credit Union Administration, FLR, 1.728% (LIBOR-1mo. + 0.4%), 3/11/2020		1,137,582		1,139,334


Issuer	Shares/Par		Value ($)
BONDS – continued
U.S. Government Agencies and Equivalents – continued
National Credit Union Administration, FLR, 2.005% (LIBOR-1mo. + 0.45%), 10/07/2020	$	368,186	$	368,764
National Credit Union Administration, FLR, 1.756% (LIBOR-1mo. + 0.35%), 12/07/2020		450,246		450,500

			$	4,763,170

U.S. Treasury Obligations – 6.5%
U.S. Treasury Notes, 1.625%, 8/31/2019	$	9,000,000	$	8,962,614
U.S. Treasury Notes, 1.375%, 2/15/2020		24,900,000		24,622,580
U.S. Treasury Notes, 1.875%, 2/28/2022		4,000,000		3,956,431

			$	37,541,625

Utilities – Electric Power – 2.7%
Dominion Energy, Inc., 2.962%, 7/01/2019	$	1,310,000	$	1,320,018
Dominion Energy, Inc., 1.6%, 8/15/2019		1,070,000		1,058,118
Dominion Energy, Inc., 2.579%, 7/01/2020		1,761,000		1,761,622
Emera U.S. Finance LP, 2.15%, 6/15/2019		2,021,000		2,012,954
Eversource Energy, 2.5%, 3/15/2021		1,240,000		1,232,025
FirstEnergy Corp., 2.85%, 7/15/2022		856,000		848,108
NextEra Energy Capital Holdings, Inc., 2.3%, 4/01/2019		1,722,000		1,720,930
Southern Co., 1.85%, 7/01/2019		2,600,000		2,584,027
Virginia Electric & Power Co., 1.2%, 1/15/2018		2,790,000		2,789,208

			$	15,327,010

Total Bonds (Identified Cost, $557,539,342)			$	556,675,497


INVESTMENT COMPANIES (h) – 3.1%
MONEY MARKET FUNDS – 3.1%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $17,895,193)		17,896,983	$	17,895,193

OTHER ASSETS, LESS LIABILITIES – 0.4%				2,445,219

NET ASSETS – 100.0%			$	577,015,909

(h)

(i)

Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security.

(n)

Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $229,313,687, representing 39.7% of net assets.

(v)

MFS Limited Maturity Portfolio

Portfolio of Investments – continued

The following abbreviations are used in this report and are defined:

CDO

Collateralized Debt Obligation

CLO

Collateralized Loan Obligation

FLR

Floating rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate.

PLC

Public Limited Company

REIT

Real Estate Investment Trust


Insurers
AGM		Assured Guaranty Municipal

See Notes to Financial Statements

MFS Limited Maturity Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value (identified cost, $557,539,342)	$556,675,497
Investments in affiliated issuers, at value (identified cost, $17,895,193)	17,895,193
Cash	148
Receivables for
Fund shares sold	38,081
Interest	3,048,189
Other assets	3,737
Total assets	$577,660,845
Liabilities
Payable for fund shares reacquired	$523,074
Payable to affiliates
Investment adviser	25,726
Shareholder servicing costs	89
Distribution and/or service fees	3,908
Payable for independent Trustees’ compensation	47
Accrued expenses and other liabilities	92,092
Total liabilities	$644,936
Net assets	$577,015,909
Net assets consist of
Paid-in capital	$568,277,518
Unrealized appreciation (depreciation)	(863,845	)
Accumulated net realized gain (loss)	(752,237	)
Undistributed net investment income	10,354,473
Net assets	$577,015,909
Shares of beneficial interest outstanding	56,686,156


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$434,319,963		42,654,828		$10.18
Service Class		142,695,946		14,031,328		10.17

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Limited Maturity Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Interest	$13,231,744
Dividends from affiliated issuers	112,595
Total investment income	$13,344,339
Expenses
Management fee	$2,408,959
Distribution and/or service fees	369,497
Shareholder servicing costs	10,325
Administrative services fee	104,803
Independent Trustees’ compensation	15,241
Custodian fee	33,753
Shareholder communications	61,107
Audit and tax fees	62,603
Legal fees	8,613
Miscellaneous	32,057
Total expenses	$3,106,958
Reduction of expenses by investment adviser	(48,111	)
Net expenses	$3,058,847
Net investment income (loss)	$10,285,492
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$393,714
Affiliated issuers	(3,878	)
Futures contracts	553,572
Net realized gain (loss)	$943,408
Change in unrealized appreciation (depreciation)
Unaffiliated issuers	$(1,130,349	)
Affiliated issuers	(272	)
Futures contracts	(48,122	)
Net unrealized gain (loss)	$(1,178,743	)
Net realized and unrealized gain (loss)	$(235,335	)
Change in net assets from operations	$10,050,157

See Notes to Financial Statements

MFS Limited Maturity Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$10,285,492		$9,011,152
Net realized gain (loss)		943,408		(345,999	)
Net unrealized gain (loss)		(1,178,743	)	2,653,650
Change in net assets from operations		$10,050,157		$11,318,803
Distributions declared to shareholders
From net investment income		$(9,144,192	)	$(8,450,814	)
Change in net assets from fund share transactions		$(51,599,224	)	$(68,490,037	)
Total change in net assets		$(50,693,259	)	$(65,622,048	)
Net assets
At beginning of period		627,709,168		693,331,216
At end of period (including undistributed net investment income of $10,354,473 and $9,142,960, respectively)		$577,015,909		$627,709,168

See Notes to Financial Statements

MFS Limited Maturity Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.17			$10.14			$10.23			$10.32			$10.29
Income (loss) from investment operations
Net investment income (loss) (d)		$0.18			$0.15	(c)		$0.12			$0.11			$0.12
Net realized and unrealized gain (loss)		(0.00	)(w)		0.02			(0.07	)		(0.03	)		(0.05	)
Total from investment operations		$0.18			$0.17			$0.05			$0.08			$0.07
Less distributions declared to shareholders
From net investment income		$(0.17	)		$(0.14	)		$(0.14	)		$(0.13	)		$(0.01	)
From net realized gain		—			—			—			(0.04	)		(0.03	)
Total distributions declared to shareholders		$(0.17	)		$(0.14	)		$(0.14	)		$(0.17	)		$(0.04	)
Net asset value, end of period (x)		$10.18			$10.17			$10.14			$10.23			$10.32
Total return (%) (k)(r)(s)(x)		1.73			1.68	(c)		0.48			0.80			0.71
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.45			0.42	(c)		0.45			0.44			0.45
Expenses after expense reductions (f)		0.45			0.42	(c)		0.44			0.44			0.45
Net investment income (loss)		1.77			1.43	(c)		1.13			1.10			1.19
Portfolio turnover		54			30			26			24			34
Net assets at end of period (000 omitted)		$434,320			$473,730			$520,750			$627,457			$713,534

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.16			$10.12			$10.20			$10.30			$10.28
Income (loss) from investment operations
Net investment income (loss) (d)		$0.16			$0.12	(c)		$0.09			$0.09			$0.10
Net realized and unrealized gain (loss)		(0.01	)		0.03			(0.06	)		(0.04	)		(0.05	)
Total from investment operations		$0.15			$0.15			$0.03			$0.05			$0.05
Less distributions declared to shareholders
From net investment income		$(0.14	)		$(0.11	)		$(0.11	)		$(0.11	)		$—
From net realized gain		—			—			—			(0.04	)		(0.03	)
Total distributions declared to shareholders		$(0.14	)		$(0.11	)		$(0.11	)		$(0.15	)		$(0.03	)
Net asset value, end of period (x)		$10.17			$10.16			$10.12			$10.20			$10.30
Total return (%) (k)(r)(s)(x)		1.45			1.48	(c)		0.28			0.49			0.48
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.70			0.68	(c)		0.70			0.69			0.70
Expenses after expense reductions (f)		0.70			0.67	(c)		0.69			0.69			0.70
Net investment income (loss)		1.52			1.18	(c)		0.88			0.85			0.94
Portfolio turnover		54			30			26			24			34
Net assets at end of period (000 omitted)		$142,696			$153,979			$172,581			$211,505			$229,865

See Notes to Financial Statements

MFS Limited Maturity Portfolio

Financial Highlights – continued

(c)

Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)

Per share data is based on average shares outstanding.

(f)

Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)

The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)

Certain expenses have been reduced without which performance would have been lower.

(s)

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(w)

Per share amount was less than $0.01.

(x)

See Notes to Financial Statements

MFS Limited Maturity Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Limited Maturity Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

In March 2017, the FASB issued Accounting Standards Update 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). For entities that hold callable debt securities at a premium, ASU 2017-08 requires that the premium be amortized to the earliest call date. ASU 2017-08 will be effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management is still evaluating the potential impacts of ASU 2017-08 but believes that adoption of ASU 2017-08 will not have a material effect on the fund’s overall financial position or its overall results of operations.

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued

trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.


Financial Instruments	Level 1		Level 2		Level 3		Total
U.S. Treasury Bonds & U.S. Government Agency & Equivalents		$—		$42,304,795		$—		$42,304,795
Non-U.S. Sovereign Debt		—		24,629,130		—		24,629,130
Municipal Bonds		—		3,422,531		—		3,422,531
U.S. Corporate Bonds		—		201,638,408		—		201,638,408
Residential Mortgage-Backed Securities		—		18,490,239		—		18,490,239
Commercial Mortgage-Backed Securities		—		15,794,768		—		15,794,768
Asset-Backed Securities (including CDOs)		—		116,724,229		—		116,724,229
Foreign Bonds		—		133,671,397		—		133,671,397
Mutual Funds		17,895,193		—		—		17,895,193
Total		$17,895,193		$556,675,497		$—		$574,570,690

For further information regarding security characteristics, see the Portfolio of Investments.

The derivative instruments used by the fund during the period were futures contracts. Depending on the type of derivative, the fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement with the derivative counterparty, or novating the position to a third party. At December 31, 2017, the fund did not have any outstanding derivative instruments.


Risk	Futures Contracts
Interest Rate		$553,572

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued


Risk	Futures Contracts
Interest Rate		$(48,122	)

Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a certain percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is realized.

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued

The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. For these securities, the value of the debt instrument also depends on the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying assets or collateral may be difficult. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae.

The fund purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.

To mitigate this risk of loss on TBA securities and other types of forward settling mortgage-backed securities, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.

For mortgage-backed securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and one amount is posted from one party to the other to collateralize such obligations. Cash that has been pledged to cover the fund’s collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.

During the year ended December 31, 2017, there were no significant adjustments due to differences between book and tax accounting.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended 12/31/17		Year ended 12/31/16
Ordinary income (including any short-term capital gains)		$9,144,192		$8,450,814

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$575,579,028
Gross appreciation	991,043
Gross depreciation	(1,999,381	)
Net unrealized appreciation (depreciation)	$(1,008,338	)
Undistributed ordinary income	10,354,473
Capital loss carryforwards	(607,744	)


Long-Term			$(607,744	)


	From net investment income
	Year ended 12/31/17		Year ended 12/31/16
Initial Class		$7,201,547		$6,727,090
Service Class		1,942,645		1,723,724
Total		$9,144,192		$8,450,814

(3)

Transactions with Affiliates

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $48,111, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.39% of the fund’s average daily net assets.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $9,598, which equated to 0.0016% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $727.

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $1,078 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, were as follows:


	Purchases		Sales
U.S. Government securities		$41,293,763		$8,881,208
Non-U.S. Government securities		$275,466,092		$342,842,269

(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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		2,833,100			$28,942,654			2,860,810			$29,260,624
Service Class		1,288,904			13,145,834			1,467,372			14,957,986
		4,122,004			$42,088,488			4,328,182			$44,218,610
Shares issued to shareholders in reinvestment of distributions
Initial Class		706,727			$7,201,547			659,519			$6,727,090
Service Class		190,830			1,942,645			169,158			1,723,724
		897,557			$9,144,192			828,677			$8,450,814
Shares reacquired
Initial Class		(7,449,956	)		$(76,219,352	)		(8,327,171	)		$(85,073,262	)
Service Class		(2,606,511	)		(26,612,552	)		(3,537,803	)		(36,086,199	)
		(10,056,467	)		$(102,831,904	)		(11,864,974	)		$(121,159,461	)
Net change
Initial Class		(3,910,129	)		$(40,075,151	)		(4,806,842	)		$(49,085,548	)
Service Class		(1,126,777	)		(11,524,073	)		(1,901,273	)		(19,404,489	)
		(5,036,906	)		$(51,599,224	)		(6,708,115	)		$(68,490,037	)

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 12%, 12%, and 1%, respectively, of the value of outstanding voting shares of the fund.

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $4,106 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Limited Maturity Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Affiliated Issuers		Beginning Shares/Par Amount			Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			23,249,759			265,534,672		(270,887,448	)		17,896,983

Affilated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$(3,878)		$(272	)		$—		$112,595			$17,895,193

MFS Limited Maturity Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of

MFS Limited Maturity Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Limited Maturity Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Limited Maturity Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Limited Maturity Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Limited Maturity Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Philipp Burgener Alexander Mackey

MFS Limited Maturity Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 1st quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 2nd quintile for each of the one- and five-year periods ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS Limited Maturity Portfolio

Board Review of Investment Advisory Agreement – continued

In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each approximately at the Broadridge expense group median.

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is not subject to any breakpoints. Taking into account that the Fund’s effective advisory fee rate was approximately at the Broadridge expense group median described above, the Trustees determined not to recommend any advisory fee breakpoints for the Fund at this time. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the group fee waiver was sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

MFS Limited Maturity Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® MID CAP

VALUE PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VMC-ANN

MFS® MID CAP VALUE PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Mid Cap Value Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Mid Cap Value Portfolio

PORTFOLIO COMPOSITION

Portfolio structure

LOGO


Top ten holdings
Hartford Financial Services Group, Inc.			1.4%
KeyCorp			1.3%
Stanley Black & Decker, Inc.			1.3%
Pinnacle Foods, Inc.			1.2%
Comerica, Inc.			1.2%
Discover Financial Services			1.2%
NASDAQ, Inc.			1.2%
Unum Group			1.2%
Huntington Bancshares, Inc.			1.2%
Citizens Financial Group, Inc.			1.1%


Equity sectors
Financial Services			28.7%
Industrial Goods & Services			9.3%
Utilities & Communications			8.4%
Basic Materials			7.5%
Energy			7.0%
Consumer Staples			6.8%
Technology			6.5%
Health Care			6.4%
Autos & Housing			5.3%
Retailing			4.6%
Special Products & Services			3.3%
Leisure			2.7%
Transportation			2.5%

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Mid Cap Value Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Mid Cap Value Portfolio (“fund”) provided a total return of 13.67%, while Service Class shares of the fund provided a total return of 13.41%. These compare with a return of 13.34% over the same period for the fund’s benchmark, the Russell Midcap® Value Index.

Market Environment

Contributors to Performance

Strong stock selection in the financial services sector was a primary factor that benefited performance relative to the Russell Midcap® Value Index. Within this sector, the fund’s holdings of alternative investment manager Apollo Global Management (b) lifted relative returns as rising financial markets helped drive solid earnings growth.

Both security selection and an overweight position in the health care sector further supported relative results. Within this sector, not holding shares of poor-performing healthcare services provider Cardinal Health aided relative performance. Shares of Cardinal Health declined due to deflationary pressures in the generic drug market which negatively impacted the company’s earnings.

An overweight position in the autos & housing sector also contributed to relative performance. Within this sector, the fund’s overweight positions in residential and commercial building materials manufacturer Owens Corning and power and hand tool manufacturer Stanley Black & Decker, as well as holdings of vehicle components manufacturer Aptiv (b)(h), strengthened relative returns. Shares of Owens Corning advanced throughout the period on the back of strong roofing and composites sales.

Elsewhere, an overweight position in chemical research company FMC, as well as owning shares of communications and aviation electronics product manufacturer Rockwell Collins (b)(h), agricultural equipment manufacturer Deere & Company (b) and integrated circuit manufacturer Maxim Integrated Products (b), positively impacted relative performance. Not holding shares of oilfield products and solutions provider Baker Hughes also helped.

Detractors from Performance

Security selection in both the technology and energy sectors hurt relative performance during the reporting period. Within the technology sector, not holding shares of semiconductor company Micron Technology, and owning shares of consumer transaction solutions provider NCR (b), detracted from relative results. NCR’s stock fell as weaker-than-expected revenues appeared to have weighed on investor sentiment. Within the energy sector, overweight positions in tubular services provider Frank’s International and

MFS Mid Cap Value Portfolio

Management Review – continued

oilfield equipment and service provider Superior Energy Services, as well as holding shares of natural gas and crude oil company PDC Energy (b), oilfield engineering solutions provider Oil States International (b) and oilfield product company Forum Energy Technologies (b), hindered relative returns.

The combination of an overweight position and stock selection in the consumer staples sector further diminished relative returns. Within this sector, the fund’s overweight position in Treehouse Foods weakened relative results as pricing and competitive pressures translated into sales and earnings that missed expectations.

Stocks in other sectors that detracted from relative returns included overweight positions in beauty supply retailer Sally Beauty Holdings (h) and advertising and marketing services conglomerate Interpublic Group. Shares of Sally Beauty Holdings lagged the benchmark as disappointing same-store sales hurt the company’s financial results.

Respectfully,

Portfolio Manager(s)

Kevin Schmitz and Brooks Taylor

(b)	Security is not a benchmark constituent.

(h)	Security was not held in the portfolio at period end.

MFS Mid Cap Value Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	3/07/08	13.67%	14.24%	9.74%
	Service Class	3/07/08	13.41%	13.96%	9.45%

Comparative benchmark(s)
	Russell Midcap® Value Index (f)		13.34%	14.68%	10.46%

(f)	Source: FactSet Research Systems Inc.

(t)	For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

Benchmark Definition(s)

Russell Midcap® Value Index – constructed to provide a comprehensive barometer for value securities in the mid-cap segment of the U.S. equity universe. Companies in this index generally have lower price-to-book ratios and lower forecasted growth values. The Russell Midcap® Value Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.

It is not possible to invest directly in an index.

Notes to Performance Summary

MFS Mid Cap Value Portfolio

Performance Summary – continued

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Mid Cap Value Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.81%		$1,000.00		$1,072.08		$4.23
Initial Class	Hypothetical (h)		0.81%		$1,000.00		$1,021.12		$4.13
Service Class	Actual		1.05%		$1,000.00		$1,070.27		$5.48
Service Class	Hypothetical (h)		1.05%		$1,000.00		$1,019.91		$5.35

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS Mid Cap Value Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
COMMON STOCKS – 99.0%
Aerospace – 2.6%
Harris Corp.		18,964	$	2,686,251
L3 Technologies, Inc.		20,259		4,008,243
Leidos Holdings, Inc.		37,231		2,404,006

			$	9,098,500

Airlines – 1.3%
Alaska Air Group, Inc.		21,576	$	1,586,052
Delta Air Lines, Inc.		52,992		2,967,552

			$	4,553,604

Alcoholic Beverages – 0.6%
Molson Coors Brewing Co.		24,443	$	2,006,037

Apparel Manufacturers – 1.2%
Hanesbrands, Inc.		83,754	$	1,751,296
PVH Corp.		17,697		2,428,205

			$	4,179,501

Automotive – 1.9%
Goodyear Tire & Rubber Co.		59,641	$	1,927,001
Harley-Davidson, Inc.		44,016		2,239,534
LKQ Corp. (a)		66,735		2,714,112

			$	6,880,647

Broadcasting – 0.8%
Interpublic Group of Companies, Inc.		135,202	$	2,725,672

Brokerage & Asset Managers – 4.5%
Apollo Global Management LLC, “A”		69,922	$	2,340,289
Invesco Ltd.		106,307		3,884,458
NASDAQ, Inc.		53,450		4,106,564
Raymond James Financial, Inc.		34,613		3,090,941
TD Ameritrade Holding Corp.		52,212		2,669,600

			$	16,091,852

Business Services – 3.3%
Amdocs Ltd.		46,366	$	3,036,046
Brenntag AG		23,224		1,465,001
Fidelity National Information Services, Inc.		38,109		3,585,676
First Data Corp. (a)		93,711		1,565,911
Global Payments, Inc.		20,822		2,087,197

			$	11,739,831

Cable TV – 0.2%
Altice USA, Inc. (a)(l)		42,988	$	912,635

Chemicals – 3.2%
Celanese Corp.		28,194	$	3,019,014
Eastman Chemical Co.		30,231		2,800,600
FMC Corp.		28,003		2,650,764
PPG Industries, Inc.		23,770		2,776,811

			$	11,247,189


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Computer Software – 1.3%
Check Point Software Technologies Ltd. (a)		14,997	$	1,553,989
Sabre Corp.		46,901		961,471
Symantec Corp.		71,991		2,020,067

			$	4,535,527

Computer Software – Systems – 2.3%
NCR Corp. (a)		64,516	$	2,192,899
NICE Systems Ltd., ADR		24,623		2,263,100
Verint Systems, Inc. (a)		25,770		1,078,475
Xerox Corp.		85,005		2,477,896

			$	8,012,370

Construction – 2.5%
Owens Corning		30,623	$	2,815,479
Stanley Black & Decker, Inc.		27,231		4,620,828
Toll Brothers, Inc.		29,393		1,411,452

			$	8,847,759

Consumer Products – 1.3%
Coty, Inc., “A”		101,910	$	2,026,990
Newell Brands, Inc.		81,085		2,505,527

			$	4,532,517

Containers – 2.1%
Berry Global Group, Inc. (a)		44,199	$	2,593,155
Graphic Packaging Holding Co.		160,129		2,473,993
Sealed Air Corp.		46,545		2,294,669

			$	7,361,817

Electrical Equipment – 2.2%
HD Supply Holdings, Inc. (a)		53,493	$	2,141,325
Sensata Technologies Holding B.V. (a)		47,883		2,447,300
TE Connectivity Ltd.		20,391		1,937,961
WESCO International, Inc. (a)		20,671		1,408,729

			$	7,935,315

Electronics – 2.3%
Analog Devices, Inc.		35,067	$	3,122,015
Keysight Technologies, Inc. (a)		52,876		2,199,642
Maxim Integrated Products, Inc.		55,650		2,909,382

			$	8,231,039

Energy – Independent – 5.3%
Cabot Oil & Gas Corp.		107,247	$	3,067,264
Concho Resources, Inc. (a)		10,360		1,556,279
Energen Corp. (a)		44,351		2,553,287
EQT Corp.		38,052		2,165,920
Hess Corp.		51,480		2,443,756
HollyFrontier Corp.		42,812		2,192,831
PDC Energy, Inc. (a)		32,626		1,681,544
Pioneer Natural Resources Co.		17,605		3,043,024

			$	18,703,905

MFS Mid Cap Value Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Engineering – Construction – 0.7%
KBR, Inc.		120,117	$	2,381,920

Entertainment – 0.3%
Madison Square Garden Co., “A” (a)		4,972	$	1,048,346

Food & Beverages – 4.9%
Archer Daniels Midland Co.		52,345	$	2,097,988
Bunge Ltd.		9,185		616,130
Cal-Maine Foods, Inc. (a)(l)		19,978		888,022
Coca-Cola European Partners PLC		54,616		2,176,448
J.M. Smucker Co.		20,113		2,498,839
Pinnacle Foods, Inc.		70,249		4,177,708
TreeHouse Foods, Inc. (a)		35,336		1,747,719
Tyson Foods, Inc., “A”		39,734		3,221,235

			$	17,424,089

Food & Drug Stores – 0.9%
Kroger Co.		78,790	$	2,162,786
Tesco PLC		320,014		904,101

			$	3,066,887

Furniture & Appliances – 0.9%
Whirlpool Corp.		18,219	$	3,072,452

Gaming & Lodging – 0.7%
Royal Caribbean Cruises Ltd.		20,051	$	2,391,683

Insurance – 7.3%
Arthur J. Gallagher & Co.		41,614	$	2,633,334
Assurant, Inc.		18,195		1,834,784
Brighthouse Financial, Inc. (a)		11,584		679,286
Everest Re Group Ltd.		10,797		2,388,944
Hanover Insurance Group, Inc.		20,896		2,258,440
Hartford Financial Services Group, Inc.		90,662		5,102,457
Lincoln National Corp.		27,934		2,147,287
Unum Group		74,726		4,101,710
Validus Holdings Ltd.		31,839		1,493,886
XL Group Ltd.		86,861		3,054,033

			$	25,694,161

Machinery & Tools – 3.0%
Deere & Co.		17,579	$	2,751,289
Eaton Corp. PLC		41,349		3,266,984
ITT, Inc.		51,322		2,739,055
Regal Beloit Corp.		25,272		1,935,835

			$	10,693,163

Major Banks – 3.6%
Comerica, Inc.		47,569	$	4,129,465
Huntington Bancshares, Inc.		279,694		4,072,344
KeyCorp		232,148		4,682,425

			$	12,884,234

Medical & Health Technology & Services – 3.0%
AmerisourceBergen Corp.		29,173	$	2,678,665
LifePoint Health, Inc. (a)		30,661		1,526,918
MEDNAX, Inc. (a)		23,455		1,253,435
Premier, Inc., “A” (a)		36,783		1,073,696


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Medical & Health Technology & Services – continued
Quest Diagnostics, Inc.		24,824	$	2,444,916
Universal Health Services, Inc.		13,587		1,540,086

			$	10,517,716

Medical Equipment – 2.9%
Dentsply Sirona, Inc.		30,265	$	1,992,345
PerkinElmer, Inc.		25,020		1,829,462
Steris PLC		30,499		2,667,748
Zimmer Biomet Holdings, Inc.		30,938		3,733,288

			$	10,222,843

Natural Gas – Distribution – 1.0%
NiSource, Inc.		63,821	$	1,638,285
Sempra Energy		19,095		2,041,637

			$	3,679,922

Natural Gas – Pipeline – 0.7%
Plains GP Holdings LP		111,238	$	2,441,674
			��
Network & Telecom – 0.6%
Motorola Solutions, Inc.		25,341	$	2,289,306

Oil Services – 1.7%
Forum Energy Technologies, Inc. (a)		88,648	$	1,378,476
Frank’s International N.V.		178,716		1,188,461
NOW, Inc. (a)		91,846		1,013,061
Oil States International, Inc. (a)		52,113		1,474,798
Superior Energy Services, Inc. (a)		113,310		1,091,175

			$	6,145,971

Other Banks & Diversified Financials – 7.4%
Citizens Financial Group, Inc.		96,656	$	4,057,619
Discover Financial Services		53,467		4,112,682
Element Fleet Management Corp.		177,150		1,338,842
Fifth Third Bancorp		126,245		3,830,273
M&T Bank Corp.		17,794		3,042,596
Northern Trust Corp.		31,299		3,126,457
SunTrust Banks, Inc.		62,261		4,021,438
Wintrust Financial Corp.		31,553		2,599,021

			$	26,128,928

Pharmaceuticals – 0.5%
Mylan N.V. (a)		43,137	$	1,825,126

Pollution Control – 0.8%
Clean Harbors, Inc. (a)		50,660	$	2,745,772

Railroad & Shipping – 0.7%
Kansas City Southern Co.		23,843	$	2,508,760

Real Estate – 5.9%
Annaly Capital Management, Inc., REIT		111,196	$	1,322,120
Brixmor Property Group Inc., REIT		112,085		2,091,506
EPR Properties, REIT		28,676		1,877,131
Life Storage, Inc., REIT		41,807		3,723,749
Medical Properties Trust, Inc., REIT		236,558		3,259,769
Mid-America Apartment Communities, Inc., REIT		22,804		2,293,170
Realogy Holdings Corp.		47,488		1,258,432

MFS Mid Cap Value Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Real Estate – continued
Sun Communities, Inc., REIT		21,847	$	2,026,965
Washington Prime Group, Inc., REIT		164,863		1,173,825
Weyerhaeuser Co., REIT		55,517		1,957,529

			$	20,984,196

Restaurants – 0.7%
Aramark		55,190	$	2,358,821

Specialty Chemicals – 2.2%
Axalta Coating Systems Ltd. (a)		72,800	$	2,355,808
RPM International, Inc.		57,382		3,007,964
Univar, Inc. (a)		81,513		2,523,642

			$	7,887,414

Specialty Stores – 2.5%
AutoZone, Inc. (a)		1,784	$	1,269,084
L Brands, Inc.		31,868		1,919,091
Michaels Co., Inc. (a)		67,537		1,633,720
Tractor Supply Co.		28,021		2,094,570
Urban Outfitters, Inc. (a)		58,271		2,042,981

			$	8,959,446

Trucking – 0.5%
Schneider National, Inc.		58,084	$	1,658,879

Utilities – Electric Power – 6.7%
AES Corp.		144,900	$	1,569,267
Ameren Corp.		32,450		1,914,226
CMS Energy Corp.		66,126		3,127,760
DTE Energy Co.		30,659		3,355,934
Eversource Energy		48,932		3,091,524
FirstEnergy Corp.		55,972		1,713,863
Pinnacle West Capital Corp.		35,327		3,009,154
Public Service Enterprise Group, Inc.		70,128		3,611,592
WEC Energy Group, Inc.		36,542		2,427,485

			$	23,820,805

Total Common Stocks (Identified Cost, $259,106,295)			$	350,428,231


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – 1.0%
MONEY MARKET FUNDS – 1.0%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $3,633,692)		3,634,056	$	3,633,692


COLLATERAL FOR SECURITIES LOANED – 0.1%
State Street Navigator Securities Lending Government Money Market Portfolio, 1.3% (j) (Identified Cost, $109,851)		109,851	$	109,851

OTHER ASSETS, LESS LIABILITIES – (0.1)%				(238,239	)

NET ASSETS – 100.0%			$	353,933,535

(a)

Non-income producing security.

(h)

(j)

The rate quoted is the annualized seven-day yield of the fund at period end.

(l)

A portion of this security is on loan.

(v)

The following abbreviations are used in this report and are defined:

ADR

American Depositary Receipt

PLC

Public Limited Company

REIT

Real Estate Investment Trust

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value, including $490,110 of securities on loan (identified cost, $259,216,146)			$350,538,082
Investments in affiliated issuers, at value (identified cost, $3,633,692)			3,633,692
Receivables for
Fund shares sold			6,735
Interest and dividends			465,184
Other assets			2,493
Total assets			$354,646,186
Liabilities
Payable for fund shares reacquired			$512,006
Collateral for securities loaned, at value (c)			109,851
Payable to affiliates
Investment adviser			29,504
Shareholder servicing costs			144
Distribution and/or service fees			2,355
Payable for independent Trustees’ compensation			59
Accrued expenses and other liabilities			58,732
Total liabilities			$712,651
Net assets			$353,933,535
Net assets consist of
Paid-in capital			$240,794,905
Unrealized appreciation (depreciation)			91,321,762
Accumulated net realized gain (loss)			18,957,190
Undistributed net investment income			2,859,678
Net assets			$353,933,535
Shares of beneficial interest outstanding			39,354,638


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$268,290,525		29,766,537		$9.01
Service Class		85,643,010		9,588,101		8.93

(c)	Non cash collateral is not included.

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Dividends	$5,517,432
Dividends from affiliated issuers	43,851
Income on securities loaned	9,181
Foreign taxes withheld	(15,822	)
Total investment income	$5,554,642
Expenses
Management fee	$2,552,807
Distribution and/or service fees	173,845
Shareholder servicing costs	14,564
Administrative services fee	63,315
Independent Trustees’ compensation	9,010
Custodian fee	19,483
Shareholder communications	33,819
Audit and tax fees	53,109
Legal fees	4,864
Miscellaneous	18,461
Total expenses	$2,943,277
Reduction of expenses by investment adviser	(27,263	)
Net expenses	$2,916,014
Net investment income (loss)	$2,638,628
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$20,697,650
Affiliated issuers	65
Foreign currency	4,168
Net realized gain (loss)	$20,701,883
Change in unrealized appreciation (depreciation)
Unaffiliated issuers	$21,478,749
Translation of assets and liabilities in foreign currencies	608
Net unrealized gain (loss)	$21,479,357
Net realized and unrealized gain (loss)	$42,181,240
Change in net assets from operations	$44,819,868

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$2,638,628		$4,102,943
Net realized gain (loss)		20,701,883		9,918,490
Net unrealized gain (loss)		21,479,357		35,069,272
Change in net assets from operations		$44,819,868		$49,090,705
Distributions declared to shareholders
From net investment income		$(4,029,207	)	$(2,686,243	)
From net realized gain		(10,126,455	)	(26,538,253	)
Total distributions declared to shareholders		$(14,155,662	)	$(29,224,496	)
Change in net assets from fund share transactions		$(7,277,298	)	$(19,173,427	)
Total change in net assets		$23,386,908		$692,782
Net assets
At beginning of period		330,546,627		329,853,845
At end of period (including undistributed net investment income of $2,859,678 and $4,263,444, respectively)		$353,933,535		$330,546,627

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$8.29			$7.84			$9.80			$10.05			$8.75
Income (loss) from investment operations
Net investment income (loss) (d)		$0.07			$0.10	(c)		$0.08			$0.09			$0.10
Net realized and unrealized gain (loss)		1.03			1.12			(0.37	)		0.93			2.93
Total from investment operations		$1.10			$1.22			$(0.29	)		$1.02			$3.03
Less distributions declared to shareholders
From net investment income		$(0.11	)		$(0.07	)		$(0.10	)		$(0.11	)		$(0.12	)
From net realized gain		(0.27	)		(0.70	)		(1.57	)		(1.16	)		(1.61	)
Total distributions declared to shareholders		$(0.38	)		$(0.77	)		$(1.67	)		$(1.27	)		$(1.73	)
Net asset value, end of period (x)		$9.01			$8.29			$7.84			$9.80			$10.05
Total return (%) (k)(r)(s)(x)		13.67			15.98	(c)		(2.33	)		10.36			36.91
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		0.81			0.77	(c)		0.82			0.81			0.81
Expenses after expense reductions (f)		0.81			0.76	(c)		0.81			0.81			0.81
Net investment income (loss)		0.82			1.31	(c)		0.82			0.86			0.99
Portfolio turnover		36			32			51			55			49
Net assets at end of period (000 omitted)		$268,291			$271,001			$274,753			$322,888			$348,322

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$8.22			$7.78			$9.74			$9.99			$8.71
Income (loss) from investment operations
Net investment income (loss) (d)		$0.05			$0.08	(c)		$0.06			$0.06			$0.07
Net realized and unrealized gain (loss)		1.02			1.12			(0.38	)		0.93			2.92
Total from investment operations		$1.07			$1.20			$(0.32	)		$0.99			$2.99
Less distributions declared to shareholders
From net investment income		$(0.09	)		$(0.06	)		$(0.07	)		$(0.08	)		$(0.10	)
From net realized gain		(0.27	)		(0.70	)		(1.57	)		(1.16	)		(1.61	)
Total distributions declared to shareholders		$(0.36	)		$(0.76	)		$(1.64	)		$(1.24	)		$(1.71	)
Net asset value, end of period (x)		$8.93			$8.22			$7.78			$9.74			$9.99
Total return (%) (k)(r)(s)(x)		13.41			15.76	(c)		(2.66	)		10.16			36.52
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		1.06			1.02	(c)		1.07			1.06			1.06
Expenses after expense reductions (f)		1.05			1.01	(c)		1.06			1.06			1.06
Net investment income (loss)		0.59			1.06	(c)		0.62			0.62			0.75
Portfolio turnover		36			32			51			55			49
Net assets at end of period (000 omitted)		$85,643			$59,545			$55,100			$38,611			$38,371

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

Financial Highlights – continued

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Mid Cap Value Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Mid Cap Value Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

MFS Mid Cap Value Portfolio

Notes to Financial Statements – continued

movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.


Financial Instruments	Level 1		Level 2		Level 3		Total
Equity Securities:
United States		$340,726,750		$—		$—		$340,726,750
Israel		3,817,089		—		—		3,817,089
United Kingdom		3,080,548		—		—		3,080,548
Germany		—		1,465,001		—		1,465,001
Canada		1,338,843		—		—		1,338,843
Mutual Funds		3,743,543		—		—		3,743,543
Total		$352,706,773		$1,465,001		$—		$354,171,774

For further information regarding security characteristics, see the Portfolio of Investments.

Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $490,110. The fair value of the fund’s investment securities on loan and a related liability of $109,851 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury obligations of $385,907. The collateral received on loans exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the

MFS Mid Cap Value Portfolio

Notes to Financial Statements – continued

fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended		Year ended
	12/31/17		12/31/16
Ordinary income (including any short-term capital gains)		$4,671,333		$9,712,780
Long-term capital gains		9,484,329		19,511,716
Total distributions		$14,155,662		$29,224,496

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$264,731,165
Gross appreciation	96,500,081
Gross depreciation	(7,059,472	)
Net unrealized appreciation (depreciation)	$89,440,609
Undistributed ordinary income	6,272,132
Undistributed long-term capital gain	17,309,822
Other temporary differences	116,067

MFS Mid Cap Value Portfolio

Notes to Financial Statements – continued

shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$3,360,693		$2,295,049		$8,162,163		$21,855,898
Service Class		668,514		391,194		1,964,292		4,682,355
Total		$4,029,207		$2,686,243		$10,126,455		$26,538,253

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:


Up to $1 billion			0.75%
In excess of $1 billion			0.70%

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $27,263, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $13,114, which equated to 0.0039% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $1,450.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $605 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Mid Cap Value Portfolio

Notes to Financial Statements – continued

The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended December 31, 2017, the fund engaged in purchase transactions pursuant to this policy, which amounted to $833,932.

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, aggregated $120,134,826 and $138,039,601, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		1,411,404			$12,144,591			2,201,765			$17,138,283
Service Class		2,990,095			24,813,034			978,217			7,813,669
		4,401,499			$36,957,625			3,179,982			$24,951,952
Shares issued to shareholders in reinvestment of distributions
Initial Class		1,400,024			$11,522,200			3,041,641			$24,150,626
Service Class		322,253			2,632,806			643,851			5,073,549
		1,722,277			$14,155,006			3,685,492			$29,224,175
Shares reacquired
Initial Class		(5,754,275	)		$(50,046,081	)		(7,599,621	)		$(61,741,837	)
Service Class		(971,461	)		(8,343,848	)		(1,455,995	)		(11,607,717	)
		(6,725,736	)		$(58,389,929	)		(9,055,616	)		$(73,349,554	)
Net change
Initial Class		(2,942,847	)		$(26,379,290	)		(2,356,215	)		$(20,452,928	)
Service Class		2,340,887			19,101,992			166,073			1,279,501
		(601,960	)		$(7,277,298	)		(2,190,142	)		$(19,173,427	)

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 33%, 11%, and 6%, respectively, of the value of outstanding voting shares of the fund.

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $2,279 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Mid Cap Value Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Underlying Affiliated Funds		Beginning Shares/Par Amount		Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			4,336,715		92,938,959		(93,641,618	)		3,634,056

Affiliated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)		Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$65		$—		$—		$43,851			$3,633,692

MFS Mid Cap Value Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of

MFS Mid Cap Value Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Mid Cap Value Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Mid Cap Value Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Mid Cap Value Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Mid Cap Value Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Kevin Schmitz Brooks Taylor

MFS Mid Cap Value Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 3rd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 4th quintile for the one-year period and the 3rd quintile for the five-year period ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS Mid Cap Value Portfolio

Board Review of Investment Advisory Agreement – continued

In assessing the reasonableness of the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that, according to the data provided by Broadridge (which takes into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate was approximately at the Broadridge expense group median and the Fund’s total expense ratio was lower than the Broadridge expense group median.

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is subject to a contractual breakpoint that reduces the Fund’s advisory fee rate on average daily net assets over $1 billion. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoint and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

MFS Mid Cap Value Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $10,433,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 97.46% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® MODERATE ALLOCATION PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VMA-ANN

MFS® MODERATE ALLOCATION PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS Moderate Allocation Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS Moderate Allocation Portfolio

PORTFOLIO COMPOSITION

Portfolio target allocation

LOGO


Portfolio holdings
MFS Total Return Bond Series			12.0%
MFS Government Securities Portfolio			10.0%
MFS Value Series			9.0%
MFS Growth Series			8.9%
MFS Research Series			8.0%
MFS Research International Portfolio			7.0%
MFS Mid Cap Growth Series			7.0%
MFS Mid Cap Value Portfolio			7.0%
MFS Inflation-Adjusted Bond Portfolio			5.0%
MFS Global Governments Portfolio			5.0%
MFS High Yield Portfolio			5.0%
MFS Limited Maturity Portfolio			4.0%
MFS Global Real Estate Portfolio			3.0%
MFS International Growth Portfolio			3.0%
MFS International Value Portfolio			3.0%
MFS New Discovery Series			1.5%
MFS New Discovery Value Portfolio			1.5%
Cash & Cash Equivalents			0.1%

Portfolio actual allocation

LOGO

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS Moderate Allocation Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS Moderate Allocation Portfolio (“fund”) provided a total return of 15.52%, while Service Class shares of the fund provided a total return of 15.23%. These compare with a return of 21.83% for the fund’s benchmark, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”). The fund’s other benchmark, the MFS Moderate Allocation Portfolio Blended Index (“Blended Index”), generated a return of 14.08%. The Blended Index reflects the blended returns of various equity and fixed income market indices, with percentage allocations to each index designed to resemble the allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.

Market Environment

Factors Affecting Performance

The fixed income asset class was also a primary contributor to relative performance. The fund’s allocation to the MFS Inflation-Adjusted Bond Portfolio and MFS Global Governments Portfolio benefited relative performance, as global markets in US dollar terms, performed well over the reporting period. Additionally, the fund’s allocation to the MFS High Yield Portfolio also strengthened relative returns, as credit markets also performed well. Conversely, the fund’s exposure to the MFS Government Securities Portfolio and MFS Limited Maturity Portfolio held back relative performance during the reporting period.

The international equity segment strengthened relative performance, as the MFS Research International Portfolio and the MFS International Value Portfolio outperformed their respective benchmarks during the reporting period. Additionally, the fund’s allocation to MFS International Growth Portfolio benefited relative returns, driven by the strong performance of emerging markets.

MFS Moderate Allocation Portfolio

Management Review – continued

Respectfully,


Portfolio Manager(s)
Joseph Flaherty

MFS Moderate Allocation Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	10/01/08	15.52%	8.65%	8.22%
	Service Class	10/01/08	15.23%	8.37%	7.95%

Comparative benchmark(s)
	Standard & Poor’s 500 Stock Index (f)		21.83%	15.79%	11.77%
	MFS Moderate Allocation Portfolio Blended Index (f)(w)		14.08%	8.86%	8.10%
	Bloomberg Barclays U.S. Aggregate Bond Index (f)		3.54%	2.10%	4.26%
	FTSE EPRA/NAREIT Developed Real Estate Index (net div) (f)		10.36%	6.32%	6.53%
	MSCI EAFE Index (net div) (f)		25.03%	7.90%	5.99%

(f)

Source: FactSet Research Systems Inc.

(t)

For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

(w)

As of December 31, 2017, the MFS Moderate Allocation Portfolio Blended Index was comprised of 43% Standard & Poor’s 500 Stock Index, 41% Bloomberg Barclays U.S. Aggregate Bond Index, 13% MSCI EAFE Index (net div), and 3% FTSE EPRA/NAREIT Developed Real Estate Index (net div).

Benchmark Definition(s)

MFS Moderate Allocation Portfolio

Performance Summary – continued

Standard & Poor’s 500 Stock Index – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.

It is not possible to invest directly in an index.

Notes to Performance Summary

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS Moderate Allocation Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period,

July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.01%		$1,000.00		$1,064.81		$0.05
Initial Class	Hypothetical (h)		0.01%		$1,000.00		$1,025.16		$0.05
Service Class	Actual		0.26%		$1,000.00		$1,063.68		$1.35
Service Class	Hypothetical (h)		0.26%		$1,000.00		$1,023.89		$1.33

(h)	5% class return per year before expenses.

(p)

MFS Moderate Allocation Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – 100.0%
Bond Funds – 41.0%
MFS Global Governments Portfolio – Initial Class (a)		8,017,102	$	84,660,597
MFS Government Securities Portfolio – Initial Class		13,652,904		169,159,481
MFS High Yield Portfolio – Initial Class		14,658,937		84,582,067
MFS Inflation-Adjusted Bond Portfolio – Initial Class (a)		7,836,431		84,711,822
MFS Limited Maturity Portfolio – Initial Class		6,643,380		67,629,607
MFS Total Return Bond Series – Initial Class		15,356,076		203,007,324

			$	693,750,898

International Stock Funds – 13.0%
MFS International Growth Portfolio – Initial Class		3,280,462	$	50,847,154
MFS International Value Portfolio – Initial Class		1,798,268		50,801,058
MFS Research International Portfolio – Initial Class		6,957,247		118,621,061

			$	220,269,273

Specialty Funds – 3.0%
MFS Global Real Estate Portfolio – Initial Class		3,563,341	$	50,848,883

U.S. Stock Funds – 42.9%
MFS Growth Series – Initial Class		3,102,150	$	151,695,137
MFS Mid Cap Growth Series – Initial Class		12,435,101		118,257,807
MFS Mid Cap Value Portfolio – Initial Class		13,124,085		118,248,009
MFS New Discovery Series – Initial Class		1,261,710		25,360,364
MFS New Discovery Value Portfolio – Initial Class		2,278,555		25,360,320
MFS Research Series – Initial Class		4,573,372		134,914,485
MFS Value Series – Initial Class		7,261,373		151,907,933

			$	725,744,055


Issuer	Shares/Par		Value ($)
INVESTMENT COMPANIES (h) – continued
Money Market Funds – 0.1%
MFS Institutional Money Market Portfolio, 1.25% (v)		1,547,664	$	1,547,509

Total Investment Companies (Identified Cost, $1,426,664,719)			$	1,692,160,618

OTHER ASSETS, LESS LIABILITIES – (0.0)%				(103,602	)

NET ASSETS – 100.0%			$	1,692,057,016

(a)

Non-income producing security.

(h)

(v)

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in affiliated issuers, at value (identified cost, $1,426,664,719)			$1,692,160,618
Receivables for
Investments sold			2,076,596
Fund shares sold			2,039
Other assets			9,742
Total assets			$1,694,248,995
Liabilities
Payable for fund shares reacquired			$2,076,997
Payable to affiliates
Administrator			190
Shareholder servicing costs			297
Distribution and/or service fees			46,258
Payable for independent Trustees’ compensation			42
Accrued expenses and other liabilities			68,195
Total liabilities			$2,191,979
Net assets			$1,692,057,016
Net assets consist of
Paid-in capital			$1,329,333,817
Unrealized appreciation (depreciation)			265,495,899
Accumulated net realized gain (loss)			68,568,763
Undistributed net investment income			28,658,537
Net assets			$1,692,057,016
Shares of beneficial interest outstanding			127,066,128


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$6,053,222		454,084		$13.33
Service Class		1,686,003,794		126,612,044		13.32

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Dividends from affiliated issuers			$33,195,291
Expenses
Distribution and/or service fees			$4,288,465
Shareholder servicing costs			31,075
Administrative services fee			17,500
Independent Trustees’ compensation			32,251
Custodian fee			27,269
Shareholder communications			38,534
Audit and tax fees			38,355
Legal fees			20,483
Miscellaneous			42,558
Total expenses			$4,536,490
Net investment income (loss)			$28,658,801
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Affiliated issuers			$36,152,843
Capital gain distributions from affiliated issuers			36,924,954
Net realized gain (loss)			$73,077,797
Change in unrealized appreciation (depreciation)
Affiliated issuers			142,345,119
Net realized and unrealized gain (loss)			$215,422,916
Change in net assets from operations			$244,081,717

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
		12/31/17		12/31/16
Change in net assets
From operations
Net investment income (loss)		$28,658,801		$30,617,893
Net realized gain (loss)		73,077,797		63,702,612
Net unrealized gain (loss)		142,345,119		8,213,774
Change in net assets from operations		$244,081,717		$102,534,279
Distributions declared to shareholders
From net investment income		$(30,618,005	)	$(45,218,025	)
From net realized gain		(64,066,257	)	(87,880,903	)
Total distributions declared to shareholders		$(94,684,262	)	$(133,098,928	)
Change in net assets from fund share transactions		$(184,197,023	)	$(85,217,568	)
Total change in net assets		$(34,799,568	)	$(115,782,217	)
Net assets
At beginning of period		1,726,856,584		1,842,638,801
At end of period (including undistributed net investment income of $28,658,537 and $30,617,741, respectively)		$1,692,057,016		$1,726,856,584

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$12.25			$12.48			$13.34			$13.02			$12.20
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.26			$0.24	(c)		$0.29			$0.21			$0.09
Net realized and unrealized gain (loss)		1.60			0.55			(0.27	)		0.48			1.88
Total from investment operations		$1.86			$0.79			$0.02			$0.69			$1.97
Less distributions declared to shareholders
From net investment income		$(0.28	)		$(0.37	)		$(0.55	)		$(0.21	)		$(0.35	)
From net realized gain		(0.50	)		(0.65	)		(0.33	)		(0.16	)		(0.80	)
Total distributions declared to shareholders		$(0.78	)		$(1.02	)		$(0.88	)		$(0.37	)		$(1.15	)
Net asset value, end of period (x)		$13.33			$12.25			$12.48			$13.34			$13.02
Total return (%) (k)(s)(x)		15.52			6.16	(c)		0.35			5.28			16.87
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.01			0.02	(c)		0.01			0.01			0.02
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.01			0.02
Net investment income (loss) (l)		1.98			1.95	(c)		2.16			1.55			0.73
Portfolio turnover		0	(b)		0	(b)		1			2			6
Net assets at end of period (000 omitted)		$6,053			$5,460			$5,509			$7,240			$6,124

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$12.24			$12.47			$13.32			$13.00			$12.19
Income (loss) from investment operations
Net investment income (loss) (d)(l)		$0.22			$0.21	(c)		$0.22			$0.17			$0.10
Net realized and unrealized gain (loss)		1.60			0.54			(0.23	)		0.49			1.82
Total from investment operations		$1.82			$0.75			$(0.01	)		$0.66			$1.92
Less distributions declared to shareholders
From net investment income		$(0.24	)		$(0.33	)		$(0.51	)		$(0.18	)		$(0.31	)
From net realized gain		(0.50	)		(0.65	)		(0.33	)		(0.16	)		(0.80	)
Total distributions declared to shareholders		$(0.74	)		$(0.98	)		$(0.84	)		$(0.34	)		$(1.11	)
Net asset value, end of period (x)		$13.32			$12.24			$12.47			$13.32			$13.00
Total return (%) (k)(s)(x)		15.23			5.87	(c)		0.13			5.04			16.51
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)(h)		0.26			0.27	(c)		0.26			0.26			0.27
Expenses after expense reductions (f)(h)		N/A			N/A			N/A			0.26			0.27
Net investment income (loss) (l)		1.66			1.71	(c)		1.69			1.29			0.76
Portfolio turnover		0	(b)		0	(b)		1			2			6
Net assets at end of period (000 omitted)		$1,686,004			$1,721,397			$1,837,130			$2,121,968			$2,199,921

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

Financial Highlights – continued

(b)	Less than 0.5%.

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(h)

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(l)

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS Moderate Allocation Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS Moderate Allocation Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

MFS Moderate Allocation Portfolio

Notes to Financial Statements – continued


Financial Instruments	Level 1		Level 2		Level 3		Total
Mutual Funds		$1,692,160,618		$—		$—		$1,692,160,618

MFS Moderate Allocation Portfolio

Notes to Financial Statements – continued

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended		Year ended
	12/31/17		12/31/16
Ordinary income (including any short-term capital gains)		$32,261,217		$49,140,721
Long-term capital gains		62,423,045		83,958,207
Total distributions		$94,684,262		$133,098,928

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$1,431,287,470
Gross appreciation	284,429,912
Gross depreciation	(23,556,764	)
Net unrealized appreciation (depreciation)	$260,873,148
Undistributed ordinary income	31,474,559
Undistributed long-term capital gain	70,375,492

MFS Moderate Allocation Portfolio

Notes to Financial Statements – continued


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$120,775		$152,525		$220,632		$266,787
Service Class		30,497,230		45,065,500		63,845,625		87,614,116
Total		$30,618,005		$45,218,025		$64,066,257		$87,880,903

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. MFS receives no compensation under this agreement; however MFS receives management fees from underlying MFS funds.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $30,681 which equated to 0.0018% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $394.

Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund pays an annual fixed amount of $17,500. The administrative services fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.0010% of the fund’s average daily net assets.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $3,061 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

MFS Moderate Allocation Portfolio

Notes to Financial Statements – continued

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of shares of underlying funds aggregated $1,251,568 and $284,648,516, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		32,383			$421,018			85,157			$1,039,228
Service Class		656,936			8,333,736			1,977,620			24,655,966
		689,319			$8,754,754			2,062,777			$25,695,194
Shares issued to shareholders in reinvestment of distributions
Initial Class		26,946			$341,407			33,625			$419,312
Service Class		7,452,042			94,342,855			10,639,905			132,679,616
		7,478,988			$94,684,262			10,673,530			$133,098,928
Shares reacquired
Initial Class		(50,857	)		$(650,991	)		(114,455	)		$(1,410,022	)
Service Class		(22,148,040	)		(286,985,048	)		(19,341,246	)		(242,601,668	)
		(22,198,897	)		$(287,636,039	)		(19,455,701	)		$(244,011,690	)
Net change
Initial Class		8,472			$111,434			4,327			$48,518
Service Class		(14,039,062	)		(184,308,457	)		(6,723,721	)		(85,266,086	)
		(14,030,590	)		$(184,197,023	)		(6,719,394	)		$(85,217,568	)

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to the fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to the fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $11,609 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

MFS Moderate Allocation Portfolio

Notes to Financial Statements – continued

(7)

Investments in Affiliated Issuers


Affiliated Issuers				Beginning Shares/Par Amount			Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Global Governments Portfolio					8,315,880			22,296		(321,074	)		8,017,102
MFS Global Real Estate Portfolio					3,648,561			388,001		(473,221	)		3,563,341
MFS Government Securities Portfolio					13,650,590			451,162		(448,848	)		13,652,904
MFS Growth Series					4,003,623			136,425		(1,037,898	)		3,102,150
MFS High Yield Portfolio					15,126,893			962,434		(1,430,390	)		14,658,937
MFS Inflation-Adjusted Bond Portfolio					8,476,016			20,428		(660,013	)		7,836,431
MFS Institutional Money Market Portfolio					524,356			36,834,031		(35,810,723	)		1,547,664
MFS International Growth Portfolio					4,199,366			131,013		(1,049,917	)		3,280,462
MFS International Value Portfolio					2,258,605			31,074		(491,411	)		1,798,268
MFS Limited Maturity Portfolio					6,820,652			114,890		(292,162	)		6,643,380
MFS Mid Cap Growth Series					15,257,914			808,412		(3,631,225	)		12,435,101
MFS Mid Cap Value Portfolio					14,901,132			623,879		(2,400,926	)		13,124,085
MFS New Discovery Series					1,617,929			27,506		(383,725	)		1,261,710
MFS New Discovery Value Portfolio					2,488,746			269,115		(479,306	)		2,278,555
MFS Research International Portfolio					8,963,689			139,200		(2,145,642	)		6,957,247
MFS Research Series					5,361,202			403,572		(1,191,402	)		4,573,372
MFS Total Return Bond Series					15,736,748			539,429		(920,101	)		15,356,076
MFS Value Series					8,369,610			467,810		(1,576,047	)		7,261,373

Affiliated Issuers	Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)			Capital Gain Distributions		Dividend Income			Ending Value
MFS Global Governments Portfolio		$(184,525	)		$5,918,689			$—		$—			$84,660,597
MFS Global Real Estate Portfolio		445,252			864,832			2,395,190		2,766,060			50,848,883
MFS Government Securities Portfolio		(374,493	)		(1,156,774	)		—		5,315,688			169,159,481
MFS Growth Series		11,837,916			24,973,717			5,967,794		157,709			151,695,137
MFS High Yield Portfolio		(449,905	)		571,799			—		5,485,535			84,582,067
MFS Inflation-Adjusted Bond Portfolio		(283,751	)		7,141,881			—		—			84,711,822
MFS Institutional Money Market Portfolio		(107	)		(84	)		—		10,313			1,547,509
MFS International Growth Portfolio		1,699,597			11,176,847			993,137		872,487			50,847,154
MFS International Value Portfolio		3,933,710			7,795,289			—		792,715			50,801,058
MFS Limited Maturity Portfolio		2,528			84,729			—		1,094,331			67,629,607
MFS Mid Cap Growth Series		4,766,248			17,296,473			6,928,919		144,684			118,257,807
MFS Mid Cap Value Portfolio		612,200			9,870,885			3,405,466		1,727,664			118,248,009
MFS New Discovery Series		650,350			5,017,996			491,233		—			25,360,364
MFS New Discovery Value Portfolio		512,082			549,220			1,988,445		650,577			25,360,320
MFS Research International Portfolio		4,360,834			23,839,392			—		2,191,005			118,621,061
MFS Research Series		3,225,690			15,083,842			8,815,939		2,116,831			134,914,485
MFS Total Return Bond Series		(500,927	)		2,702,055			—		6,798,503			203,007,324
MFS Value Series		5,900,144			10,614,331			5,938,831		3,071,189			151,907,933

		$36,152,843			$142,345,119			$36,924,954		$33,195,291			$1,692,160,618

MFS Moderate Allocation Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of MFS Moderate Allocation Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS Moderate Allocation Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinion.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS Moderate Allocation Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS Moderate Allocation Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS Moderate Allocation Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Joseph Flaherty

MFS Moderate Allocation Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

In connection with their contract review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, on the investment performance of the Fund for various time periods ended December 31, 2016 and the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), (ii) information provided by Broadridge on the Fund’s fees and expenses and the fees and expenses of comparable funds identified by Broadridge (the “Broadridge expense group”), (iii) information as to whether and to what extent applicable expense waivers and reimbursements are observed for the Fund, (iv) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (v) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vi) descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (vii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not independently verified and the independent Trustees did not independently verify any information provided to them by MFS.

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 3rd quintile for each of the one- and five-year periods ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS Moderate Allocation Portfolio

Board Review of Investment Advisory Agreement – continued

In assessing the reasonableness of the Fund’s expenses, the Trustees considered, among other information, the Fund’s total expense ratio of the Fund’s Initial Class shares as a percentage of average daily net assets and the total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that MFS currently observes an expense limitation for the Fund, which may not be changed without the Trustees’ approval. The Trustees also considered that, according to the data provided by Broadridge (which takes into account any expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s total expense ratio was lower than the Broadridge expense group median. Because the Fund does not pay an advisory fee, the Trustees did not consider the extent to which economies of scale would be realized due to the Fund’s growth of assets, whether fee levels reflect economies of scale for shareholders, or the fees paid by similar funds to other investment advisers or by similar clients of MFS.

The Trustees also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on the Fund’s or the Underlying Funds’ behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.

MFS Moderate Allocation Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $68,666,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 25.05% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ANNUAL REPORT

December 31, 2017

LOGO

MFS^® NEW DISCOVERY VALUE PORTFOLIO

MFS^® Variable Insurance Trust III

LOGO

VDV-ANN

MFS® NEW DISCOVERY VALUE PORTFOLIO

CONTENTS

The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.

NOT FDIC INSURED • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF

MFS New Discovery Value Portfolio

LETTER FROM THE EXECUTIVE CHAIRMAN

LOGO

Dear Contract Owners:

Respectfully,

LOGO

Robert J. Manning

Executive Chairman

MFS Investment Management

February 15, 2018

The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.

MFS New Discovery Value Portfolio

PORTFOLIO COMPOSITION

Portfolio structure

LOGO


Top ten holdings
Portland General Electric Co.			1.6%
Medical Properties Trust, Inc., REIT			1.5%
Select Income, REIT			1.5%
MSC Industrial Direct Co., Inc., “A”			1.4%
Wintrust Financial Corp.			1.4%
Prosperity Bancshares, Inc.			1.4%
Berry Global Group, Inc.			1.4%
Hanover Insurance Group, Inc.			1.3%
ITT, Inc.			1.3%
Black Hills Corp.			1.3%


Equity sectors
Financial Services			33.0%
Industrial Goods & Services			16.7%
Technology			7.7%
Basic Materials			7.2%
Utilities & Communications			6.2%
Health Care			5.3%
Energy			5.1%
Consumer Staples			3.8%
Autos & Housing			3.2%
Special Products & Services			3.2%
Retailing			3.2%
Leisure			2.7%
Transportation			1.2%

Percentages are based on net assets as of December 31, 2017.

The portfolio is actively managed and current holdings may be different.

MFS New Discovery Value Portfolio

MANAGEMENT REVIEW

Summary of Results

For the twelve months ended December 31, 2017, Initial Class shares of the MFS New Discovery Value Portfolio (“fund”) provided a total return of 15.24%, while Service Class shares of the fund provided a total return of 15.01%. These compare with a return of 7.84% over the same period for the fund’s benchmark, the Russell 2000® Value Index.

Market Environment

Contributors to Performance

Security selection and an underweight position in the financial services sector were primary factors lifting performance relative to the Russell 2000® Value Index. Within this sector, the fund’s holdings of alternative investment manager Apollo Global Management (b) and commercial aircraft leasing company Air Lease (b) contributed to relative returns. Shares of Apollo Management advanced as rising financial markets helped drive solid earnings and fee growth.

Stock selection and an overweight position in the autos & housing sector also benefited relative performance. Holdings of commercial and residential landscape supplies distributor Siteone Landscape Supply (b)(h), residential and commercial building materials manufacturer Owens Corning (b) and residential home building company Toll Brothers (b), as well as the fund’s overweight position in insulation distributor Topbuild (h), aided relative results. Shares of Owens Corning rose throughout the period on the back of strong roofing and composites sales.

Security selection in the basic materials sector further strengthened relative returns. Within this sector, the fund’s positions in specialty materials manufacturer Ferro (b) and metals and silicon distributer Ferroglobe (United Kingdom) buoyed relative performance. Strong organic sales growth, notably in pigments and surface technologies, as well as successful efforts to control rising raw material costs, helped Ferro deliver earnings results that beat market expectations over the reporting period.

Elsewhere, the fund’s holdings of revenue management systems developer Model N (b) and apparel retailer Urban Outfitters (b) also supported relative returns.

Detractors from Performance

Stock selection in both the health care and energy sectors weakened relative performance during the reporting period. Within the health care sector, not owning shares of clinical-stage biotechnology company Bluebird Bio, and holding shares of physician services provider Mednax (b), hurt relative results. Shares of Mednax fell as a shift in the company’s customer mix, from higher-margin commercial clients to lower-margin government Medicare orders, hurt its financial results. Within the energy sector, the fund’s overweight positions in tubular services provider Frank’s International and oilfield services and equipment provider Superior Energy

MFS New Discovery Value Portfolio

Management Review – continued

Services hindered relative returns. Shares of Frank’s International appeared to have reacted negatively to weak business demand in both the international and Gulf of Mexico regions; weakness that eventually led to the company’s decision to suspend its dividend in the latter part of the reporting period.

Stocks in other sectors that weighed on relative performance included holdings of property and casualty insurance firm Aspen Insurance (b) (Bermuda), oil and gas pipeline company Boardwalk Pipeline Partners (b), food producer Treehouse Foods (b) and financial services firm Element Fleet Management (b) (Canada). Shares of Treehouse Foods came under pressure as increased price competition translated into lower sales and earnings that missed expectations. The fund’s overweight position in industrial services company Team, and not holding shares of supply chain solutions company XPO Logistics also detracted from relative returns.

Respectfully,

Portfolio Manager(s)

Kevin Schmitz

(b)	Security is not a benchmark constituent.

(h)	Security was not held in the portfolio at period end.

MFS New Discovery Value Portfolio

PERFORMANCE SUMMARY THROUGH 12/31/17

Growth of a Hypothetical $10,000 Investment (t)

LOGO

Total Returns through 12/31/17

Average annual total returns


	Share Class	Class Inception Date	1-yr	5-yr	Life (t)
	Initial Class	10/01/08	15.24%	15.61%	11.31%
	Service Class	10/01/08	15.01%	15.33%	11.03%

Comparative benchmark(s)
	Russell 2000® Value Index (f)		7.84%	13.01%	9.51%

(f)	Source: FactSet Research Systems Inc.

(t)	For the period from the class inception date through the stated period end. (See Notes to Performance Summary.)

Benchmark Definition(s)

Russell 2000® Value Index – a market-capitalization-weighted, value-oriented index that measures the performance of small-capitalization stocks that have relatively low price-to-book ratios and lower forecasted growth values. The Russell 2000® Value Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.

It is not possible to invest directly in an index.

Notes to Performance Summary

MFS New Discovery Value Portfolio

Performance Summary – continued

From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

MFS New Discovery Value Portfolio

EXPENSE TABLE

Fund Expenses Borne by the Contract Holders during the Period, July 1, 2017 through December 31, 2017

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.

Actual Expenses

Hypothetical Example for Comparison Purposes


Share Class		Annualized Expense Ratio		Beginning Account Value 7/01/17		Ending Account Value 12/31/17		Expenses Paid During Period (p) 7/01/17-12/31/17
Initial Class	Actual		0.88%		$1,000.00		$1,109.26		$4.68
Initial Class	Hypothetical (h)		0.88%		$1,000.00		$1,020.77		$4.48
Service Class	Actual		1.13%		$1,000.00		$1,107.75		$6.00
Service Class	Hypothetical (h)		1.13%		$1,000.00		$1,019.51		$5.75

(h)	5% class return per year before expenses.

(p)	“Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

MFS New Discovery Value Portfolio

PORTFOLIO OF INVESTMENTS – 12/31/17

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.


Issuer	Shares/Par		Value ($)
COMMON STOCKS – 98.5%
Aerospace – 2.0%
CACI International, Inc., “A” (a)		3,345	$	442,711
ManTech International Corp., “A”		14,119		708,632

			$	1,151,343

Automotive – 0.0%
Fenix Parts, Inc. (a)		47,044	$	11,291

Brokerage & Asset Managers – 1.6%
Apollo Global Management LLC, “A”		14,052	$	470,321
TMX Group Ltd.		8,045		450,827

			$	921,148

Business Services – 2.7%
Forrester Research, Inc.		6,525	$	288,405
PRA Group, Inc. (a)		17,194		570,841
Travelport Worldwide Ltd.		51,845		677,614

			$	1,536,860

Chemicals – 0.7%
Ingevity Corp. (a)		5,416	$	381,666

Computer Software – 1.1%
Sabre Corp.		31,054	$	636,607

Computer Software – Systems – 4.0%
Model N, Inc. (a)		26,737	$	421,108
NICE Systems Ltd., ADR		6,698		615,613
Presidio, Inc. (a)		27,085		519,220
Verint Systems, Inc. (a)		16,972		710,278

			$	2,266,219

Construction – 3.2%
Armstrong World Industries, Inc. (a)		8,269	$	500,688
GMS, Inc. (a)		11,736		441,743
Owens Corning		4,707		432,762
Toll Brothers, Inc.		8,822		423,632

			$	1,798,825

Consumer Products – 1.0%
Sensient Technologies Corp.		7,447	$	544,748

Consumer Services – 0.5%
ServiceMaster Global Holdings, Inc. (a)		5,094	$	261,169

Containers – 2.4%
Berry Global Group, Inc. (a)		13,081	$	767,463
Graphic Packaging Holding Co.		39,085		603,863

			$	1,371,326

Electrical Equipment – 4.9%
AZZ, Inc.		6,199	$	316,769
HD Supply Holdings, Inc. (a)		16,023		641,400
MSC Industrial Direct Co., Inc., “A”		8,230		795,512
TriMas Corp. (a)		22,768		609,044
WESCO International, Inc. (a)		6,253		426,142

			$	2,788,867


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Electronics – 2.6%
Integrated Device Technology, Inc. (a)		11,873	$	352,984
OSI Systems, Inc. (a)		5,865		377,589
Plexus Corp. (a)		12,035		730,765

			$	1,461,338

Energy – Independent – 1.0%
Energen Corp. (a)		9,464	$	544,842

Engineering – Construction – 1.7%
KBR, Inc.		34,847	$	691,016
Team, Inc. (a)		17,208		256,399

			$	947,415

Entertainment – 1.4%
IMAX Corp. (a)		18,629	$	431,262
Parques Reunidos Servicios Centrales
S.A.U.		19,621		349,602

			$	780,864

Food & Beverages – 2.8%
Cal-Maine Foods, Inc. (a)(l)		12,058	$	535,978
Hostess Brands, Inc. (a)		44,720		662,303
TreeHouse Foods, Inc. (a)		7,928		392,119

			$	1,590,400

Insurance – 4.2%
Aspen Insurance Holdings Ltd.		8,181	$	332,149
Everest Re Group Ltd.		1,733		383,444
Hanover Insurance Group, Inc.		6,980		754,398
Safety Insurance Group, Inc.		6,053		486,661
Third Point Reinsurance Ltd. (a)		26,756		391,975

			$	2,348,627

Leisure & Toys – 1.3%
Brunswick Corp.		13,127	$	724,873

Machinery & Tools – 5.8%
Gardner Denver Holdings, Inc. (a)		10,337	$	350,734
Herman Miller, Inc.		14,970		599,549
ITT, Inc.		14,116		753,371
Regal Beloit Corp.		7,089		543,017
Ritchie Bros. Auctioneers, Inc.		16,612		497,197
SPX FLOW, Inc. (a)		10,720		509,736

			$	3,253,604

Medical & Health Technology & Services – 3.9%
HMS Holdings Corp. (a)		30,801	$	522,077
LifePoint Hospitals, Inc. (a)		8,053		401,039
MEDNAX, Inc. (a)		10,642		568,709
Premier, Inc., “A” (a)		24,347		710,689

			$	2,202,514

Medical Equipment – 0.8%
Steris PLC		5,326	$	465,865

MFS New Discovery Value Portfolio

Portfolio of Investments – continued


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Natural Gas – Distribution – 1.1%
New Jersey Resources Corp.		15,474	$	622,055

Natural Gas – Pipeline – 1.0%
Boardwalk Pipeline Partners LP		42,530	$	549,062

Oil Services – 4.1%
Forum Energy Technologies, Inc. (a)		23,442	$	364,523
Frank’s International N.V.		79,121		526,155
Keane Group, Inc. (a)(l)		29,421		559,293
NOW, Inc. (a)		35,349		389,900
Superior Energy Services, Inc. (a)		27,242		262,340
U.S. Silica Holdings, Inc.		6,430		209,361

			$	2,311,572

Other Banks & Diversified Financials – 19.3%
Air Lease Corp.		13,716	$	659,602
Berkshire Hills Bancorp, Inc.		15,442		565,177
Brookline Bancorp, Inc.		28,121		441,500
Cathay General Bancorp, Inc.		13,312		561,367
Element Fleet Management Corp.		92,265		697,309
First Hawaiian, Inc.		23,665		690,545
First Interstate BancSystem, Inc.		17,426		697,911
Glacier Bancorp, Inc.		18,201		716,937
Hanmi Financial Corp.		15,734		477,527
Lakeland Financial Corp.		11,822		573,249
Prosperity Bancshares, Inc.		11,073		775,885
Sandy Spring Bancorp, Inc.		12,599		491,613
Santander Consumer USA Holdings, Inc.		23,519		437,924
TCF Financial Corp.		34,158		700,239
Texas Capital Bancshares, Inc. (a)		4,484		398,628
Textainer Group Holdings Ltd. (a)		22,906		492,479
UMB Financial Corp.		10,082		725,098
Wintrust Financial Corp.		9,576		788,775

			$	10,891,765

Pharmaceuticals – 0.6%
Genomma Lab Internacional S.A., “B” (a)		307,677	$	321,095

Pollution Control – 2.3%
Advanced Disposal Services, Inc. (a)		16,542	$	396,016
Clean Harbors, Inc. (a)		10,492		568,666
Evoqua Water Technologies LLC (a)		13,273		314,703

			$	1,279,385

Real Estate – 7.9%
Brixmor Property Group Inc., REIT		18,923	$	353,103
Corporate Office Properties Trust, REIT		16,060		468,952
Life Storage, Inc., REIT		7,721		687,710
Medical Properties Trust, Inc., REIT		62,917		866,996
Select Income, REIT		33,208		834,517
STAG Industrial, Inc., REIT		25,291		691,203
Store Capital Corp., REIT		21,853		569,052

			$	4,471,533

Specialty Chemicals – 4.1%
Ferro Corp. (a)		19,028	$	448,871
Ferroglobe PLC (a)		18,547		300,461
Orion Engineered Carbons S.A.		23,070		590,592


Issuer	Shares/Par		Value ($)
COMMON STOCKS – continued
Specialty Chemicals – continued
RPM International, Inc.		10,225	$	535,994
Univar, Inc. (a)		13,349		413,285

			$	2,289,203

Specialty Stores – 3.2%
Express, Inc. (a)		15,085	$	153,113
Michaels Co., Inc. (a)		20,902		505,619
Tuesday Morning Corp. (a)(l)		37,876		104,159
Urban Outfitters, Inc. (a)		17,787		623,612
Zumiez, Inc. (a)		18,738		390,219

			$	1,776,722

Trucking – 1.2%
Marten Transport Ltd.		15,310	$	310,793
Werner Enterprises, Inc.		9,861		381,128

			$	691,921

Utilities – Electric Power – 4.1%
Black Hills Corp.		12,214	$	734,184
El Paso Electric Co.		12,060		667,521
Portland General Electric Co.		20,123		917,206

			$	2,318,911

Total Common Stocks (Identified Cost, $43,184,222)			$	55,513,635


INVESTMENT COMPANIES (h) – 0.2%
Money Market Funds – 0.2%
MFS Institutional Money Market Portfolio, 1.25% (v) (Identified Cost, $125,090)		125,102	$	125,090


COLLATERAL FOR SECURITIES LOANED – 0.6%
State Street Navigator Securities Lending Government Money Market Portfolio, 1.3% (j) (Identified Cost, $347,929)		347,929	$	347,929

OTHER ASSETS, LESS LIABILITIES – 0.7%				390,785

NET ASSETS – 100.0%			$	56,377,439

(a)

Non-income producing security.

(h)

(j)

The rate quoted is the annualized seven-day yield of the fund at period end.

(l)

A portion of this security is on loan.

(v)

The following abbreviations are used in this report and are defined:

ADR

American Depositary Receipt

PLC

Public Limited Company

REIT

Real Estate Investment Trust

See Notes to Financial Statements

MFS New Discovery Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF ASSETS AND LIABILITIES

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.


At 12/31/17
Assets
Investments in unaffiliated issuers, at value, including $341,137 of securities on loan (identified cost, $43,532,151)			$55,861,564
Investments in affiliated issuers, at value (identified cost, $125,090)			125,090
Cash			4,197
Receivables for
Investments sold			765,240
Fund shares sold			60
Interest and dividends			66,681
Receivable from investment adviser			4,350
Other assets			699
Total assets			$56,827,881
Liabilities
Payables for
Fund shares reacquired			$64,557
Collateral for securities loaned, at value			347,929
Payable to affiliates
Shareholder servicing costs			32
Distribution and/or service fees			300
Payable for independent Trustees’ compensation			43
Accrued expenses and other liabilities			37,581
Total liabilities			$450,442
Net assets			$56,377,439
Net assets consist of
Paid-in capital			$36,248,973
Unrealized appreciation (depreciation)			12,329,476
Accumulated net realized gain (loss)			7,555,115
Undistributed net investment income			243,875
Net assets			$56,377,439
Shares of beneficial interest outstanding			5,073,978


	Net assets		Shares outstanding		Net asset value per share
Initial Class		$45,470,150		4,086,502		$11.13
Service Class		10,907,289		987,476		11.05

Net asset value per share is calculated using actual net assets and shares outstanding rather than amounts that have been rounded for presentation purposes.

See Notes to Financial Statements

MFS New Discovery Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENT OF OPERATIONS

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.


Year ended 12/31/17
Net investment income (loss)
Income
Dividends	$762,813
Dividends from affiliated issuers	7,445
Income on securities loaned	7,346
Interest	83
Foreign taxes withheld	(8,796	)
Total investment income	$768,891
Expenses
Management fee	$508,404
Distribution and/or service fees	26,897
Shareholder servicing costs	3,803
Administrative services fee	18,526
Independent Trustees’ compensation	2,628
Custodian fee	6,276
Shareholder communications	6,434
Audit and tax fees	51,610
Legal fees	1,680
Miscellaneous	11,302
Total expenses	$637,560
Reduction of expenses by investment adviser	(112,846	)
Net expenses	$524,714
Net investment income (loss)	$244,177
Realized and unrealized gain (loss)
Realized gain (loss) (identified cost basis)
Unaffiliated issuers	$7,830,758
Affiliated issuers	(85	)
Foreign currency	269
Net realized gain (loss)	$7,830,942
Change in unrealized appreciation (depreciation)
Unaffiliated issuers	$(23,000	)
Translation of assets and liabilities in foreign currencies	52
Net unrealized gain (loss)	$(22,948	)
Net realized and unrealized gain (loss)	$7,807,994
Change in net assets from operations	$8,052,171

See Notes to Financial Statements

MFS New Discovery Value Portfolio

FINANCIAL STATEMENTS ^| STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.


	Year ended
	12/31/17			12/31/16
Change in net assets
From operations
Net investment income (loss)		$244,177			$480,528
Net realized gain (loss)		7,830,942			5,385,189
Net unrealized gain (loss)		(22,948	)		7,578,064
Change in net assets from operations		$8,052,171			$13,443,781
Distributions declared to shareholders
From net investment income		$(523,089	)		$(482,043	)
From net realized gain		(5,264,061	)		(5,204,769	)
Total distributions declared to shareholders		$(5,787,150	)		$(5,686,812	)
Change in net assets from fund share transactions		$(899,193	)		$(8,250,152	)
Total change in net assets		$1,365,828			$(493,183	)
Net assets
At beginning of period		55,011,611			55,504,794
At end of period (including undistributed net investment income of $243,875 and $482,857, respectively)		$56,377,439			$55,011,611

See Notes to Financial Statements

MFS New Discovery Value Portfolio

FINANCIAL STATEMENTS ^| FINANCIAL HIGHLIGHTS


Initial Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.79			$9.44			$10.74			$12.12			$8.85
Income (loss) from investment operations
Net investment income (loss) (d)		$0.05			$0.09	(c)		$0.09			$0.06			$0.06
Net realized and unrealized gain (loss)		1.44			2.34			(0.40	)		0.35			3.44
Total from investment operations		$1.49			$2.43			$(0.31	)		$0.41			$3.50
Less distributions declared to shareholders
From net investment income		$(0.11	)		$(0.10	)		$(0.07	)		$(0.07	)		$(0.12	)
From net realized gain		(1.04	)		(0.98	)		(0.92	)		(1.72	)		(0.11	)
Total distributions declared to shareholders		$(1.15	)		$(1.08	)		$(0.99	)		$(1.79	)		$(0.23	)
Net asset value, end of period (x)		$11.13			$10.79			$9.44			$10.74			$12.12
Total return (%) (k)(r)(s)(x)		15.24			27.03	(c)		(2.56	)		3.44			39.94
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		1.08			1.05	(c)		1.10			1.10			1.06
Expenses after expense reductions (f)		0.88			0.87	(c)		0.88			0.98			1.05
Net investment income (loss)		0.48			0.91	(c)		0.83			0.56			0.55
Portfolio turnover		52			48			53			49			55
Net assets at end of period (000 omitted)		$45,470			$46,635			$47,068			$54,917			$57,686

Service Class	Year ended
	12/31/17			12/31/16			12/31/15			12/31/14			12/31/13
Net asset value, beginning of period		$10.72			$9.38			$10.68			$12.06			$8.80
Income (loss) from investment operations
Net investment income (loss) (d)		$0.03			$0.06	(c)		$0.06			$0.03			$0.03
Net realized and unrealized gain (loss)		1.43			2.33			(0.40	)		0.34			3.43
Total from investment operations		$1.46			$2.39			$(0.34	)		$0.37			$3.46
Less distributions declared to shareholders
From net investment income		$(0.09	)		$(0.07	)		$(0.04	)		$(0.03	)		$(0.09	)
From net realized gain		(1.04	)		(0.98	)		(0.92	)		(1.72	)		(0.11	)
Total distributions declared to shareholders		$(1.13	)		$(1.05	)		$(0.96	)		$(1.75	)		$(0.20	)
Net asset value, end of period (x)		$11.05			$10.72			$9.38			$10.68			$12.06
Total return (%) (k)(r)(s)(x)		15.01			26.73	(c)		(2.90	)		3.19			39.68
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f)		1.33			1.30	(c)		1.35			1.35			1.31
Expenses after expense reductions (f)		1.13			1.12	(c)		1.13			1.23			1.30
Net investment income (loss)		0.24			0.66	(c)		0.58			0.30			0.29
Portfolio turnover		52			48			53			49			55
Net assets at end of period (000 omitted)		$10,907			$8,376			$8,437			$10,305			$11,434

See Notes to Financial Statements

MFS New Discovery Value Portfolio

Financial Highlights – continued

(c)	Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher.

(d)	Per share data is based on average shares outstanding.

(f)	Ratios do not reflect reductions from fees paid indirectly, if applicable.

(k)	The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.

(r)	Certain expenses have been reduced without which performance would have been lower.

(s)	From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.

(x)	The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

MFS New Discovery Value Portfolio

NOTES TO FINANCIAL STATEMENTS

(1)

Business and Organization

MFS New Discovery Value Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.

(2)

Significant Accounting Policies

MFS New Discovery Value Portfolio

Notes to Financial Statements – continued


Financial Instruments	Level 1		Level 2		Level 3		Total
Equity Securities		$55,513,635		$—		$—		$55,513,635
Mutual Funds		473,019		—		—		473,019
Total		$55,986,654		$—		$—		$55,986,654

For further information regarding security characteristics, see the Portfolio of Investments. The fund held worthless level 3 securities at the beginning of the period which were disposed of during the period for $0 and no realized gain or loss.

Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $341,137. The fair value of the fund’s investment securities on loan and a related liability of $347,929 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The collateral on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.

MFS New Discovery Value Portfolio

Notes to Financial Statements – continued

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.

Book/tax differences primarily relate to wash sale loss deferrals.

The tax character of distributions declared to shareholders for the last two fiscal years is as follows:


	Year ended 12/31/17		Year ended 12/31/16
Ordinary income (including any short-term capital gains)		$1,411,113		$1,506,595
Long-term capital gains		4,376,037		4,180,217
Total distributions		$5,787,150		$5,686,812

The federal tax cost and the tax basis components of distributable earnings were as follows:


As of 12/31/17
Cost of investments	$43,968,021
Gross appreciation	13,690,520
Gross depreciation	(1,671,887	)
Net unrealized appreciation (depreciation)	$12,018,633
Undistributed ordinary income	1,717,496
Undistributed long-term capital gain	6,365,723
Other temporary differences	26,614


	From net investment income				From net realized gain on investments
	Year ended 12/31/17		Year ended 12/31/16		Year ended 12/31/17		Year ended 12/31/16
Initial Class		$439,568		$429,416		$4,255,688		$4,421,516
Service Class		83,521		52,627		1,008,373		783,253
Total		$523,089		$482,043		$5,264,061		$5,204,769

MFS New Discovery Value Portfolio

Notes to Financial Statements – continued

(3)

Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:


Up to $250 million			0.90%
In excess of $250 million			0.85%

MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the year ended December 31, 2017, this management fee reduction amounted to $4,520, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the year ended December 31, 2017 was equivalent to an annual effective rate of 0.89% of the fund’s average daily net assets.

The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.88% of average daily net assets for the Initial Class shares and 1.13% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2019. For the year ended December 31, 2017, this reduction amounted to $108,326, which is included in the reduction of total expenses in the Statement of Operations.

Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the year ended December 31, 2017, the fee was $3,359, which equated to 0.0059% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the year ended December 31, 2017, these costs amounted to $444.

Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the year ended December 31, 2017, the fee paid by the fund under this agreement was $100 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.

The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. During the year ended December 31, 2017, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $42,927 and $129,321, respectively. The sales transactions resulted in net realized gains (losses) of $53,426.

MFS New Discovery Value Portfolio

Notes to Financial Statements – continued

(4)

Portfolio Securities

For the year ended December 31, 2017, purchases and sales of investments, other than short-term obligations, aggregated $28,932,632 and $36,052,773, 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. Transactions in fund shares were as follows:


	Year ended 12/31/17						Year ended 12/31/16
	Shares			Amount			Shares			Amount
Shares sold
Initial Class		93,805			$1,023,916			190,429			$1,881,992
Service Class		371,261			4,044,312			110,795			1,102,645
		465,066			$5,068,228			301,224			$2,984,637
Shares issued to shareholders in reinvestment of distributions
Initial Class		478,619			$4,695,256			500,096			$4,850,932
Service Class		111,989			1,091,894			86,619			835,880
		590,608			$5,787,150			586,715			$5,686,812
Shares reacquired
Initial Class		(807,724	)		$(8,747,810	)		(1,357,333	)		$(13,806,560	)
Service Class		(276,792	)		(3,006,761	)		(315,861	)		(3,115,041	)
		(1,084,516	)		$(11,754,571	)		(1,673,194	)		$(16,921,601	)
Net change
Initial Class		(235,300	)		$(3,028,638	)		(666,808	)		$(7,073,636	)
Service Class		206,458			2,129,445			(118,447	)		(1,176,516	)
		(28,842	)		$(899,193	)		(785,255	)		$(8,250,152	)

The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 45%, 15%, and 10%, respectively, of the value of outstanding voting shares of the fund.

(6)

Line of Credit

The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the year ended December 31, 2017, the fund’s commitment fee and interest expense were $382 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.

(7)

Investments in Affiliated Issuers


Affiliated Issuers		Beginning Shares/Par Amount		Acquisitions Shares/Par Amount		Dispositions Shares/Par Amount			Ending Shares/Par Amount
MFS Institutional Money Market Portfolio			416,540		14,708,983		(15,000,421	)		125,102

Affiliated Issuers	Realized Gain (Loss)	Change in Unrealized Appreciation (Depreciation)		Capital Gain Distributions		Dividend Income			Ending Value
MFS Institutional Money Market Portfolio	$(85)		$—		$—		$7,445			$125,090

MFS New Discovery Value Portfolio

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of MFS Variable Insurance Trust III and the Shareholders of

MFS New Discovery Value Portfolio:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of MFS New Discovery Value Portfolio (one of the series of MFS Variable Insurance Trust III) (the “Fund”), including the portfolio of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 15, 2018

We have served as the auditor of one or more of the MFS investment companies since 1924.

MFS New Discovery Value Portfolio

TRUSTEES AND OFFICERS – IDENTIFICATION AND BACKGROUND


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds overseen by the Trustee	Principal Occupations During the Past Five Years	Other Directorships During the Past Five Years (j)
INTERESTED TRUSTEES
Robert J. Manning (k) (age 54)	Trustee	February 2004	137	Massachusetts Financial Services Company, Executive Chairman (since January 2017); Director; Chairman of the Board; Chief Executive Officer (until 2015); Co-Chief Executive Officer (2015-2016)	N/A

Robin A. Stelmach (k) (age 56)	Trustee	January 2014	137	Massachusetts Financial Services Company, Vice Chair (since January 2017); Chief Operating Officer and Executive Vice President (until January 2017)	N/A

INDEPENDENT TRUSTEES
John P. Kavanaugh (age 63)	Trustee and Chair of Trustees	January 2009	137	Private investor	N/A

Steven E. Buller (age 66)	Trustee	February 2014	137	Financial Accounting Standards Advisory Council, Chairman (2014-2015); Public Company Accounting Oversight Board, Standing Advisory Group, Member (until 2014); BlackRock, Inc. (investment management), Managing Director (until 2014), BlackRock Finco UK (investment management), Director (until 2014)	N/A

John A. Caroselli (age 63)	Trustee	March 2017	137	JC Global Advisors, LLC (management consulting), President (since 2015); First Capital Corporation (commercial finance), Executive Vice President (until 2015)	N/A

Maureen R. Goldfarb (age 62)	Trustee	January 2009	137	Private investor	N/A

Michael Hegarty (age 73)	Trustee	December 2004	137	Private investor	Rouse Properties Inc., Director (until 2016); Capmark Financial Group Inc., Director (until 2015)

Clarence Otis, Jr. (age 61)	Trustee	March 2017	137	Darden Restaurants, Inc., Chief Executive Officer (until 2014)	VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director; Federal Reserve Bank of Atlanta, Director (until 2015)

Maryanne L. Roepke (age 61)	Trustee	May 2014	137	American Century Investments (investment management), Senior Vice President and Chief Compliance Officer (until 2014)	N/A

Laurie J. Thomsen (age 60)	Trustee	March 2005	137	Private investor	The Travelers Companies, Director; Dycom Industries, Inc., Director (since 2015)

MFS New Discovery Value Portfolio

Trustees and Officers – continued


Name, Age	Position(s) Held with Fund	Trustee/Officer Since (h)	Number of MFS Funds for which the Person is an Officer	Principal Occupations During the Past Five Years
OFFICERS
Christopher R. Bohane (k) (age 44)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Kino Clark (k) (age 49)	Assistant Treasurer	January 2012	137	Massachusetts Financial Services Company, Vice President

John W. Clark, Jr. (k) (age 50)	Assistant Treasurer	April 2017	137	Massachusetts Financial Services Company, Vice President (since March 2017); Deutsche Bank (financial services), Department Head – Treasurer’s Office (until February 2017)

Thomas H. Connors (k) (age 58)	Assistant Secretary and Assistant Clerk	September 2012	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Ethan D. Corey (k) (age 54)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

David L. DiLorenzo (k) (age 49)	President	July 2005	137	Massachusetts Financial Services Company, Senior Vice President

Heidi W. Hardin (k) (age 50)	Secretary and Clerk	April 2017	137	Massachusetts Financial Services Company, Executive Vice President and General Counsel (since March 2017); Harris Associates (investment management), General Counsel (from September 2015 to January 2017); Janus Capital Management LLC (investment management), Senior Vice President and General Counsel (until September 2015)

Brian E. Langenfeld (k) (age 44)	Assistant Secretary and Assistant Clerk	June 2006	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Susan A. Pereira (k) (age 47)	Assistant Secretary and Assistant Clerk	July 2005	137	Massachusetts Financial Services Company, Vice President and Senior Counsel

Kasey L. Phillips (k) (age 47)	Assistant Treasurer	September 2012	137	Massachusetts Financial Services Company, Vice President

Matthew A. Stowe (k) (age 43)	Assistant Secretary and Assistant Clerk	October 2014	137	Massachusetts Financial Services Company, Vice President and Assistant General Counsel

Frank L. Tarantino (age 73)	Independent Senior Officer	June 2004	137	Tarantino LLC (provider of compliance services), Principal

Richard S. Weitzel (k) (age 47)	Assistant Secretary and Assistant Clerk	October 2007	137	Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel

Martin J. Wolin (k) (age 50)	Chief Compliance Officer	July 2015	137	Massachusetts Financial Services Company, Senior Vice President and Chief Compliance Officer (since July 2015); Mercer (financial service provider), Chief Risk and Compliance Officer, North America and Latin America (until June 2015)

James O. Yost (k) (age 57)	Treasurer	September 1990	137	Massachusetts Financial Services Company, Senior Vice President

(h)

(j)	Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”).

(k)

MFS New Discovery Value Portfolio

Trustees and Officers – continued

Messrs. Buller and Otis and Ms. Roepke are members of the Trust’s Audit Committee.

Each of the Interested Trustees and certain Officers hold comparable officer positions with certain affiliates of MFS.

The Statement of Additional Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.


Investment Adviser Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618		Custodian State Street Bank and Trust Company 1 Lincoln Street Boston, MA 02111-2900
Distributor MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618		Independent Registered Public Accounting Firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
Portfolio Manager(s) Kevin Schmitz

MFS New Discovery Value Portfolio

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

Based on information provided by Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the performance of peer groups of funds over various time periods. The Trustees placed particular emphasis on the total return performance of the Fund’s Initial Class shares in comparison to the performance of funds in its Lipper performance universe over the three-year period ended December 31, 2016, which the Trustees believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Initial Class shares was in the 2nd quintile relative to the other funds in the universe for this three-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Initial Class shares was in the 3rd quintile for each of the one- and five-year periods ended December 31, 2016 relative to the Lipper performance universe. Because of the passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.

MFS New Discovery Value Portfolio

Board Review of Investment Advisory Agreement – continued

The Trustees also considered whether the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s advisory fee rate schedule is subject to a contractual breakpoint that reduces the Fund’s advisory fee rate on average daily net assets over $250 million. The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’ complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoint and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its assets and overall complex assets grow.

MFS New Discovery Value Portfolio

PROXY VOTING POLICIES AND INFORMATION

QUARTERLY PORTFOLIO DISCLOSURE

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

FURTHER INFORMATION

INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS

FEDERAL TAX INFORMATION (unaudited)

The following information is provided pursuant to provisions of the Internal Revenue Code.

The fund designates $4,814,000 as capital gain dividends paid during the fiscal year.

For corporate shareholders, 37.49% of the ordinary income dividends paid during the fiscal year qualify for the corporate dividends received deduction.

rev. 3/16


FACTS		WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION?


Why?		Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account balances

• Account transactions and transaction history

• Checking account information and wire transfer instructions

When you are no longer our customer, we continue to share your information as described in this notice.


How?		All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing.


Reasons we can share your personal information	Does MFS share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes – to offer our products and services to you	No	We don’t share
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share


Questions?		Call 800-225-2606 or go to mfs.com.


Page 2


Who we are
Who is providing this notice?		MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company.


What we do
How does MFS protect my personal information?		To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you.
How does MFS collect my personal information?		We collect your personal information, for example, when you • open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can’t I limit all sharing?		Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.


Definitions
Affiliates		Companies related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice.
Nonaffiliates		Companies not related by common ownership or control. They can be financial and nonfinancial companies. • MFS does not share with nonaffiliates so they can market to you.
Joint marketing		A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • MFS doesn’t jointly market.


Other important information
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.

LOGO

ITEM 2.

CODE OF ETHICS.

The Registrant has adopted a Code of Ethics (the “Code”) pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant’s principal executive officer and principal financial and accounting officer. Effective January 1, 2017, the Code was amended to (i) clarify that the term “for profit” company as used in Section II.B of the Code excludes the investment adviser and its subsidiaries and pooled investment vehicles sponsored by the investment adviser or its subsidiaries, (ii) align the Code’s provisions regarding receipt of gifts and entertainment in Section II.B of the Code with the gifts and entertainment policy of the Funds’ investment adviser, and (iii) make other administrative changes. During the period covered by the report, the Registrant has not granted a waiver, including an implicit waiver, from any provision of the Code.

A copy of the Code effective as of January 1, 2017 is filed as an exhibit to this Form N-CSR.

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Messrs. Steven E. Buller, and Clarence Otis, Jr. and Ms. Maryanne L. Roepke, members of the Audit Committee, have been determined by the Board of Trustees in their reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in Form N-CSR. In addition, Messrs. Buller and Otis and Ms. Roepke are “independent” members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Items 4(a) through 4(d) and 4(g):

The Board of Trustees has appointed Deloitte & Touche LLP (“Deloitte”) to serve as independent accountants to the Registrant (hereinafter the “Registrant” or the “Fund”). The tables below set forth the audit fees billed to the Fund as well as fees for non-audit services provided to the Fund and/or to the Fund’s investment adviser, Massachusetts Financial Services Company (“MFS”), and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Fund (“MFS Related Entities”).

For the fiscal years ended December 31, 2017 and 2017, audit fees billed to the Fund by Deloitte were as follows:


	Audit Fees
	2017		2016
Fees billed by Deloitte:
MFS Blended Research Small Cap Equity Portfolio		43,618		42,731
MFS Conservative Allocation Portfolio		29,683		29,070
MFS Global Real Estate Portfolio		44,549		43,644
MFS Growth Allocation Portfolio		29,683		29,070
MFS Inflation-Adjusted Bond Portfolio		34,266		33,563
MFS Limited Maturity Portfolio		54,618		53,515
MFS Mid Cap Value Portfolio		44,955		44,042
MFS Moderate Allocation Portfolio		29,683		29,070
MFS New Discovery Value Portfolio		43,618		42,731

Total		354,673		347,436

For the fiscal years ended December 31, 2017 and 2016, fees billed by Deloitte for audit-related, tax and other services provided to each Fund and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:


	Audit-Related Fees¹				Tax Fees²				All Other Fees³
	2017		2016		2017		2016		2017		2016
Fees billed by Deloitte:
To MFS Blended Research Small Cap Equity Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS Conservative Allocation Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS Global Real Estate Portfolio		2,400		2,400		5,200		5,123		0		0
To MFS Growth Allocation Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS Inflation-Adjusted Bond Portfolio		2,400		2,400		4,064		4,004		0		0
To MFS Limited Maturity Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS Mid Cap Value Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS Moderate Allocation Portfolio		2,400		2,400		4,878		4,806		0		0
To MFS New Discovery Value Portfolio		2,400		2,400		4,878		4,806		0		0
Total fees billed by Deloitte To above Funds:		21,600		21,600		43,410		42,769		0		0


	Audit-Related Fees¹				Tax Fees²					All Other Fees³
	2017		2016		2017		2016			2017		2016
Fees billed by Deloitte:
To MFS and MFS Related Entities of MFS Blended Research Small Cap Equity Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Conservative Allocation Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Global Real Estate Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Growth Allocation Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Inflation-Adjusted Bond Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Limited Maturity Portfolio*		0		0		0		0	��		5,390		5,000
To MFS and MFS Related Entities of MFS Mid Cap Value Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS Moderate Allocation Portfolio*		0		0		0		0			5,390		5,000
To MFS and MFS Related Entities of MFS New Discovery Value Portfolio*		0		0		0		0			5,390		5,000


	Aggregate fees for non-audit services:
	2017		2016
Fees billed by Deloitte:
To MFS Blended Research Small Cap Equity Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS Conservative Allocation Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS Global Real Estate Portfolio, MFS and MFS Related Entities^#		812,226		118,035
To MFS Growth Allocation Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS Inflation-Adjusted Bond Portfolio, MFS and MFS Related Entities^#		811,090		116,916
To MFS Limited Maturity Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS Mid Cap Value Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS Moderate Allocation Portfolio, MFS and MFS Related Entities^#		811,904		117,718
To MFS New Discovery Value Portfolio, MFS and MFS Related Entities^#		811,904		117,718

^*	This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Fund (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex).

#	This amount reflects the aggregate fees billed by Deloitte for non-audit services rendered to the Fund and for non-audit services rendered to MFS and the MFS Related Entities.

The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under “Audit Fees,” including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews.

²	The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis.

³	The fees included under “All Other Fees” are fees for products and services provided by Deloitte other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees”.

Item 4(e)(1):

Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services:

To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Fund and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 in each period between regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting.

Item 4(e)(2):

None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).

Item 4(f):

Not applicable.

Item 4(h): The Registrant’s Audit Committee has considered whether the provision by a Registrant’s independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant’s principal auditors.

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to the Registrant.

ITEM 6.

SCHEDULE OF INVESTMENTS

A schedule of investments of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the Registrant.

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the Registrant.

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable to the Registrant.

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.

ITEM 11.

CONTROLS AND PROCEDURES.

(a)

Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)

There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12.

DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the Registrant.

ITEM 13.

EXHIBITS.

(a)	File the exhibits listed below as part of this form. Letter or number the exhibits in the sequence indicated.

(1)

Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Code of Ethics attached hereto.

(2)

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.

(b)

If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto.

Notice

Notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) MFS VARIABLE INSURANCE TRUST III


By (Signature and Title)*		DAVID L. DILORENZO
		David L. DiLorenzo, President

Date: February 15, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By (Signature and Title)*		DAVID L. DILORENZO
		David L. DiLorenzo, President (Principal Executive Officer)

Date: February 15, 2018


By (Signature and Title)*		JAMES O. YOST
		James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer)

Date: February 15, 2018

*	Print name and title of each signing officer under his or her signature.

MFS Variable Insurance Trust Iii N-CSRCertified annual shareholder report (management investment company)